I believe it was Sir Francis Bacon in 1597 who is credited with saying, “Knowledge is power”. Another famous saying is “CASH is King”. So how is it that many companies don’t provide monthly financials to their department heads? In my mind, not keeping key staff informed is equal to Kings not having maps of their kingdom.
Let me explain. Assuming Mr. Bacon knew a thing or two about knowledge and power, he might argue that financial knowledge within an organization empowers leaders to LEAD. I’ve seen directors sit down with their administrative assistant and together find thousands of dollars in savings by reviewing department ledgers. I’ve seen managers who didn’t know the first thing about a budget, much less a variance report, grow over time to mentor their peers in how to operate effectively against a budget and grow department revenue year over year.
How is it then that many CEOs say that they don’t want to share the financial details of an organization with directors and managers because it might scare or overwhelm them. In my mind it’s all about what information is shared and how it is delivered.
Every organization needs a leadership training plan with a chapter on finance. If you are like so many other companies, you too have employees that showed natural leadership and were promoted into management roles, often with little to no prior management experience. It’s critical to have training plans that help managers lead. Understanding basic financials is a key skill.
One possible way of implementing director/ manager level financial data into an organization that currently doesn’t do this is detailed below.
Step 1: Basic Group Training
Start out by asking your Controller to prepare a basic power point on financial concepts along with examples of the types of reports that your company uses. The data can be fictitious if sharing actual might “overwhelm” them, but it’s training on the concepts that are important at first, not the numbers.
Step 2: Private coaching
This trainer could then schedule 1:1 follow-up sessions with each participant. Many managers/directors are hesitant to share openly how weak they really are in understanding financials.
Step 3: Share basic monthly data
Once the baseline training is done, start by sending out Department level financials along with the ledger. The CFO/Controller needs to schedule monthly review meetings with each Director to go over the data to answer questions and talk about results.
Step 4: Introduce the concept of a variance report
Implement the concept of a variance report, where the Director is responsible for providing an explanation prior to the monthly meeting with their Controller on any variance to budget over X dollars. This will begin to shift the responsibility and accountability of understanding department spend from the Controller to the Director. When a Director has to come with information instead of receive information there is a shift in ownership of results that occurs.
Step 5: Share results publicly
The next step is having department heads begin to share and be accountable to presenting financial data to the greater team. Peer accountability and performance intensifies the need to understand how one’s department impacts the whole and vice versa.
Slowly but surely an organization can move from sharing no financial data to empowering it’s leaders to make decisions daily that impact the bottom line. Information is power and we want powerful Kings!