June 30, 2025 • 21 mins
Donna and Yakov discuss the pitfalls of having HR and Learning & Development report to the Chief Financial Officer instead of the CEO. This setup, though seemingly logical, often misaligns HR's strategic goals with financial priorities, treating people as costs rather than assets. Solutions include direct CEO reporting or creating a Chief People Officer role for better strategic alignment.
#HR, #LearningAndDevelopment, #Finance, #StrategicAlignment, #ChiefPeopleOfficer, #HumanResources, #Leadership
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Episode Transcript
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(00:00):
Welcome to Bite-sized L&D, your quick no-nonsense update on the latest in workplace learning.
(00:10):
Today, we're tackling the strategic implications of HR and learning and development, reporting
structures and how aligning them with the CFO can impact organisational goals.
We'll also delve into why HR should have a direct line to the CEO to boost long-term
growth and innovation.
Alright, let's get straight into it.
(00:33):
Alright everybody, welcome to another deep dive on Bite-sized L&D.
I'm Dana and as always, I'm here with my co-host, the ever-insightful Yakov Lasker.
Today we're tackling something that might sound a bit inside baseball, but trust me,
it affects every single person in your organisation.
Thanks Dana, and you're absolutely right about this being more important than people
(00:57):
realise.
We're talking about organisational reporting structures today.
Specifically, why so many companies make what seems like a logical decision that turns out
to be an absolute strategic catastrophe.
Ooh, strong words, lay it on me Yakov.
Well, here's the scenario that plays out in countless organisations.
(01:17):
HR and learning and development end up reporting to the Chief Financial Officer instead of
the CEO.
On the surface, it makes total sense, right?
The CFO controls the budget, people are often the biggest expense, and hey, someone needs
to keep those costs in check.
Right, and I bet a lot of our listeners are thinking, what's wrong with that?
(01:40):
My CFO is super competent and trustworthy.
And you know what?
They probably are.
But here's where things get interesting, and by interesting, I mean problematic.
Exactly.
The research shows that while only 13% of organisations have HR reporting to the CFO,
it's still surprisingly common.
(02:02):
And when it happens, it creates this fundamental misalignment between what HR and L&D are supposed
to do and how their success gets measured.
So walk me through why this seems logical in the first place, because I'm guessing
there's a pretty compelling case that gets made in boardrooms across the country.
Oh, absolutely.
Picture this.
A growing company may be started as a small business.
(02:25):
Initially, whoever handled payroll also handled the basic HR stuff.
Benefits, compliance, maybe some hiring.
That person naturally reported to finance because, well, they were essentially doing
accounting work with a people twist.
Makes sense.
And as the company grows, they just keep that structure?
(02:47):
Exactly.
It's organisational inertia.
Plus, CFOs are typically the most trusted lieutenants of CEOs.
They're seen as the responsible adults in the room who keep costs under control.
So when HR issues come up, it feels natural to say, hey, CFO, you handle this too.
And let's be honest, people are expensive.
(03:09):
Salaries, benefits, training costs.
It all adds up fast.
So having the money person oversee the people function probably feels like good financial
discipline.
You've hit on something crucial there, Dana.
This whole approach treats people as a cost centre rather than an investment.
And that's where the wheels start coming off the bus.
(03:30):
But here's what makes it even worse.
CFOs are fundamentally wired for administration, not innovation or production or cooperation.
Their entire skill set is built around managing what already exists, not creating what could
be.
That's such an important distinction.
So when you put someone whose expertise is in administrative control in charge of functions
(03:54):
that need to drive innovation and people development, you're setting up a fundamental mismatch.
Right.
Because when your boss's primary job is to cut costs and maximise efficiency, suddenly
every L&D programme, every retention initiative, every employee development opportunity has
to justify itself in immediate, no quantifiable financial terms.
(04:18):
And here's where it gets really messy.
This creates massive tension with other C-level executives.
Oh, how so?
Think about it.
The COO is focused on operational excellence and scaling the business.
The CTO is pushing for innovation and technical advancement.
The chief marketing officer wants to build brand and attract talent.
(04:42):
But when HR reports to the CFO, people decisions get filtered through a purely cost-saving
lens that often conflicts with what these other executives need.
