CFO Studio Magazine with Alison Cornell

MONEY BUSINESS 18 WWW.CFOSTUDIO.COM Q1 2017 Finance – HR Collaboration Is Key, But Management Sees Difficulties in Alignment Management and Leadership: What’s the Difference? Aggressive Goals and Leadership Failures at VW, Mitsubishi, Wells Fargo 78 % of Finance execs consider HR a strategic partner, however: 32 % expect HR to go over budget 34 % expect mismanagement of Affordable Care Act reporting 35 % expect to have to pay IRS audit penalties IN ADDITION: 97 % of Finance execs have significant concerns with benefits costs 93 % have significant concerns with HR’s missteps on executive liability 88 % have significant concerns with HR’s Affordable Care Act audits U nder pressure from the U.S. Environmental Protection Agency, Volkswagen admitted last year that the company faked data on diesel vehicles’ emissions. Confessed the company’s chairman (and former CFO) Hans Dieter Pötsch, engineers could not design a legitimate way to meet U.S. emission standards within VW’s time and budget requirements. At Mitsubishi fuel-economy readings were manipulated by falsifying tire pressure. The precipitating factor for that dishonesty: That automaker, in a two-year period, increased its fuel-economy targets for certain models five times. Those were the models where cheating occurred. And then, Wells Fargo confessed to opening 1.5 million fake bank accounts and creating 565,000 fraudulent credit card applications. The Wells Fargo employees who engaged in this swindle did so because they felt “pressure” to meet targets. Who is to blame for all this malfeasance? Employees who pervert the truth to meet improbable goals, or leaders who set the goals? Setting big goals is one of the primary jobs of leaders. Helping managers and their teams meet those goals —motivating and listening — is another part of leadership. Addressing Wells Fargo’s delinquent behavior, Richard Cordray, director of the Consumer Financial Protection Bureau warns, “Financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.” How could management have foreseen the results of their actions? By keeping an ear tuned to receive bad news, and then learning from it. As John F. Kennedy once said, “Leadership and learning are indispensable to each other.” I n theory, managers and leaders are viewed as performing very different roles, but do they really? A recent study based on semi-structured interviews with eight leaders from business, government, and NCAA Division I sports that was reported in the Harvard Business Review raises this question. “We think of managers having a different focus from leaders. And yet this distinction blurs significantly when we look at the daily activities of these people in charge. The majority of the activities described were very similar, or even identical — delegating, learning, motivating, and so on,” writes the study’s author, John O’Leary, in HBR . The major difference between leadership and management seems to be whether the behaviors are others-focused or results-focused. Differences described by interviewees: Leaders’ Interest Managers’ Interest Trusting people...................................................Gaining trust Engaging people.................................................Being accountable Motivating & encouraging people........................Being optimistic, Being visible, Providing recognition and reward Delegates to empower subordinates...................Delegates to increase efficiency SOURCE: Hub International Limited survey of more than 400 senior-level HR and Finance executives at U.S. companies with 50–1,000 employees (“Employee Benefits Barometer: SMB Perspectives and Priorities in an Era of Disruption,” conducted December 2015) While finance executives consider HR a strategic partner, these same executives’ assessment of the job done by HR in the employee benefits area reveals a shaky partnership: