How Public Sector HR and Finance Can Work Better Together

June 25, 2024

By Alex Smith and Jacquelyn Flickinger, Oracle

As former leaders in the public sector, we have both long been aware that Human Resources (HR) and Finance are intricately linked. Yet all too often, there are unnecessary barriers between them, created more out of a legacy of silos in states and local governments than out of any rational reasoning.

In the daily operations of government, one can easily see how personnel decisions can directly impact an organization’s financial well-being. Whether it involves labor negotiations, changes in healthcare plans, or personnel mobility, public sector leaders must weigh recruiting and retention needs against fiscal responsibility. While Finance and HR may have different viewpoints, a shared vision, effective communication, and integrated systems can position them to serve their organizations at the highest level.

With a strong HR/Finance alliance and aligned objectives, HR and Finance leaders can concentrate on and monitor mutual data, understand the impacts of changes, new policies, or initiatives on the other party, and in turn, they can collaborate on decision-making and provide joint recommendations.

A February 7 article in Public Sector Executive highlighted the challenges that public sector organizations are facing, including social unrest, climate change, budget constraints, and digital disruption. While fixes for any of these societal challenges are elusive, one thing is clear: The solutions to each of them require both money and people. That means that public sector chief financial officers and chief human resource officers must develop strong relationships and become strategic partners for any solutions to be uncovered and implemented. Collaborating strategically, Finance and HR can significantly benefit their agencies by improving cost-effectiveness, operations, and decision-making processes.

As the article states, “As a public sector CFO, you need to break down the silos that exist within your organization and across different levels of government, establishing common goals and metrics that align with your organization’s mission.”

When HR and Finance systems are not fully integrated, government employees can end up spending a significant amount of time on low-value, transactional tasks within their separate departments, causing either duplicate entries or time-consuming reconciliations.

One solution is to streamline their processes by opting for a single vendor, instead of dealing with two products, two implementation teams, and two software providers. By collaboratively selecting one Enterprise Resource Planning system, they can access a unified suite of products, a seamless user experience.

Touchpoints between HR and Finance exist in more places than you might imagine. In a simple example, when an employee is promoted and moves departments, the impact of that change requires a change in the supervisory hierarchy and determining who is responsible for reviewing and approving their transactions. There is also a joint impact on how salaries, benefits, and expenditures are coded to the general ledger and what user access is appropriate for their new role and responsibilities. By having a joint effort, it not only simplifies the many connections and eliminates integrations but also accelerates project completion by months compared to separate installations.

One of the most important benefits of a unified technological approach to both HR and Finance is that it allows for sharing the kinds of data that are vital to the smooth running of any public sector organization. As a 2020 report from the IBM Center for the Business of Government  stated, “Intergovernmental data sharing can drive significant public value by enabling more efficient emergency response, improving service delivery, facilitating a better allocation of resources, and creating a seamless user experience.”

Picture a scenario where a public sector CFO conducts an expense analysis of salaries and overtime and discovers that overtime costs have exceeded the budget significantly. By forming a partnership between HR and Finance, leaders from both departments can collaborate to determine the cause of overtime, evaluate proper staffing levels, and establish improved guidance and controls for overtime policies. This collaboration aims to assist the organization in effectively managing overtime expenses by working together to determine proper preventative measures on a go-forward basis.

What’s more, when Finance and HR collaborate, activities like onboarding and approvals can become more streamlined. In many communities, processes that should be relatively simple can get bogged down for days or even weeks when the Finance and HR departments aren’t working together smoothly. But breaking down the barriers between the two can help to ensure that employees have appropriate – and timely – access to transaction records, necessary approvals, training for report preparation/review, as well as efficient receipt of notifications and assignments.

During these challenging times, HR and Finance departments need to be more interdependent than ever before. To take things a step further, HR and Finance should do more than simply communicate with one another more effectively, they should forge a genuine alliance aimed at providing services to taxpayers in the most efficient and effective ways possible.

The contents of this blog post reflect those of the authors, and not necessarily those of the GFRC.