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Financial and people planning work together to maximize organizational growth

The ability of Human Resources (HR) and finance to work together and understand each team's role can be critical to an organization. HR and finance are two distinct business areas in many companies, often operating in silos. Finance helps allocate and track resources to support an organization's goals, maintaining a balance between costs and revenue. HR hires, recruits, onboards, and motivates people to achieve those goals. This part of HR is often an organization's biggest expense. While they are two different operations, it's essential they collaborate effectively because, without collaboration, it’s difficult for those different operations to fully support organizational objectives effectively, which is why it is imperative that there is one single source of truth for both HR and finance to work from.

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The case for integrated workforce planning

While traditional financial and workforce planning processes are familiar and sometimes relied upon to create annual or quarterly plans, this static approach no longer cuts the mustard in our uncertain economic operating environment. When HR and finance are both using manual spreadsheets or outdated legacy IT systems that don’t integrate well, collaboration, accuracy, and visibility become extremely difficult. Manual, laborious tasks, out-of-date and often incomplete data, and fragmented communication and decision-making across departments result in erratic planning, siloed decision-making, and misaligned goals and priorities.

Business leaders need to look for new ways to leverage their resources constantly. With so much data to understand, it can be time-consuming and challenging to process the right information productively. An integrated financial planning software solution such as Unit4 FP&A (financial planning and analysis) covers all aspects of planning, giving a clear overview of actual figures, as well as forecasting capabilities, analytics, and reporting customized to different target groups. It takes a flexible, integrated approach to cover all an organization’s financial planning needs, whether planning cash flow, managing operational budgets, or forecasting sales, costs, and revenue. It provides integrated P&L, balance sheet, and cash flow data, an integrated view of actuals, medium- and long-term planning and forecasting, and allows for multidimensional views – according to regions, products, or customers.

Such a single source of truth that comes from the FP&A solution must have excellent integration with the ERP system. This ensures that the actual/current data of finance and HR are always synched with the FP&A system. When looking to the future, the FP&A possibilities of planning on different levels of granularity are critical for HR. Some organizations can plan on a more aggregated level, for example, by cost center. They can plan the development of FTEs (full-time equivalents) and apply average costs per FTE. For other organizations, it is key to explicitly plan individual FTEs and then keep track of the hiring process and costs for those individual employees.

Combine this with human capital management (HCM) capabilities, and organizations can optimize people processes, simplify and increase their payroll accuracy, and boost their talent's productivity, engagement, and growth. The starting point of planning is always to have a very clear picture of the current HR situation. Here the PPA (people planning and analytics) model of Unit4 FP&A for workforce planning is of great help because it shows potential areas where investments and new teams might be needed.

An integrated ecosystem like this will help organizations to make more informed decisions by unifying workforce data and finance. It helps organizations understand how achieving the right people mix can deliver value and improve financial performance. HR leaders will be able to assess key KPIs that deliver more meaningful people experiences, such as pay, tenure, skills, diversity, and regional balance. This integrates financial and HR data to create a complete picture of organizational performance and how people and teams affect it.

Agility and driving integrated planning

Creating workforce plans that help your organization stay agile and effective even in periods of extreme uncertainty is key to survival and growth. With agility, organizations will be able to keep on track. HR and finance leaders operating in siloed, misaligned environments need to transition from tactical planning to more strategic workforce planning that puts the right people in the right place at the right time. Integrated workforce planning enables them to make plans in unison with other key business aims, from corporate strategy to financials, operations, departmental budgets, and forecasts. This creates a comprehensive and dynamic workforce plan that syncs with strategic organizational goals.

Integrated scenario management planning

Scenario management planning is used in FP&A to help guide organizations through considerable uncertainty, contemplating various paths of possibilities. Despite best attempts, forecasts will have inherent errors; actual results will deviate from the figures organizations had anticipated hitting. To remain forward-thinking and agile through change, organizations can create a future reality before future reality occurs. Circumstances change, so rather than simply craft possible scenarios, it’s wise to simulate how changing assumptions and drivers may impact certain results. This allows the organization to contemplate how the direction of the business may change, and while this is wise, actual tracking is also extremely important.

By tracking ongoing performance, it becomes evident whether any of these scenarios are likely to come to fruition. When the company knows how it is faring versus its expectation, it can pivot and refresh its scenarios. The most capable and successful companies can recalibrate their scenario planning model in real time when circumstances trigger a change.

Let’s look at an example: Maximizing people planning with Unit4 ‘Compensation Simulation’ functionality

Different versions of salary changes can be looked at using the ‘Compensation Simulation’ functionality within Unit4 HCM. It allows the selection of parameters, e.g., pay rise %/£ such as best/worst-case scenario, and can be modeled across various departments and FTEs. It permits manual overrides, and HR leaders can load reference salaries using 3rd party industry data as a baseline. It provides a single click to access HR master data in the system, and after the simulation, the final values can be uploaded to Unit4 Compensation Planning as suggestions for the actual salary review process.

This simulation with Unit4 FP&A allows an organization to determine how much budget for different scenarios is needed for salary increases. This data can then be the basis for a board decision on how much money can be spent on salary increases. Then the process in Unit4 Compensation Planning starts with the actual assigning of increases by the managers to the individual employees.

Raw HR data is pulled from the ERP/HCM system allowing for user-friendly dashboarding, visualizations, and multi-dimensional or ad-hoc analysis. Using FP&A then helps give an effective overview of historical data to inform future planning using the journey function. Compensation Planning is a core HCM functionality used to plan, allocate, and communicate pay decisions. It comes into its own during uncertain economic times, such as the current cost of living crisis affecting all employees, high inflation, and significant staff turnover volumes. It enables organizations to act with greater agility and respond to uncertain times more quickly.

Combined with other business costs, such as energy and real estate, it gives a more holistic view and allows organizations to remain flexible in their service delivery by maintaining their workforce requirements.

How can Unit4 help your organization?

Our next-generation enterprise solutions power many of the world’s most people-centric mid-market organizations. Our state-of-the-art cloud platform, ERPx, brings together the capabilities of Financials, Procurement, Project Management, HR, and FP&A onto a unified cloud platform that shares real-time information and is designed with a powerful, people-centric approach, so employees can benefit from better insight and become more effective and increasingly engaged. It supports rapid and continuous change while delivering an individualized fit for customers at scale, delivering the right tools to unify the processes across their organization and connect their people.

You can check out our suite of solutions here.

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Michael Lengenfelder

Michael Lengenfelder

Vice President FP&A, Unit4

Michael Lengenfelder is Head of Product Management Unit4 Financial Planning and Analysis (FP&A) with global responsibility for the Unit4 FP&A product portfolio since April 1, 2021. He has been with Unit4 since 2005 in various leadership roles. After completing his studies in International Business Administration at the Vienna University of Economics and Business Administration, he joined the former Prevero Austria GmbH as a consultant and has been accompanying Unit4's FP&A journey ever since.