Explain the business
When it comes to the financials, are you speaking another language?
|3 minute read|
Your staff don’t understand the economics of your organisation. Sorry to break this news, especially after you have presented the financial results and budgets to your team every month for the past ten years.
Most words in accounting and finance are like another language that your staff only half understand.
And, if you are taking some comfort in the fact that at least the senior team understand the finances, then you may need to think again. Chances are they are no more enlightened.
To check how accurate these bold statements are for your organisation, listen carefully to the conversations about budgets, costs and profits/surplus.
Are people questioning the cost blowouts in their portfolios?
Do people know who their most profitable customers are and why?
Do they know the difference between an overhead and a direct cost?
Do they know the difference between profit and profit margin?
Are you receiving requests from one senior team member for additional staff whilst at the same time they know you are considering retrenching staff elsewhere?
Answers to all of these questions should signal the level of financial literacy across the team.
It is true that many people don’t know about the financial implications of their area because they have no interest in it. They choose to ignore it in the hope that someone else is on top of the finances.
This cannot be allowed to continue.
Incongruously it is the lower level staff who are closest to the customer and where the most money is spent.
They are best placed to know where the opportunities for savings exist and where the best results from investment can be achieved. Yet their lack of understanding of the financial implications limits their ability to apply this unique insight.
We need to find ways to engage staff in the business of the business.
There are many games and simulations that can help with financial literacy, which can then be adapted to explain the specifics of your organisation.
With the greatest respect to your finance team, they are probably not the best people to carry out this education program. Their intimate knowledge of the topic and the language leads them to make significant assumptions about what everyone else does or should know.
Go for an external provider who can work with each small team to explain the big picture for the whole organisation and how the individual contribution of each team and team member impact on the overall budget.
One small step in the next 24 hours
Make a decision to never again present the monthly finances to your staff.
From now on, allocate a different staff member each month to present the results.
This will immediately force each presenter to get on top of the monthly accounts, to understand them well enough to give a good presentation and deliver it in a common language everyone can understand.
If they have had access to the initial financial literacy training, they can get additional coaching and support from the finance team.
Such an approach will terrify some people but it will send a clear signal that everyone needs to understand the business.