So you've got the CTO saying, we need to invest in upskilling our developers in AI technologies.
And the CFO-controlled HR is like, that's a $50,000 expense.
(05:03):
What's the immediate ROI?
Exactly.
And in theory, the CFO should be aligned with the company's operations, product development,
marketing and sales strategy.
But here's the dirty little secret.
This rarely happens in real life.
Most product strategy meetings?
The CFO isn't even in the room.
(05:24):
Wait, really?
That seems like a pretty big disconnect.
It's more common than you'd think.
CFOs often operate in their own silo, focused on the financial reports and budget management
while the actual business strategy gets developed without their input.
So when HR reports to someone who's disconnected from the core business strategy, how can HR
(05:45):
possibly support that strategy effectively?
And here's the kicker.
Some of the most important people investments simply can't be measured that way, at least
not in the short term.
How do you put a precise dollar figure on improved employee engagement?
Or better leadership skills?
Or a stronger company culture?
Ooh, and I bet this creates some pretty uncomfortable conversations when L&D comes to the CFO and
(06:09):
says we need $50,000 for a leadership development program.
You're reading my mind.
The CFO is going to ask, what's the ROI?
How do we know this will generate more than $50,000 in value?
And honestly, that's not an unreasonable question.
But the L&D professional is stuck trying to prove the value of something that might pay
(06:29):
dividends for years in ways that are hard to quantify.
So the CFO is doing their job, protecting the bottom line.
But that fundamental orientation creates this constant tension with what L&D is trying to
accomplish.
Exactly.
And it gets worse.
When HR reports to finance, they get pushed one step away from strategic decision making.
(06:52):
Think about it.
Instead of having a direct line to the CEO where they can influence company-wide people
strategy, every initiative has to first convince the CFO, who then might advocate up to the
CEO.
That's like playing telephone with your career development strategy.
And we all know how well that game works out.
Ha!
(07:12):
Perfect analogy.
But seriously, this distance from strategic decision making is huge.
The research shows that 61% of organizations have HR reporting directly to the CEO.
And there's a good reason for that.
When people decisions are made at the highest level, they're more likely to align with long-term
business goals rather than just quarterly cost targets.
(07:34):
I'm starting to see why you called this a strategic catastrophe earlier.
But let's talk about L&D specifically, because I imagine this creates some unique challenges
for learning and development teams.
Oh, it's particularly brutal for L&D.
Here's why.
Learning and development is inherently about long-term growth and capability building.
(07:55):
They're investing in people today, so they can drive business results tomorrow, next quarter,
next year.
But CFOs are often measured on short-term financial performance.
So you've got this fundamental mismatch in time horizons.
Exactly!
And it shows up in how L&D programs get evaluated.
Instead of asking, are we building the capabilities our organization needs for the future?
(08:17):
The question becomes, can we prove this training will generate X dollars in savings or revenue
by the end of the quarter?
And that probably leads to focusing on the wrong kinds of learning programs, right?
Like maybe you invest in technical skills training because it's easier to measure, but
you skip the leadership development that's actually more critical long-term.
(08:40):
Absolutely!
You end up with what I call metrics-driven mediocrity.
Programs get designed around what's easy to measure rather than what's actually most
valuable.
The research shows that while 96% of L&D leaders want to report on business impact, only 17%
are actually doing it effectively.
Yikes!
(09:01):
So we're measuring the wrong things, and even when we try to measure the right things.
We're not very good at it.
That's the sad reality.
And when L&D reports to the CFO, this pressure to prove immediate financial value becomes
even more intense.
But here's another layer that makes this really problematic.
CFOs fundamentally view people as costs, not assets.
(09:26):
They're typically less people-oriented and less empathetic by nature, which sounds harsh,
but it's actually just a reflection of their training and role.
Right.
They're trained to look at numbers, not navigate human complexity.
Exactly!
And here's the kicker.
This mindset influences who they hire for HR roles.
When a CFO is hiring HR leaders, they're often looking for people who think like them.
(09:50):
Administratively focused, cost-conscious, compliant.
They're not necessarily looking for the empathetic, people-first leaders that actually make HR
effective.
Oh wow!
So it's not just about reporting structure.
