While their rivalry isn't as well known as the Yankees and Red Sox or the Hatfields and McCoys, it's no secret in corporate circles that the relationship between CFO and HR pro, can be an adversarial one. However, new research on the shifting roles for CFOs provides insight on ways the two positions could work more collaboratively for mutual benefit.

One report, How CFOs are Managing Change in Roles and Expectations, released jointly by Mercer and Russell Reynolds Associates, shows that CFOs are working harder to gain the trust of boards of directors, investors, regulators and auditors. "In the wake of recent corporate scandals, market volatility and regulatory changes, external stakeholders demand more information and accountability from CFOs," the report states.

Such increased pressure to deliver accounting information that passes the fine-tooth-comb test "makes CFOs personally responsible, in large part, for building and maintaining the public's trust in their companies," researchers conclude. "Today's market does not permit surprises. Regulations like Sarbanes-Oxley and International Financial Reporting standards increase pressure on the finance department to ensure compliant reporting, and on the CFO to certify the accuracy of the numbers."

Human capital collaboration

And apparently, another study finds, CFOs are a little fuzzy on some of those numbers. Although employers spend an estimated 36% of their revenues on human capital - including pay, benefits and training - just 16% of CFOs say they fully understand the return they are getting on this huge investment, according to Human capital management: The CFOs perspective, conducted by CFO Research Services and Mercer Human Resource Consulting. The firms surveyed 180 financial executives to examine the changing role of the finance function in managing human capital.

"CFOs are in a difficult situation," says Rick Guzzo, a human capital strategy consultant with Mercer. "Most see the importance of human capital to business success, yet they are unable to apply ordinary financial discipline to managing what is often their company's largest investment.

Furthermore, Guzzo continues, "Their predicament is getting tougher. Financial executives are feeling increasing pressure from boards, investors, and analysts to show how human capital is being managed in their companies."

According to the study, 49% of CFOs report that investors are beginning to ask about human capital issues to at least a moderate extent. About one-quarter (23%) say their boards currently are involved in human capital issues to a considerable or great extent.

The changing role of the CFO in managing human capital could bring about a detente between the finance and HR functions.

"Historically, there's been little love lost between finance and HR in most companies," Guzzo says. "However, the changing business landscape makes it necessary for these two areas to come together in new, more collaborative ways. The financial executives surveyed acknowledge both a need and a willingness to work in partnership with HR to better manage the human capital of their enterprises."

According to the study:

* CFOs want to be more involved in human capital decisions - not just in setting and allocating HR budgets, which has been their traditional role. Of those surveyed, 62% want an "important" or "leadership" role in human capital decisions, but only 38% say they currently play such a role.

* Financial executives today see human capital as a key value driver, not merely an expense as they once did. Among those surveyed, 92% say human capital has a great effect on the company's ability to achieve customer satisfaction. Eighty-two percent believe human capital affects profitability, 72% innovation/new product development, 71% success in integrating acquisitions, and 64% growth.

* Financial executives believe both finance and HR should report directly to the CEO and work together collaboratively.

"The relationship between HR and finance has changed because managing human capital is no longer just the province of the HR function," Guzzo says. "It is a responsibility increasingly shared by senior leadership across the organization."  - K.M.B.