Have you ever boarded an aircraft and glanced into the cockpit? Have you wondered, as many people do, just how they manage to deal with the dozens of instruments, knobs, levers and switches? Well, never fear, the pilot sitting in the left seat will have spent thousands of hours in the right-hand seat before he was made a captain.
It makes sense doesn’t it? But yet in business people are promoted into management positions without a clue as to how to read the instruments. In this case the instruments are the financial statements. They tell you how the business is performing and about the financial health of the business. And if you can’t read them the business may crash.
So you read, get sent on a ‘Finance for Non-Financial Managers’ course, and become slightly familiar with that thick pack that lands on your desk every month – accountants like to create the ‘thud factor’.
Or, have you just gained enough knowledge of the jargon* to create the impression that you know what you’re talking about?
That’s just not good enough! It won’t keep you out of trouble.
You trot along to your monthly management meeting ready for action – but are you really ready?
Picture this scenario. Your monthly meeting takes place in the second week of each month. Let’s say that in the first week of the month being reported on there was an unfortunate incident that will affect the numbers. In the rush of events you have forgotten the incident which took place weeks before. However, at the meeting your bosses pounce on the offending figures and there you are; embarrassed as hell.
So what do you do?
Build your own ‘instrument 'panel’.
Imagine yourself being away at the coast – drinks with little umbrellas and all that goes with that – you’ve seen the photos of Richard Branson.
You need to identify three different sets of important numbers:
- Which three key figures would, if SMSed to you daily, assure you that all was well back at work – or have you hopping on a plane to get back
- You also need to have three different key figures that you get on a weekly basis that either reassure or dismay you.
- And then you need to have three other key figures that you get at the month end.
So now if something bad happens during a month that will show up in the figures at the financial meeting in the following month you will be prepared to explain exactly what happened – and what corrective action you took to ensure that it doesn’t happen again.
Incidentally, pilots to not scan that vast array of instruments in the cockpit. They focus on certain key instruments and there are alarms that alert them to any other problems.
Focus on the key numbers that you have identified and you won’t crash.
*Note: I don't teach jargon on my workshops but a real understanding by getting participants to go exercises and work through short cars studies.