It's about who ends up in HR leadership positions in the first place.
Precisely!
And you can see this play out in everyday decisions.
(10:11):
I heard a perfect example from an HR professional recently.
During a discussion about flexible work policies, the CFO said, why should we give them the
right to come only two days to the office?
I come every day.
That's such a Diane Xing CFO approach, applying their own experience and priorities to everyone
else without considering different roles, working styles, or what actually drives productivity.
(10:38):
That's pretty telling.
It shows a complete lack of understanding about what motivates different types of workers
or how to create policies that actually support performance.
And this problem gets even worse in modern, technology-driven companies.
Most CFOs come from traditional business backgrounds and represent what I'd call old industry thinking.
(11:01):
They often don't understand high-tech environments, software development cycles, or the unique
people dynamics that drive innovation in these spaces.
Can you give me an example of what you mean by that?
Sure, in a tech company, you might have developers who do their best work at 2 AM, or creative
teams that need long periods of uninterrupted focus, or research teams where breakthrough
(11:23):
moments can't be scheduled.
A traditional CFO looks at that and sees inefficiency or lack of structure.
They don't understand that forcing everyone into a 9-to-5 office-based model might actually
destroy the very creativity and productivity they're trying to optimize.
Right.
Because they're applying industrial age management thinking to knowledge, work, and creative
(11:46):
processes.
Exactly.
And here's where this creates a cascading problem.
When HR reports to someone who doesn't understand the business, the products, or the unique
challenges of different departments, how can HR possibly be effective business partners?
They end up making policies and programs in a vacuum without really understanding what
each division actually needs to succeed.
(12:08):
So instead of HR being strategic partners who understand the business deeply, they become
this disconnected administrative function that applies one-size-fits-all solutions.
Precisely.
And this makes me wonder if we're thinking about organizational structure all wrong.
Maybe instead of having one centralized HR function reporting to the CFO, each major
(12:30):
division should have its own HR and LND support that really understands their specific challenges,
culture, and success factors.
That's a fascinating idea.
So like the engineering division would have HR people who actually understand software
development culture, and the sales division would have HR support that gets the unique
(12:51):
pressures and motivations of sales teams.
This is making me think about talent retention too.
Like if you're constantly focused on minimizing costs, you might miss the bigger picture of
what it actually costs to lose good people.
Oh, that's a perfect example.
The cost of turnover is often hidden and spread out over time.
(13:11):
You've got recruitment costs, training costs for replacements, lost productivity during
transitions, the impact on team morale.
It's substantial, but not always obvious on a monthly P&L statement.
And if your LND team is reporting to someone whose job is to watch every penny going out
the door, they might not get the investment needed to keep people engaged and growing
(13:33):
in their roles.
It becomes this vicious cycle where underinvestment in people development leads to higher turnover,
which leads to higher costs, which leads to even more pressure to cut LND spending.
It's completely backwards.
So let's talk about the skills mismatch here.
Because even if we have an amazing CFO who really cares about people, are they actually
(13:56):
equipped to guide HR and LND strategy?
That's such an important point, Donna.
The skills that make someone an excellent financial leader are often quite different
from, and sometimes in direct opposition to, the skills needed for effective people leadership.
Finance is about precision, control, risk, mitigation, staying within established parameters.
(14:20):
Right.
They're the check the box people, which is incredibly valuable for financial management.
Absolutely.
People development is more about vision, creativity, taking calculated risks on human potential,
thinking outside the box.
One expert I came across put it perfectly.
They said a leader needs to be a visionary with talent for out of the box thinking, while
(14:43):
finance professionals are often focused on staying within the box and controlling variables.
And there's nothing wrong with either approach in their proper context.
But when you put a control oriented mindset in charge of a function that needs to be innovative
and growth focused, you get suboptimal results.
Exactly.
Plus, think about the message this sends to the rest of the organization.
(15:06):
When HR and LND report to finance, you're essentially telling your workforce that people
are primarily a cost to be managed rather than an asset to be developed.
Ooh, that's a cultural signal I hadn't considered.
Employees are pretty smart.
They notice these organizational structures and draw conclusions about what the company
actually values.
(15:27):
Right.
