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Financial Analysis for HR Professionals

A new Rotman initiative aims to give HR executives enough financial savvy to contribute effectively at the highest level


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We know human resource management practices have the potential to build a capacity for innovation and strategic renewal in organizations. We also know that potential is not always realised.

It is important therefore, that HR professionals are included in the conversation as companies reset for post-pandemic change and growth. Once included, to contribute effectively, they need a strong understanding of the ‘big picture’ of the business they are in, beyond their professional expertise.

Central to this understanding of the business environment and dynamics that constitute the big picture, for their organization, is a grasp of financial analysis.

This is an area that many non-finance executives find difficult—particularly those HR professionals who typically had a tertiary education in the humanities and can have a quasi-phobia of figures and finance. “Often HR people became HR executives because they didn't want to deal with the financial aspect of the firm,” says Ramy Elitzur, Associate Professor of Accounting at University of Toronto’s Rotman School of Management, “And that's understandable. The only problem is it can mean being shut out of many vital discussions in the C-suite.”

Finance Analysis for HR Professionals, a unique new online executive program led by Professor Elitzur, aims to put this right. “Having these people, which to a large extent, are women, actually be part of the conversation—and maybe remedy the fact they are not often promoted to be the CEOs—that was why we thought they need a course specifically explaining, in a user-friendly manner, what financial literacy is and how they can use financial information, not just in executive discussions, but in their daily lives.”

Being a part of C-suite conversations is important, but financial literacy is just as important in its influence on how HR professionals perform their day-to-day work. Their role in staff recruitment, retention, and development is necessarily ringed by financial considerations which sit within the firm’s wider short-, medium-, and long-term financial context.

“I'm not here to turn them into accountants,” declares Elitzur, “I want to make them savvy users of financial experts.” When financial metrics appear to an executive as gibberish it lowers their ability to contribute to the conversation. To use data analytics, executives do not need to be data scientists, they just need to be able to have intelligent conversations with data scientists—the same applies to financial analysis.


Join Rotman School of Management’s ‘Finance Analysis for HR Professionals’ program to gain the financial savvy you need to contribute effectively

Dates: October 6-7 & 13-14 │ Time: 10am – 1pm EST │ Format: 100% Online


“These HR people are highly intelligent people. We can help them go one notch up,” states Elitzur. “I've had students from my financial literacy class who went to a board meeting where the board chair said, ‘I think it was a mistake to send you to that course because you suddenly asked me questions that you never asked…. The best questions in board meetings and audit committees are not the financial ones. They’re from the people who actually have a critical mindset—and these people do have that critical mindset.”

Understanding financial statements (balance sheets, P&Ls, cashflow analysis, etc.) is in essence relatively straightforward, but it is something that many people are afraid of because they assume a lot of complex knowledge and maths is involved. They are wary of the figures and fear being made to look bad, particularly in discussion with the type of CFO whose attitude is, ‘I’m the domain expert. You’ve no idea what I'm talking about’.

“It actually creates two kinds of responses,” says Elitzur. “One response is, ‘I don't know about that, therefore I don't want to get to deal with it’. The other response, which I find, for example, with physicians, is ‘We're so smart that we don't need to learn that’. And that's actually much worse than saying, I don't know.”

About the program

The first day looks at who is responsible for what—management duties in terms of financial reporting; the roles of the board of directors, the audit committee, and the regulators; and the responsibilities of HR executives themselves for financial reporting.

An exercise using game theory is employed to explain how corporate governance works, the reasons why we have reports, asymmetric information between management and shareholders, and conflicts of interest.

“One of the major tasks of governance,” Elitzur points out, “is to minimize the agency problem—the problem between shareholders, and management.” Because management knows so much more about the week-to-week running of the business than shareholders do and the two have different agendas, a legally binding system of financial reporting and auditing has been developed to level the playing field.

This not only has implications in terms of governance, but also in terms of incentives. “Executive compensation doesn't, in itself, fulfill its basic role, which is to align the interests of management and shareholders.” HR executives need to understand this as they deal with executive compensation consultants and committees.

Similarly, HR executives designing an incentive plan must ask: does this make sense? Elitzur gives the example of a stressful wait at an airport baggage carousel when he arrived in Israel in a hurry to attend a funeral. Two bags showed up quickly, but not his. After some time, he confronted the floor manager and asked if a staff bonus scheme was in place. It was but it was based on the time taken to get the first bags to the carousel—"Run to the truck, pick two random pieces of luggage and throw them on the carousel and you get your bonus; where it should be based on the last piece or the majority of the pieces being delivered.”

At the core of Elitzur’s teaching is the idea that, “Financial literacy is first and foremost, business literacy. You need to understand the context. So financial literacy for somebody who sits in Microsoft is very different to financial literacy for somebody who sits in a very different organization.”

On the second day the program ramps up the difficulty level. As Elitzur explains, “We take a real global company in real time—how do you analyze the company and what can you learn of its strategy? For example, which products should it keep? which territories should it get out of?”  It also looks at the role of management in risk management and the roles of the CRO and of the audit committee.

The Finance Analysis for HR Professionals program aims to show participants both perspectives, “How business models, operations and strategy affect financial statements and ratios, on one hand. And on the other—how financial ratios and statements make you change your strategy, make you change your operations, make you change your business model and how they affect shareholder value.”

Ultimately, for Elitzur, it’s about confidence building as well as capability building—"If you tell yourself you cannot do something,” he says, “you won't be able to do it.”

Rotman School of Management is Canada’s leading business school and has Canada’s largest group of management faculty. It is home to some of the most innovative research institutes in the world



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