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HR needs to know the numbers

It used to be common for all sectors of a business to operate independently -- HR didn't cross Financial or vice versa. But over the years HR has moved from processing vacation to advising and leading organizational direction, and with a more important role comes the importance of proving value.

Rotman School of Management Professor Partha Mohanram tells HRM TV why it's time for HR professionals to embrace the financial side of the company, especially for those aiming for a seat in the boardroom.

Video transcript below:

Caitlin Nobes, HRM TV
Caitlin Nobes:
 Did you go into HR in hopes of avoiding the kind of budgets and financing an accountant would need, I may have bad news for you.  I am Caitlin Nobes, you are watching HRM TV.

For most of us, it’s easy to avoid learning anything beyond the basics of company finances.  But  if you are going to move beyond middle management, you need to understand more than just red and black.

Partha Mohanram, Rotman School of Management
Partha Mohanram:
 So you need to know what the financial statements of your division are.  You need to know the basic concepts of what a balance sheet is, what an income statement is, what are sales, what are revenues, what are profits, what are expenses, how do you account for these things.  So these things become really crucial as you rise in an organisation.

Caitlin Nobes:  For those without a background in finances, it can seem overwhelming, but the complicated words and phrases usually describe fairly simple concepts.  It’s important to understand how financial statements are developed, because if you don’t know the process you could be making decisions based on bad information.

Partha Mohanram:  What you see isn’t always what you get.  What I mean by this is, sometimes you can have two companies or which have very similar financial numbers, but the two companies performance and future prospects may be completely different.  Understanding not just the numbers, but what lies behind the numbers right, is very critical.

Caitlin Nobes:  It’s not an area often emphasized for HR professionals, but as the focus on budgets and return on investment increases, having an understanding of financial processes will help you communicate to the [___ ].  I’m Caitlin Nobes, thanks for watching HRM TV.