And if you want to attract and retain top talent, especially in today's market where
people are increasingly focused on growth and development opportunities, that signal
can be really damaging.
It suggests that people development is an afterthought rather than a strategic priority.
So what about those situations where it might seem unavoidable?
(15:49):
Like maybe you're a smaller company and your CEO is already stretched thin with a bunch
of direct reports.
Good question.
And I get it.
There's definitely a span of control issue as companies grow.
But here's the thing.
If you truly believe that people are your most important asset, then people's strategy should
be one of the things the CEO makes time for, even if it means delegating other responsibilities.
(16:15):
That's a really good point.
It's about prioritization and what you're willing to invest your most senior leadership
attention in.
Exactly.
And if you absolutely must have HR report to someone other than the CEO, there are better
alternatives than the CFO.
Some companies have HR report to the COO, especially if operations includes a strong
people element.
(16:37):
Others create a chief people officer role that sits at the same level as the CFO.
I like that idea.
Creating people strategy represented at the same level as financial strategy rather than
subordinated to it.
Yes.
It's about creating what Jack Welch called the golden triangle.
CEO, CFO and HR all working together as equals rather than in a hierarchy where financial
(17:00):
considerations always trump people considerations.
So let's get practical for a minute.
Say someone listening to this realizes their organization has HR and L&D reporting to the
CFO and they're thinking, oh no, we're doing this wrong.
What should they actually do about it?
Great question.
First don't panic.
(17:21):
Organizational structure is important, but it's not everything.
You can still do good L&D work even in a suboptimal reporting structure.
But if you want to advocate for change, start by building a compelling business case.
What would that look like?
Focus on strategic alignment and competitive advantage.
Know how your current structure might be limiting your ability to respond to talent challenges,
(17:45):
develop future leaders, or build the capabilities needed for long-term growth.
Use language that resonates with business leaders.
Talk about talent risks, competitive positioning, strategic capability building, and probably
avoid framing it as we don't like reporting to the CFO, right?
Make it about what's best for business outcomes.
(18:07):
Absolutely.
To commit positively, something like to maximize our people investment and align talent strategy
with business strategy, we should consider having HR report directly to the CFO.
Focus on the opportunity rather than the problem.
Makes sense.
Any other practical advice for L&D professionals who find themselves in this situation right
(18:29):
now?
Build relationships across the organization, especially with business leaders who can speak
to the value of your programs.
If you can get line managers and department heads talking about how L&D initiatives have
helped their teams perform better, that creates a powerful coalition for change.
And I imagine being extra disciplined about measurement and storytelling becomes crucial
(18:52):
when you're reporting to a finance-oriented leader.
100%.
You need to get really good at translating people outcomes into business language.
That doesn't mean compromising on what you do, but it does mean getting better at explaining
what matters in terms your audience cares about.
This has been such an eye-opening conversation, Yakov.
I think a lot of our listeners are going to be looking at their org charts with fresh
(19:15):
eyes after this.
I hope so.
Because here's the bottom line.
And this is something every senior leader should understand.
If you want people development to be strategic rather than just transactional, it needs to
be positioned strategically in your organization.
Right.
Leader follows strategy, but structure also shapes strategy.
(19:37):
If you bury people development under cost management, don't be surprised when it gets
treated like a cost center instead of a growth driver.
Perfectly said.
And in today's economy, where talent is often the primary differentiator between companies,
that's a competitive risk you can't afford to take.
So maybe you can apply this thinking to your own organization.
(19:58):
Take a look at where HR and L&D sit in your org chart.
Ask yourself.
Does this structure support our people strategy or does it constrain it?
And if it's constraining it, what can you do to advocate for change?
And remember, this isn't about being anti-finance or anti-CFO.
CFOs play a crucial role and should absolutely be involved in people's strategy.
(20:20):
But they should be partners in that strategy, not gatekeepers who filter everything through
a cost management lens.
Great distinction, collaboration, not subordination.
Exactly right.
This has been another fantastic deep dive, folks.
If this episode got you thinking about organizational design and people strategy, we'd love to hear
(20:40):
from you.
Drop us a line and let us know how your organization handles these relationships.
