Fractional HR Perspective: What Strategic HR Looks Like in Practice
Alison Folwell, head of marketing at People Puzzles, a fractional HR consultancy provider based in the U.K., shares how to align the CFO-CHRO partnership.
There is a version of the HR-finance relationship that most executives know well: operational, transactional, and administrative. You will have seen it: HR submits a budget request, finance scrutinizes it, HR justifies it, finance approves a reduced version, and everyone goes back to their corners.
It is a dynamic that serves nobody, yet it persists; not because either function is doing something wrong, but because neither has taken the time to understand what the other is actually for.
When that changes, something more useful becomes possible. Finance gets a clearer picture of where people risk is turning into financial risk. HR gets a genuine seat at the commercial table. And the business gets better decisions.
The misconception that holds both functions back
Ask a CFO what HR does, and a surprisingly common answer, even among educated leaders, is some version of: the soft stuff. Contracts, culture, and well-being. Important, perhaps, but not quite the engine room.
This reflects a real version of HR: the operational side, the kind focused on compliance, process, and administration, which doesn’t generate much commercial insight. It costs money and manages risk in a limited, reactive way. If that is the only version of HR a CFO has encountered, their skepticism is not unreasonable.
What changes the equation is strategic HR. And the difference between the two is not subtle. These are related disciplines, but which are poles apart in impact, influence, and outcomes.
A transactional HR function reports that it is running a manager development program this quarter. A strategic HR function makes a different kind of case: team turnover is 40% higher in poorly managed teams, and replacing one mid-level employee costs approximately £15,000 (nearly $20,000 USD) in recruitment and lost productivity. The program is the same. The framing tells the CFO something entirely different about the function presenting it.
What strategic HR actually looks like
Strategic HR doesn’t often happen naturally – it usually needs to be brought in intentionally, but it can be coached and embedded successfully.
To explore what this looks like in action, we spoke with Nicola Cavanagh, regional director at People Puzzles, a U.K.-based fractional HR consultancy. She recounted working with the managing director of a fast-scaling, founder-led manufacturing business who was struggling to balance the people needs with the business needs and had reached a stalemate.
“People issues and financial pressures had compounded to the point where the business was beginning to implode, and the managing director knew it,” she said. “But he was paralyzed by being too close to the business, and too involved. He had built close personal relationships with his team and could not find the distance to make the decisions the business needed.” The business impact of this indecision was creating financial strain and revenue was stalling. It was time to bring finance into the mix with a connected approach.
In order to solve the issue, Cavanagh worked with Steve Anderson, a regional director based in the West Midlands of The CFO Centre, a fractional CFO provider, and his team, to help the client unify on finance and HR.
“Founder-led businesses are typically well-built for growth,” Anderson said. “They plan for it, invest behind it, and build their operating models around it. What they find harder is the moment growth stalls as often they don’t have the data-driven insights to make informed decisions.”
The leader needed to focus on strategic HR through significant risk management.
What this managing director needed was not an HR process or a handbook. “He needed someone to actually take over the situation, give him perspective, help him find a solution, and to take over the delivery, having those tough conversations that he continually shied away from,” Cavanagh said.
As the business grew, it became clear that they didn't have the right people in the right roles. The managing director was so involved in the day-to-day issues that he was pulled away from leading the business. It was clear that he needed strong leaders below him to effectively manage the teams, drive accountability and productivity, embed their growth aspirations, and ensure everyone knew how their role contributed.
Without strategic intervention, companies operate as a business maintaining a cost base its revenue can no longer support. That is a financial problem. But the reason it persists is nearly always a people problem — a founder who cannot make difficult calls, a leadership team without the structure or capability to adapt, and a culture that has never been tested by contraction.
This is where HR and finance, working together, can do their most important work.
Growth is only half the job
One of the more persistent myths about strategic HR is that it is primarily a growth-phase function. Talent acquisition, culture building, and leadership development — these are the things HR is assumed to be for. Finance, meanwhile, manages the numbers when things get difficult.
In practice, good HR is as valuable in decline and transition as it is in growth — often more so. Restructuring, redundancy, performance management, organizational design under pressure: these are the moments when people decisions carry the highest financial stakes.
An employment tribunal that was not avoided costs money. A redundancy process that was not handled correctly costs money. A senior underperformer who was not managed out fairly and promptly costs money — in productivity, in team morale, and eventually in whatever it costs to exit them later under worse conditions.
The language matters here too. HR leaders who describe this work as "managing a difficult leaver situation" are underselling what is actually a significant financial risk mitigation exercise. The CFO sitting across the table is thinking about liability, cost, and precedent. HR should be comfortable in that conversation, because they are already doing the work it describes.
What a genuine partnership looks like in practice
The fractional model offers a useful case study in what the successful HR-finance relationship can look like; when a CFO identifies that a people problem is driving a financial one, they know what to ask for and why.
That clarity does not happen automatically. It is built through familiarity. These are professionals who understand each other's disciplines and trust that a referral will be handled with the same commercial rigor they would apply themselves.
For in-house HR and finance leaders, the equivalent is investing in the relationship continuously rather than episodically. Not just at budget time. Not just when a restructure needs sign-off. The CFO who understands what HR is doing and why, is not a gatekeeper to be managed. They are a thinking partner who can make the HR function more effective.
The shift that changes everything
Strategic HR does not ask finance to take people investment on faith. It brings the commercial case alongside the human one. When HR raises a concern about compensation benchmarking, the commercial framing is not: we think we should pay people more. It is: we have three roles sitting below market rate, the flight risk on those positions is real, and the cost of replacing them significantly outweighs the cost of fixing the gap now.
That is not spin. That is accuracy. The people risk and the financial risk are the same risk, and naming it that way is what earns HR a place in the conversation finance is already having.
CFOs who have worked alongside strategic HR tend to become its most effective advocates. They have watched it turn a founder's paralysis into a restructure that saved the business. They have seen it reduce the people risk sitting inside their financial model. They understand that when the two functions are genuinely in dialogue — not periodic negotiation — the business makes better decisions, faster.
The soft stuff, when it is done properly, is anything but.
Alison Folwell is the head of marketing at People Puzzles, a fractional HR consultancy provider based in the U.K.
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