Headcount Planning

HR and Finance: Why Collaboration Is Key to Strategic Workforce Planning

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by Joe Garafalo

June 30th, 2021

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People are typically both a company’s greatest asset and greatest expense. And on the surface, that makes sense. If people are the most valuable part of the business, why wouldn’t a company invest as much as 70% of its budget in headcount-related expenses?

But while there’s an undeniable link between people and expenses, there’s often a disconnect between the two departments that care most about those things—HR and finance. 

If you want to be more strategic about your workforce planning, don’t get stuck trying to figure out which side of the equation should own the process. Instead, build a more collaborative relationship between human resources and finance to elevate both functions to a more strategic position in the organization. 

There’s a Data Gap Between HR and Finance

The traditional disconnect between HR and Finance comes down to the fact that the two functions speak entirely different languages. Where HR talks about the business in terms of people and org charts, Finance relates everything to annual plans and budget targets.

But this problem isn’t unique to HR and Finance. There are plenty of departments across an organization that speak different languages and find a way to create common ground. 

The difference for HR and Finance is that the two are on much different data cycles. 

Especially at fast-growing companies, HR is always deep in the processes of recruiting, interviewing, negotiating, and onboarding. Data updates rapidly and org charts constantly evolve. Finance may work hard to move equally quickly, but they’re often stuck in monthly and quarterly close cycles with little time to work with HR to change workforce plans on the fly.

At best, you end up fighting through a reconciliation process to come up with a rough headcount plan. But there’s so much more that goes into workforce planning than just accurately forecasting how many people will be at the company as it grows.

Bridging the gap between HR and Finance is critical to achieving the common goal between these two teams—a workforce plan that unlocks both new levels of employee performance and profitability.

ChartHop Planning Reports

Finance and HR Need a Common Operating Picture

The best way to bridge the gap between HR and finance is to make sure the two teams are working with a common operating picture. 

That doesn’t mean the HR department has to master financial modeling in Excel. And it doesn’t mean Finance has to start mapping out org charts in addition to its planning responsibilities. Rather, it means creating a connected ecosystem of tools and data between the two teams so each is working with the same understanding of the business. 

Both HR and finance now have best-of-breed software available to them for streamlining their aspects of workforce planning.

The HR team can take advantage of a tool like ChartHop to centralize data, streamline workforce planning, and better collaborate with department heads. And finance can get away from static spreadsheets with a tool like Mosaic that pulls all that HR data in to show how headcount changes impact budgets to help automate reporting and analysis.

Having real-time visibility into both the human and financial side of workforce planning elevates the roles of each department. Instead of wasting time trying to figure out why the headcount numbers are slightly off between departments, you can collaborate to answer strategic questions, like:

These are questions you can only answer when HR and finance are working in tandem. Once you’ve created the common operating picture that enables this level of collaboration, you’ll start to see the bigger-picture benefits for your organization.

3 Benefits of a Tighter Relationship Between HR and Finance

Bridging the data gap and creating a common operating picture allow HR and Finance to go from basic headcount reporting to true strategic workforce planning. And that shift comes with benefits that go beyond simply eliminating the headaches of traditional spreadsheet-based planning.

When HR and Finance work together consistently on strategic workforce planning, you unlock the following benefits for your company.

1. HR Further Elevates Its Role as a Strategic Business Partner

Like finance, the HR department is always looking to prove its strategic value to the business. That’s difficult to do when you have to spend all your time wrangling data and trying to manually update spreadsheets.

Closer collaboration with finance, combined with a modern toolset, gives HR more opportunities to further elevate its role as a strategic business partner. 

For example, finance might be able to see that there are 20 new rows in the headcount plan that represent new customer success hires. But the finance department typically can’t visualize what that looks like for the org. HR adds value to the finance team (and the organization as a whole) by showing what that hiring plan actually looks like, and how those additions impact the broader company objectives, like launching a new product line or selling into a new market. 

ChartHop Scenarios

Visualizing the hiring plan adds invaluable context to the financial side of the headcount model. Who are the managers for those new hires? Are you hiring the right mix of seniority levels to meet company goals? Have you accounted for employee movement into new roles?

Bringing this kind of context to finance and the leadership team aligns HR with company goals and budgets, increasing trust in HR as a strategic partner.

2. Leaders See the Tangible ROI of Workforce Investments

One of the hardest parts of workforce planning is walking the fine line between investing in things that keep the organization competitive as an employer and showing the tangible ROI of talent development expenses.

Without a collaborative relationship with finance, HR teams are often left on their own to fight for more budget to build up the company culture and invest in the employee experience. You have to consistently justify requests to increase spending on benefits, talent development, and comp structures. And you have to translate your plans into financial terms to do it.

A more collaborative relationship makes it easier to align on the value of workforce investments. You’re able to work directly with finance to identify the return on investment of different initiatives and find creative ways to match non-payroll investments with overarching budgets. 

In this case, finance acts less like a gatekeeper and more like a partner that understands the deep value of HR initiatives.

3. The Business Improves Its Bottom Line

A collaborative relationship between HR and finance leads to more informed, data-driven decisions in workforce planning. And that, in turn, leads to smarter spending around payroll, talent development, and workplace culture.

Traditionally, finance may have acted alone in mapping out the impact of comp increases, bonus structures, and employee incentives on the company’s profitability. But these expenses don’t tell the full story. Collaborating with HR ensures finance gains insight into attrition and turnover rates that also impact the bottom line. 

ChartHop Compensation Planning

Deeper insight into HR data helps finance forecast budgets more accurately and help optimize costs. For example, collaboration between the HR department and finance can reveal opportunities to negotiate better prices for employee benefits. The result is an immediate improvement in profitability as well as the long-term benefit of increased employee satisfaction that ultimately boosts the bottom line as well.

Unlock the Strategic Value of HR and Finance Collaboration

The days of fractured relationships between HR and Finance should be long gone. The two departments compliment each other too well for there to be any disconnect in the workforce planning process.

HR functions bring a broader perspective to workforce planning and act as a consistent champion for employees. And finance has the unique ability to frame that perspective in a way that ties initiatives to tangible ROI and business performance. It’s a perfect match that can deliver significant value to the business—if you can find the right ways to unlock its potential.

This article was Part 1 in a two-part series about the strategic value of HR and Finance collaboration. Look out for Part 2 for a list of specific areas where HR and Finance can work together to unlock the benefits listed here and drive strategic value for a business.


Joe Garafalo is the Co-Founder and COO at Mosaic. Joe began his career in the Big 4 with KPMG. After completing his master’s degree at St. John’s University, he went on to hold multiple leadership positions in finance at Palantir, Axoni, and Barkbox. Joe co-founded Mosaic in 2019 as an answer to the complexity and inefficiency of existing finance tools. As the first Strategic Finance Platform, Mosaic is designed to ingest data from all business systems to help teams plan, analyze, report, and forecast with better accuracy and speed.


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Blog Author

Written by Joe Garafalo

Co-Founder and COO at Mosaic

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