And if you're dealing with any of these challenges in your own workplace, remember that change
is possible, but it usually starts with someone willing to make the case for why things could
be better.
Absolutely.
Thanks for tuning in to Bite-sized L&D.
(21:01):
Until next time, keep learning and keep growing.
See you next episode.
(21:31):
Stay tuned for more updates.
Welcome to Bite-sized L&D, your quick no-nonsense update on the latest in workplace learning.
(00:10):
Today, we're tackling the strategic implications of HR and learning and development, reporting
structures and how aligning them with the CFO can impact organisational goals.
We'll also delve into why HR should have a direct line to the CEO to boost long-term
growth and innovation.
Alright, let's get straight into it.
(00:33):
Alright everybody, welcome to another deep dive on Bite-sized L&D.
I'm Dana and as always, I'm here with my co-host, the ever-insightful Yakov Lasker.
Today we're tackling something that might sound a bit inside baseball, but trust me,
it affects every single person in your organisation.
Thanks Dana, and you're absolutely right about this being more important than people
(00:57):
realise.
We're talking about organisational reporting structures today.
Specifically, why so many companies make what seems like a logical decision that turns out
to be an absolute strategic catastrophe.
Ooh, strong words, lay it on me Yakov.
Well, here's the scenario that plays out in countless organisations.
(01:17):
HR and learning and development end up reporting to the Chief Financial Officer instead of
the CEO.
On the surface, it makes total sense, right?
The CFO controls the budget, people are often the biggest expense, and hey, someone needs
to keep those costs in check.
Right, and I bet a lot of our listeners are thinking, what's wrong with that?
(01:40):
My CFO is super competent and trustworthy.
And you know what?
They probably are.
But here's where things get interesting, and by interesting, I mean problematic.
Exactly.
The research shows that while only 13% of organisations have HR reporting to the CFO,
it's still surprisingly common.
(02:02):
And when it happens, it creates this fundamental misalignment between what HR and L&D are supposed
to do and how their success gets measured.
So walk me through why this seems logical in the first place, because I'm guessing
there's a pretty compelling case that gets made in boardrooms across the country.
Oh, absolutely.
Picture this.
A growing company may be started as a small business.
(02:25):
Initially, whoever handled payroll also handled the basic HR stuff.
Benefits, compliance, maybe some hiring.
That person naturally reported to finance because, well, they were essentially doing
accounting work with a people twist.
Makes sense.
And as the company grows, they just keep that structure?
(02:47):
Exactly.
It's organisational inertia.
Plus, CFOs are typically the most trusted lieutenants of CEOs.
They're seen as the responsible adults in the room who keep costs under control.
So when HR issues come up, it feels natural to say, hey, CFO, you handle this too.
And let's be honest, people are expensive.
(03:09):
Salaries, benefits, training costs.
It all adds up fast.
So having the money person oversee the people function probably feels like good financial
discipline.
You've hit on something crucial there, Dana.
This whole approach treats people as a cost centre rather than an investment.
And that's where the wheels start coming off the bus.
(03:30):
But here's what makes it even worse.
CFOs are fundamentally wired for administration, not innovation or production or cooperation.
Their entire skill set is built around managing what already exists, not creating what could
be.
That's such an important distinction.
So when you put someone whose expertise is in administrative control in charge of functions
(03:54):
that need to drive innovation and people development, you're setting up a fundamental mismatch.
Right.
Because when your boss's primary job is to cut costs and maximise efficiency, suddenly
every L&D programme, every retention initiative, every employee development opportunity has
to justify itself in immediate, no quantifiable financial terms.
(04:18):
And here's where it gets really messy.
This creates massive tension with other C-level executives.
Oh, how so?
Think about it.
The COO is focused on operational excellence and scaling the business.
The CTO is pushing for innovation and technical advancement.
The chief marketing officer wants to build brand and attract talent.
(04:42):
But when HR reports to the CFO, people decisions get filtered through a purely cost-saving
lens that often conflicts with what these other executives need.
So you've got the CTO saying, we need to invest in upskilling our developers in AI technologies.
And the CFO-controlled HR is like, that's a $50,000 expense.
(05:03):
What's the immediate ROI?
Exactly.
And in theory, the CFO should be aligned with the company's operations, product development,
marketing and sales strategy.
