Why should HR see the budget?

Paige · October 2002

Help me out here--I'm in a heated (not really) argument with our general manager (organizationally--we both report to the CEO) as to why HR should 1) be a part of the budget process and 2) be allowed to see the budget. He doesn't think either is necessary--if I have a request, I should submit it and they will tell me if the expenditure is approved or not. "HR has absolutely nothing to do with the budget.

Theresa Gegen TX · October 2002

Margaret would probably have a lot to say about this.

If HR wants to be more than a clerk like function, and wants to be a stragetic planner (who is involved in more than resolving EEO complaints, and is really involved in how the organization will be staffed in the future), then seeing the budge fits well into that role. It seems like HR in your organization is pigon holed into the non-strategic role. What you need to do is to show your bosses that HR can do more -- that it can help with planning and manpower issues.

Good Luck!!

Margaret Morford · October 2002

Theresa's right. I do want to say something about this topic, but first I had to push the throbing vein back into my forehead!

HR cannot contribute to a business unless they understand the numbers that run the business. That starts with being exposed to the budget, but goes beyond that. HR needs to be on the distribution list to receive the monthly financials so they can help make the numbers. Then HR must do their part to understand the numbers in great detail once they are exposed to them. This does not simply mean are we making budget, but how are the margins, earnings per share, manufacturing variances, overhead absorbtion, ROI, etc? I think that you need to have a conversation with your manager about the fact that you want to be a business partner, not just the HR Department. That you cannot contribute without knowing the financials that drive the business. If he shows no sign of relenting, then I think you need to resign yourself to being a clerical function for whatever time you spend your career there. If you want to progress, you will either need to change his perception of HR or find another opportunity where you do get to look at the numbers. A clerical role is easier, but a strategic role is much more interesting, exciting and fun.

I travel all around the country speaking about the topic of how to make HR a strategic player. It is critical that we change our role as HR professionals if we do not want the profession to leave us behind.

Okay, I've pushed the vein back into my head. Thanks for letting me step up on the soap box. HR is my chosen profession and I want to see us move away from the situation described above.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Pork · October 2002

Paige, You are the most important manager in the company and you are the strongest team player. You can handle it either way! I have been there and done that. I was previously involved in the budget process in the largest company because I controlled benefits, medical, W/C, life insurance, disability, safety, risk management, legal cases in the personnel arena, the airplane company with three airplanes, the farm companies with 55,000 acreas, etc. needless to say I was equal to the income generator in budget issues and expenses issues. It was a nightmare and I was constantly challenged for spending verses generating income. Now, I am not involved and when I am able to put money on the bottomline as a result of an OJT program $11,000.00 last year it is a real pleasure to here the operators say "thank you". $11,000 is nothing in comparsion, but the actual fact that an HR added rather than spend gave me great pride. Just make sure they do budget for those benefits and that they do plan for wage increases, and insurance increases based on usage or growth or cost, budget for the increase in accident rates of cost, etc. If they do not want your input, then they should not later smash you when something is out of control. However, if there is known to be a hidden element that is going to nail the company during the budget year make sure you raise the issue and provide the input. Based on the projected injurys this year over past years by type and expense, we are going to get hit with an anticipated increase in w/c insurance carrier adjustment greater by about $18,000.00. The budget and operators are not watching that hook, so don't let them be surprised when it happens. Just maybe they will see you input and involvement could be important. Better to have you involved and learning about how the company really operates than to have you "sitting in the closet and feeding you manure to produce mushrooms". Good luck, Pork

Hatchetman · October 2002

[font size="1" color="#FF0000"]LAST EDITED ON 10-01-02 AT 06:59PM (CST)[/font][p]Without knowing what your budget document looks like and how decisions are made about staffing, I think HR needs to be involved to ensure that positions are properly allocated to each organizational unit. I'm sure the executives want to make sure that when an employee is hired, there is money behind the position, the duties that he or she has been hired to do are going to be done in the unit where the employee is assigned to work, etc.

In short the executives, for example, don't want to hire an $80,000 year line manager in a section that doesn't need one simply because the senior manager wants to build up his or her empire. By having HR approve the position allocations, that's a large step toward ensuring proper use and payment of employees.

There may be other positive or negative fall-out from the role HR plays or doesn't play in the budget process: such as grievances and discrimination charges, again, depending on what your company's policies and practices are, whether or nor you're unionized, how promotions are determined, etc.

In the end, even that is a bottom line issue.

JEBtrois · October 2002

I think the bigger question is why is the budget a secret? If the company is for-profit then the budget really shouldn't be secret, particularly to the management team responsible to the share-holders. If the company is not-for-profit then the budget is public domain anyway. The long and short of it is that while the details of a line-item budget aren't really necessary for rank and file staff, the senior HR executive/director or whatever you call it is REQUIRED to have a working knowledge of the budget in my shop. I mean really...how can I expect my HR executive (someone indirectly responsible for approximately 1/2 of all operating expenses) to do his/her job without the knowledge of what's within the company's capabilities.

A budget is only a best guess on an upcoming fiscal year. Market pressures come into play and management does its best to control expenses based on actual revenue. The notion that if anyone wants to request something they can and then "management" will decide if it's in the budget is antiquate and, all things considered, in today's corporate environment, foolish. Put the cards on the table and do your best to navigate an increasingly competitive world; with the help of the entire team. Strategic items of the budget may not be shared, but the basics shouldn't be a secret. At the very least an operating statement and balance sheet should be shared with anyone who wants to see them unless things like raises etc. haven't been shared with everyone yet. I still hold that the senior ranking person of each division of the organization should be privy to all aspects of the budget.

John

Lori B · October 2002

I agree with all of the above. In my company, HR controls the single biggest cost centers (payroll, insurance, work comp, legal) so it would be absurd to not include HR in the budget process. In the same breath, we stand to implement the most cost savings/preventative measures by keeping us out of risk exposure and lawsuits. Talk these types of dollars to your CEO and he or she will hopefully see the light. Having said that, make sure you know how to read the financials so you can provide meaningful input. I think a lot of HR folks make a lot of noise about wanting to be strategic players but they lack the hard skills once the door is opened.

Why should HR see the budget?

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