Updated: Jul 24
This article is for anyone seeking information on creating a more financially intelligent company- whether an owner, executive, manager, or employee. We detail the importance of understanding the financial side of your business and the effects it can have on the overall performance of a company.
We are adamant about making a difference among our fellow small businesses as well as empowering our people through knowledge and truth. That being said, financial intelligence is a vehicle to true empowerment, understanding the data that indicates strengths, weaknesses, future forecasts, opportunities, and threats can be the difference between a surviving business and one that is thriving. For much too long there's been a misconception that only a handful of individuals in a company should be the ones that understand what the financial data means, we're here to disprove this ruse and make it known that the higher the financial intelligence quotient- the better a company performs.
A More Transparent and Purposeful Workplace
Understanding the financial side of the business creates more purpose within the work-life experience, knowing the rules of finance and how profits are figured allows you to see the bigger context of the business enterprise. Knowing how your company operates and how certain figures are affected by your contributions as well as their relation to the bottom line is a huge driving factor in employee satisfaction.
It is not a secret that power and politics govern a large part of the hierarchy within companies, giving unearned advantages to those who focus on creating allies for the wrong reasons. These imbalances create a blurring of a company's objectives and often lead to toxic work environments, but many believe the antidote to this is transparency. When there is a common understanding of company objectives and open communication about the steps being taken to attain them it is far easier to create a sense of camaraderie and trust within the organization.
A study conducted by the Center for effective organizations that measured factors of employee involvement like the sharing of information about company performance and training employees in skills in understanding the business concluded that when these factors were implemented, overall company performance was positively affected. Specifically, it saw a positive relation to productivity, customer satisfaction, quality, speed, profitability, competitiveness, and employee satisfaction.
This is to say that when people know what's going on- motivation, commitment, and trust in the company increases.
Sharing company financials and instilling a certain level of transparency when it comes to the numbers of the business, although an important factor, is not enough- they have to be understood.
Including financial training in your company cannot be a one-time thing, you can't expect to hold an annual meeting or hand out a few pamphlets and expect people to pick those things up without some drilling. The learning must be engaging, it must be interactive, and multi-faceted- video, audio, and hands-on, and ultimately it needs to be repeated as much as your budget and time allows.
Here are some great approaches for any owner or manager to take when implementing financial training within their company:
Start by creating informal training sessions, once or twice a month, power-points and/or supportive handouts are a great start. Survey your audience to gauge their knowledge of the basics, and assess and strategize on the content of your sessions. Make sure to allow at least 2-3 sessions per topic, and review sessions for relevancy to audience and company application. 30-60 minute sessions, make them voluntary but maybe offer an incentive to attend, encourage 100% attendance, and make sure to create an environment where attendees feel involved and valued for their contributions to the company.
Weekly "Numbers" Meeting
What are the few numbers that you watch on a regular basis that best measure company performance and that indicate you as a manager are doing a good job? Begin to share these numbers with your team on a weekly basis, and explain the importance of those numbers, where they come from, and how everyone's performance affects them. Show the trend lines as the sessions go by, start forecasting where you anticipate those numbers to be in the next month or few months, and watch your employees begin to take ownership of those forecasted numbers as they gradually realize how their specific duties move the needle.
Scoreboards and other visual aids
A strategy utilized in many high-volume/high-commission sales atmospheres- showcase numbers on a scoreboard, analyze the key numbers and compare/contrast performances.
Integrating leadership/management development programs with financial intelligence programs
Start with high-level employees, then host sessions for mid-level employees, then for all employees. Try training by employee role, department, or function, gauge receptiveness, then strategize for content accordingly.
Things to Consider:
Never neglect the foundational elements and always cater to the level of the audience, this includes leaders as well as employees. Foundational elements include reading an income statement and balance sheet, definitions of basic financial statement terms, and what it means to expense or capitalize.
Include your KPIs, key measures, and key concepts. This invites your audience into the conversations your CEO and CFO are having, what things are most important in your company and industry?
Review, Review, Review. Definitions, elements, formulas, and results.
Understanding your audience is vital. If you're working with salesmen, cater your training so that it can help those salesmen assess their client's needs from a financial perspective. If you're working with HR people, make sure they learn exactly how their duties affect the bottom line of the company.
In all of these approaches, you must acknowledge the key ways adults learn. Combining concepts with actual calculations, applying them to real situations, discussing the meaning of those results, then leading discussions about their impact is the best way to ensure your audience has the best chance of retaining the information being taught.
If you are a business owner who has been looking for business funding and feel like you have exasperated all of your available resources, or have gotten constant denials because of one issue or another, book a call with Regal Business Group and allow us to help you get your desired funding approved. ***RBG is an online financial marketplace partnered with SBA approved lenders as well as other industry leading business funding sources dedicated to helping you make the lending process easy. There are no fees associated with any of Regal Business Group's services.***
This article was sourced from Financial Intelligence: A Manager's Guide To Knowing What The Numbers Really Mean by Karen Berman.
Need help finding proper training? Find a financial literacy course on Coursera for free.