But here's the dirty little secret.
This rarely happens in real life.
Most product strategy meetings?
The CFO isn't even in the room.
(05:24):
Wait, really?
That seems like a pretty big disconnect.
It's more common than you'd think.
CFOs often operate in their own silo, focused on the financial reports and budget management
while the actual business strategy gets developed without their input.
So when HR reports to someone who's disconnected from the core business strategy, how can HR
(05:45):
possibly support that strategy effectively?
And here's the kicker.
Some of the most important people investments simply can't be measured that way, at least
not in the short term.
How do you put a precise dollar figure on improved employee engagement?
Or better leadership skills?
Or a stronger company culture?
Ooh, and I bet this creates some pretty uncomfortable conversations when L&D comes to the CFO and
(06:09):
says we need $50,000 for a leadership development program.
You're reading my mind.
The CFO is going to ask, what's the ROI?
How do we know this will generate more than $50,000 in value?
And honestly, that's not an unreasonable question.
But the L&D professional is stuck trying to prove the value of something that might pay
(06:29):
dividends for years in ways that are hard to quantify.
So the CFO is doing their job, protecting the bottom line.
But that fundamental orientation creates this constant tension with what L&D is trying to
accomplish.
Exactly.
And it gets worse.
When HR reports to finance, they get pushed one step away from strategic decision making.
(06:52):
Think about it.
Instead of having a direct line to the CEO where they can influence company-wide people
strategy, every initiative has to first convince the CFO, who then might advocate up to the
CEO.
That's like playing telephone with your career development strategy.
And we all know how well that game works out.
Ha!
(07:12):
Perfect analogy.
But seriously, this distance from strategic decision making is huge.
The research shows that 61% of organizations have HR reporting directly to the CEO.
And there's a good reason for that.
When people decisions are made at the highest level, they're more likely to align with long-term
business goals rather than just quarterly cost targets.
(07:34):
I'm starting to see why you called this a strategic catastrophe earlier.
But let's talk about L&D specifically, because I imagine this creates some unique challenges
for learning and development teams.
Oh, it's particularly brutal for L&D.
Here's why.
Learning and development is inherently about long-term growth and capability building.
(07:55):
They're investing in people today, so they can drive business results tomorrow, next quarter,
next year.
But CFOs are often measured on short-term financial performance.
So you've got this fundamental mismatch in time horizons.
Exactly!
And it shows up in how L&D programs get evaluated.
Instead of asking, are we building the capabilities our organization needs for the future?
(08:17):
The question becomes, can we prove this training will generate X dollars in savings or revenue
by the end of the quarter?
And that probably leads to focusing on the wrong kinds of learning programs, right?
Like maybe you invest in technical skills training because it's easier to measure, but
you skip the leadership development that's actually more critical long-term.
(08:40):
Absolutely!
You end up with what I call metrics-driven mediocrity.
Programs get designed around what's easy to measure rather than what's actually most
valuable.
The research shows that while 96% of L&D leaders want to report on business impact, only 17%
are actually doing it effectively.
Yikes!
(09:01):
So we're measuring the wrong things, and even when we try to measure the right things.
We're not very good at it.
That's the sad reality.
And when L&D reports to the CFO, this pressure to prove immediate financial value becomes
even more intense.
But here's another layer that makes this really problematic.
CFOs fundamentally view people as costs, not assets.
(09:26):
They're typically less people-oriented and less empathetic by nature, which sounds harsh,
but it's actually just a reflection of their training and role.
Right.
They're trained to look at numbers, not navigate human complexity.
Exactly!
And here's the kicker.
This mindset influences who they hire for HR roles.
When a CFO is hiring HR leaders, they're often looking for people who think like them.
(09:50):
Administratively focused, cost-conscious, compliant.
They're not necessarily looking for the empathetic, people-first leaders that actually make HR
effective.
Oh wow!
So it's not just about reporting structure.
It's about who ends up in HR leadership positions in the first place.
Precisely!
And you can see this play out in everyday decisions.
(10:11):
I heard a perfect example from an HR professional recently.
During a discussion about flexible work policies, the CFO said, why should we give them the
right to come only two days to the office?
