The passage of your HR budget through the annual Budget Review process is often a better indicator of the company's real endorsement of strategic HR than any document you could persuade the CEO to sign. For most of us, that time of year is dreaded - when all business units face the Finance Department inquisition of justifications, and pruning with a machette.

The ideal (and it is possible) is not for HR to sit on the other side of the table. HR should be sitting side-by-side with Finance on the enquiring side of the table, working jointly on assessing the resourcing needs of the organisation for the year ahead. If you are like most organisations, more than 60% of costs go into the Personnel Expenses line, with the rest falling into Operating Expenses, many of which are fixed. So, why should Finance sit alone as the guardian of the organizational purse-strings, when the biggest variable is the HR slice of the pie?

Firstly, the heads of HR and Finance need to be good enough partners for HR to get invited to sit through all of those presentations, and HR needs to commit (at the highest level) to sitting through the days of tedium, asking tough questions too. I found this one of the most enlightening exercises ever to undergo but, by the end of it, I knew a whole lot more about the fundamentals of our business than I did before.

That's the platform to strategic relevance.

Finance spends days listening to everyone trying to pad their budgets enough to survive the cuts and still have enough to run their departments. When it comes to making the cuts (after the song-and-dance show) Finance talks in very honest terms to the CEO as a partner about what is needed to run the business next year, and that's where you want to be.

The strong HR director will be courageous enough to identify and even champion where trimming should be made, and not chicken out into the 'equal pain' philosophy of pruning, whereby all cost centres are told to shave off X% from their submissions. So, how does this help you 'sell' your own HR budget and the salary increase percentage which is put into the budget?

  • You get to understand what the bottom line issues are that the CFO is grappling with. Unprofitable areas, marginal units, poor productivity, excessive overheads. By understanding where Finance is coming from, you will be in a much better place to get them to understand where you are coming from.
  • Support your budget with facts, not fluff. Accountants are trained differently to us, and don't like 'love & harmony' justifications, especially at budget time. This means salary survey data being shared, and other appropriate market benchmarking evidence.
  • Optimise your use of their budget template. Remember that one of the people you are facing is very proud of that template (he wrote it) and your detailed motivations, well thought out and justified, should be submitted well in advance, to minimise your reliance on the whims of the presentation ordeal.
  • If you have to give high level rationales for financially painful cost increases, refer to your company's own compensation philosophy. Almost certainly, you have bought into a 50th (or more) percentile of the market pay objective, so show the numbers on graphs, etc with appropriate costings. Immediately indicate that you realize that "we can't afford to do it all in one jump, but need an incremental approach". But, keep up your sleeve the example of the good young accountant who they regret having lost to the opposition for more money, just to drive your point home!
  • Refer to organisational goals when justifying other above-inflation increments. Plans to capture new markets, etc can be used to motivate additional investments in key areas you want supported.
  • The so-called softer HR aspects, like Training & Development, are difficult to inspire a die-hard accountant. So, instead of talking about people growth or career development, use language like productivity increases, error/rework reduction and risk mitigation. The terms are less sexy than HR professionals would like, but ring an accord with Finance.
  • Never be naive by talking about built-in 'fat'. Finance department also budgets for fat, but they call it "contingencies" and it sounds palatable. Likewise, you don't want to build in 'flexibility' as it will seem like you don't really know what you want. But planning to "offset" savings in one area with overruns in another sounds prudent.
  • Saying you would like to shave off more, but feel that the budgeted amount is 'conservative' is more likely to get the reluctant nod than blindly defending your number.
  • Finally, kicking for touch is a useful tactic when you are about to lose a decision while in the budget presentation, when you feel a "no" is coming. Count on the fact that these presentations all run overtime, and that the accountants are pressed to finish. So, by saying, "let me meet with X in Finance to see if we can achieve more savings" is likely to buy you another bite at the cherry, when you can do some more homework and convince the Number 2 of your case. Number 2 is often the key person to influence, not the chief pitbull, as he puts the numbers together. Getting time with him to "ask for advice" is often critical to your budget surviving the make or break back room discussions, when Finance decides what they will really support to the CFO and CEO.

And you thought it was just about money?!