No subject seems to pervade our lives as much as finance. Whether it is wresting with the family budget or seeing if your company qualifies for a bank loan, finance looms larger than any other technical subject on a daily basis. Managers are expected to scale down medical supply inventories or set up budgets for departments or projects, yet it has been my experience working as a business coach with in the healthcare industry that most management is sorely lacking in their basic understanding of finance. Why even some C – level employees depend too heavily on the CFO to tell them WHAT to do in regards to smart financial decision making.
All organizations preach to their managers to think like owners and consider all sorts of ideas and options before making a decision. We drill home the virtues of thinking costs savings and value added to our managers, yet how many businesses or healthcare organizations, large or small, train their management in the specifics of business finance? I would suggest few to none. But what business does not need ample cash flow and sustained profitability from every department in order to be successful?
If managers are expected to take ownership and share the responsibilities of running the business, they must be held to the same standards as owners or executive level management when it comes to financial understanding and accountability.
The key is to start training people immediately. We spend so much time training or hiring for technical expertise but very little to the financial understanding that is so basic for the achievement of corporate financial goals. Before promoting from within, ensure candidates have met certain basic criteria for leading people and understanding the financial risks of all aspects of their leadership. Before hiring from the outside, consider interview questions that specifically elicit a person’s financial comprehension.
So many executives simply hand over periodic financial reports to managers and assume they know what the heck they are looking at. Most reports end up in the bottom drawer somewhere. Many managers don’t take company financials seriously until they are required to – by that time it may be too late.
Managers today should know how to effectively utilize the basic tools such as reading, understanding and utilizing a balance sheet, statement of cash flows, and a profit and loss statement when making decisions. Teach managers at all levels how to create a functional budget so there are accurate financial metrics by which to measure a manager’s performance. Every manager’s performance should be tied directly to company financial goals. If not, don’t give them the title of manager. The need to make quick financial decisions is vital at every level to succeed in business today.
How would you rate your management’s actual understanding and accurate use of financial information?
Now is the time to take action to ensure your managers have every tool available to them to make proper decisions and take appropriate actions as leaders- especially those critical financial tools.
To your continued success,
Coach Nancy
