Investment assets are tangible or intangible items obtained for producing additional income or held for speculation in anticipation of a future increase in value. I favor the designation of Human Capital over Human Resources because whereas resources are depleted or used up, capital connotes investment. This may be semantics, but it instills an ever-present reminder that spending on your people is, or should be, viewed as an investment.
The role of the CFO has changed dramatically in recent years. Now, in addition to financial reporting, CFOs are also responsible for performance acceleration, driving analysis and data-based decision-making, and providing the perspective and insights needed to accelerate strategy execution. Against a backdrop of spending squeezes, technical innovation, and massive changes in organizational cultures and employee expectations, the CFO should play a central role in striking a more perfect balance between people and investment.
CFOs must demonstrate a deep understanding of how organizations make investments to achieve business goals and improve organizational capabilities. Given that human capital is typically among a company’s biggest investments, increasingly CFOs are finding themselves having to not only evaluate and prioritize human capital investments but also assess how human capital initiatives translate into short- and long-term value for the enterprise. And, as soon as this responsibility settles in, many CFOs come to the stark realization that traditional GAAP-based financial statements are misleading when it comes to measuring and managing human capital performance. I refer to this as the GAAP Gap. Increasingly, progressive CFOs are reaching for methods that complement traditional financial management techniques, including Human Equity Valuation and Value-Based Talent Management. These approaches elucidate the workforce-to-value connection with the financial rigor demanded by CFOs.
Many companies are now drawing on the strong financial modeling and analytical skills of the CFO to complement and extend the CHRO’s capabilities in workforce planning and talent deployment in accord with the CEO's strategic vision (we refer to this CEO, CFO, CHRO collaboration as the Triple Helix of company performance). CFOs are uniquely suited, by dint of reputation and skill set, to help the company drive a more effective, value-oriented HR strategy.
Organizations developing new skills for the next normal must determine exactly how and where to invest in them. The finance leader is uniquely suited to provide the necessary combination of insights.