- unable to speak the language of business – a term often used when referring to accounting,
- lacking an appreciation of how their decisions influence the organizations financial results and they thus become too dependent on the opinion of accountants
- without adequate commercial literacy and in some cases,
- with limited business acumen because they do not grasp certain cause and effect relationships.
For more staff, gaining these insights can effectively be achieved through attending a financial training programme. However, when it comes to more senior leaders, this is often not the solution. A group programme is unlikely to cater for what are likely to be the unique needs of such individuals and some may even find themselves feeling more insecure for having had their inadequacies in this area exposed in front of others. An awkward situation to say the least, and one that sees a number of senior people who do attend courses retreat into the role of silent observer, reaping little reward from time spent away from the office. Regrettably, there are others whose only benefit from a financial programme is a vocabulary of jargon which they don’t really understand. Use of this jargon allows them to engage in ‘finance speak’ but a lack of insight into the concepts behind the terminology can lead to poor decisions and even worse consequences.
No wonder then that many avoid attending finance programmes despite their need for input in this area. What this leaves is a significant band of senior leaders who are left floundering when it comes to even the most rudimentary financial calculations and many others who lack a basic insight into what makes a business tick. What is the solution?
The discrete and personalised approach of one-on-one finance coaching offers a highly agreeable remedy for the technically skilled yet financially inept senior manager. Interaction on an individual basis allows for an assessment of the manager’s particular needs and a tailored response that leads him/her through an appropriate selection of discussions and exercises that will clarify and put into context, a wide range of essential financial concepts. There are coaches who specialise in this field.
An experienced financial coach will give leaders a sound understanding of such vital areas as what exactly costs are; how accountants calculate profit; why profit is an “opinion” and cash flow a fact – and how a profitable business can fail; and what questions to ask in the interpretation of financial statements. Effective coaching, however, requires a much broader focus than a simple ‘How to read a Balance Sheet’ exercise. After all, one needs to look at more than the financial statements to assess a business’s position and considerably more to gain an understanding of where and how specialist decisions impact on the business. Providing an insight into the overall function of a business requires a broader discussion of such issues as the legal environment of business; the effects of price changes and the relationship between margins, volumes and expenses; cost allocation and the budgetary process; and how to motivate requests for capital expenditure.
The aim is to provide the individual with the background needed to understand the impact of decisions made on the business’s profits and cash flow, and to be able to report on the performance of non-financial departments in financial terms. Non-financial leaders should ultimately be comfortable discussing financial decisions, and in a position not only to ask questions with confidence, but to evaluate the answers.
Potential candidates for one-on-one coaching tend to fall into two categories. Firstly, there are those who, by virtue of their position, are expected to have a sound working knowledge of finance, and, acutely aware of their shortcomings, seek help themselves. The second group comprises a band of senior leaders whose problem may best be described as an attitude of, “I try to avoid getting involved in matters related to finance lest I expose my ignorance.” These are the individuals who shy away from attending financial programmes and whose introduction to financial training assistance is generally through referral for coaching by an organisation that has some understanding for their unique requirements.
Whatever the motivation or mode of contact, individual financial training provides an appropriate and discrete solution for non-financial leaders who need pertinent input in order to play a more effective and meaningful role in the organisation.