I come every day.
That's such a Diane Xing CFO approach, applying their own experience and priorities to everyone
else without considering different roles, working styles, or what actually drives productivity.
(10:38):
That's pretty telling.
It shows a complete lack of understanding about what motivates different types of workers
or how to create policies that actually support performance.
And this problem gets even worse in modern, technology-driven companies.
Most CFOs come from traditional business backgrounds and represent what I'd call old industry thinking.
(11:01):
They often don't understand high-tech environments, software development cycles, or the unique
people dynamics that drive innovation in these spaces.
Can you give me an example of what you mean by that?
Sure, in a tech company, you might have developers who do their best work at 2 AM, or creative
teams that need long periods of uninterrupted focus, or research teams where breakthrough
(11:23):
moments can't be scheduled.
A traditional CFO looks at that and sees inefficiency or lack of structure.
They don't understand that forcing everyone into a 9-to-5 office-based model might actually
destroy the very creativity and productivity they're trying to optimize.
Right.
Because they're applying industrial age management thinking to knowledge, work, and creative
(11:46):
processes.
Exactly.
And here's where this creates a cascading problem.
When HR reports to someone who doesn't understand the business, the products, or the unique
challenges of different departments, how can HR possibly be effective business partners?
They end up making policies and programs in a vacuum without really understanding what
each division actually needs to succeed.
(12:08):
So instead of HR being strategic partners who understand the business deeply, they become
this disconnected administrative function that applies one-size-fits-all solutions.
Precisely.
And this makes me wonder if we're thinking about organizational structure all wrong.
Maybe instead of having one centralized HR function reporting to the CFO, each major
(12:30):
division should have its own HR and LND support that really understands their specific challenges,
culture, and success factors.
That's a fascinating idea.
So like the engineering division would have HR people who actually understand software
development culture, and the sales division would have HR support that gets the unique
(12:51):
pressures and motivations of sales teams.
This is making me think about talent retention too.
Like if you're constantly focused on minimizing costs, you might miss the bigger picture of
what it actually costs to lose good people.
Oh, that's a perfect example.
The cost of turnover is often hidden and spread out over time.
(13:11):
You've got recruitment costs, training costs for replacements, lost productivity during
transitions, the impact on team morale.
It's substantial, but not always obvious on a monthly P&L statement.
And if your LND team is reporting to someone whose job is to watch every penny going out
the door, they might not get the investment needed to keep people engaged and growing
(13:33):
in their roles.
It becomes this vicious cycle where underinvestment in people development leads to higher turnover,
which leads to higher costs, which leads to even more pressure to cut LND spending.
It's completely backwards.
So let's talk about the skills mismatch here.
Because even if we have an amazing CFO who really cares about people, are they actually
(13:56):
equipped to guide HR and LND strategy?
That's such an important point, Donna.
The skills that make someone an excellent financial leader are often quite different
from, and sometimes in direct opposition to, the skills needed for effective people leadership.
Finance is about precision, control, risk, mitigation, staying within established parameters.
(14:20):
Right.
They're the check the box people, which is incredibly valuable for financial management.
Absolutely.
People development is more about vision, creativity, taking calculated risks on human potential,
thinking outside the box.
One expert I came across put it perfectly.
They said a leader needs to be a visionary with talent for out of the box thinking, while
(14:43):
finance professionals are often focused on staying within the box and controlling variables.
And there's nothing wrong with either approach in their proper context.
But when you put a control oriented mindset in charge of a function that needs to be innovative
and growth focused, you get suboptimal results.
Exactly.
Plus, think about the message this sends to the rest of the organization.
(15:06):
When HR and LND report to finance, you're essentially telling your workforce that people
are primarily a cost to be managed rather than an asset to be developed.
Ooh, that's a cultural signal I hadn't considered.
Employees are pretty smart.
They notice these organizational structures and draw conclusions about what the company
actually values.
(15:27):
Right.
And if you want to attract and retain top talent, especially in today's market where
people are increasingly focused on growth and development opportunities, that signal
can be really damaging.
It suggests that people development is an afterthought rather than a strategic priority.
So what about those situations where it might seem unavoidable?
