When companies claim that ‘people are our greatest asset’ you can be forgiven for assuming that a certain amount of lip service is being paid. But softer skills such as internal communication, and intangible assets such as knowledge and brand management, are making their way up the finance director’s agenda.
Steve Harvey is a case in point. He joined Microsoft’s UK office as FD in 1990 after a spell at Habitat as a management accountant before its sale to IKEA. Harvey assumed the mantle of Microsoft’s director of people, profit and culture in the late 1990s, combining the finance and HR functions.
Harvey volunteered for the HR job because he felt he could make more impact on people in the business. “You get to a stage in life, and I’m now 45, when you want to give something back.” But as Microsoft UK is primarily concerned with marketing and selling products in the US, the financial aspects of the business were centralised in Washington State, meaning the UK FD job was more controller than director.
So Harvey’s number two, Paul Hart, who Harvey says “is a much better controller than I ever was”, assumed responsibility for ‘profit’ in January 2003, while Harvey became simply director of people and culture. This left Harvey to concentrate on succession planning and retaining talented staff.
Microsoft has historically had a bad reputation as an employer. When Harvey first joined Microsoft he admits it “was like the old Wild West” where employees worked ridiculous hours on bad pay on the promise of getting rich through share options. This, combined with lots of negative press, made it difficult to attract good talent to the organisation – especially when the share price was taking a tumble. “We got to the stage where we could only attract applications for jobs by putting out adverts without our name on them. That’s how bad our reputation got as a sweatshop.”
And while Harvey still says that Microsoft is quite “mean” in remuneration terms, the UK organisation has grown from less than 100 employees to about 1,500 today. Moreover, Microsoft came first in the Sunday Times Best Places to Work list in 2003 and employee churn levels are down to about 5% a year (and Harvey says they would be only 1% if he didn’t actively weed out staff who do not pull their weight).
Harvey still sees himself as a finance guy with a people focus. “I describe it as having a leg in each camp, but there is a hell of a tension between the legs as well,” he says. “When I volunteered to take over the HR function, some directors were not happy at all because they didn’t like the idea of a finance person being in charge of people.” Even Microsoft’s centralised HR department in the US is still unsure about having a former FD running the HR operation in the UK. “I still think finance in the US sees me as an ally because I control the biggest area of spend, but I’m not sure about HR – I think they look at me quite sceptically sometimes.”
This tension between finance and HR, Harvey says, is typical in many businesses, but having worked in both functions, Harvey says he is best placed to add value through good HR practice. But is Harvey going soft – swapping the nuts and bolts of finance for the unstrategic and unaccountable world of HR? Absolutely not, he says. “We now take a very business-like approach to HR. When HR people used to wake up at night they were thinking about HR issues, not business issues. They would pop up in board meetings when there was a people issue and be quiet the rest of the time. I turned that around … to enforce some financial discipline in the HR world.”
One of Harvey’s key performance indicators in his HR role is turnover per sales and marketing head, and he estimates that it stands at $3.9m compared with an upper-quartile UK average of about $400,000. Nevertheless, Microsoft’s CEO Steve Ballmer announced that the organisation has to save $1bn in cost over the next year. Harvey is focused on making those cost targets without affecting long-term productivity, especially staff levels. “You can’t cut costs easily and you can do a lot of damage very quickly,” he says.
In general, Harvey says that FDs don’t always make the best HR people as there are many FDs in business who are too focused on cutting costs. Nevertheless, he says it is the duty of all managers to step back from budgets and nurture talent within their organisations.
“Finance directors must make sure they give young talent a chance,” Harvey says. “I was running finance for a week (at Microsoft) and my focus was making sure I was able to use and keep bright young talent and not make the internal hierarchy too long. A lot of finance guys don’t know how to support staff and just give them more and more work. To have someone who has mentored you and has opened a few doors for you makes the difference. That approach would make the finance world a much better place.”