(15:49):
Like maybe you're a smaller company and your CEO is already stretched thin with a bunch
of direct reports.
Good question.
And I get it.
There's definitely a span of control issue as companies grow.
But here's the thing.
If you truly believe that people are your most important asset, then people's strategy should
be one of the things the CEO makes time for, even if it means delegating other responsibilities.
(16:15):
That's a really good point.
It's about prioritization and what you're willing to invest your most senior leadership
attention in.
Exactly.
And if you absolutely must have HR report to someone other than the CEO, there are better
alternatives than the CFO.
Some companies have HR report to the COO, especially if operations includes a strong
people element.
(16:37):
Others create a chief people officer role that sits at the same level as the CFO.
I like that idea.
Creating people strategy represented at the same level as financial strategy rather than
subordinated to it.
Yes.
It's about creating what Jack Welch called the golden triangle.
CEO, CFO and HR all working together as equals rather than in a hierarchy where financial
(17:00):
considerations always trump people considerations.
So let's get practical for a minute.
Say someone listening to this realizes their organization has HR and L&D reporting to the
CFO and they're thinking, oh no, we're doing this wrong.
What should they actually do about it?
Great question.
First don't panic.
(17:21):
Organizational structure is important, but it's not everything.
You can still do good L&D work even in a suboptimal reporting structure.
But if you want to advocate for change, start by building a compelling business case.
What would that look like?
Focus on strategic alignment and competitive advantage.
Know how your current structure might be limiting your ability to respond to talent challenges,
(17:45):
develop future leaders, or build the capabilities needed for long-term growth.
Use language that resonates with business leaders.
Talk about talent risks, competitive positioning, strategic capability building, and probably
avoid framing it as we don't like reporting to the CFO, right?
Make it about what's best for business outcomes.
(18:07):
Absolutely.
To commit positively, something like to maximize our people investment and align talent strategy
with business strategy, we should consider having HR report directly to the CFO.
Focus on the opportunity rather than the problem.
Makes sense.
Any other practical advice for L&D professionals who find themselves in this situation right
(18:29):
now?
Build relationships across the organization, especially with business leaders who can speak
to the value of your programs.
If you can get line managers and department heads talking about how L&D initiatives have
helped their teams perform better, that creates a powerful coalition for change.
And I imagine being extra disciplined about measurement and storytelling becomes crucial
(18:52):
when you're reporting to a finance-oriented leader.
100%.
You need to get really good at translating people outcomes into business language.
That doesn't mean compromising on what you do, but it does mean getting better at explaining
what matters in terms your audience cares about.
This has been such an eye-opening conversation, Yakov.
I think a lot of our listeners are going to be looking at their org charts with fresh
(19:15):
eyes after this.
I hope so.
Because here's the bottom line.
And this is something every senior leader should understand.
If you want people development to be strategic rather than just transactional, it needs to
be positioned strategically in your organization.
Right.
Leader follows strategy, but structure also shapes strategy.
(19:37):
If you bury people development under cost management, don't be surprised when it gets
treated like a cost center instead of a growth driver.
Perfectly said.
And in today's economy, where talent is often the primary differentiator between companies,
that's a competitive risk you can't afford to take.
So maybe you can apply this thinking to your own organization.
(19:58):
Take a look at where HR and L&D sit in your org chart.
Ask yourself.
Does this structure support our people strategy or does it constrain it?
And if it's constraining it, what can you do to advocate for change?
And remember, this isn't about being anti-finance or anti-CFO.
CFOs play a crucial role and should absolutely be involved in people's strategy.
(20:20):
But they should be partners in that strategy, not gatekeepers who filter everything through
a cost management lens.
Great distinction, collaboration, not subordination.
Exactly right.
This has been another fantastic deep dive, folks.
If this episode got you thinking about organizational design and people strategy, we'd love to hear
(20:40):
from you.
Drop us a line and let us know how your organization handles these relationships.
And if you're dealing with any of these challenges in your own workplace, remember that change
is possible, but it usually starts with someone willing to make the case for why things could
be better.
Absolutely.
Thanks for tuning in to Bite-sized L&D.
(21:01):
Until next time, keep learning and keep growing.
See you next episode.
(21:31):
Stay tuned for more updates.
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