No matter what you're managing, you should get familiar with your company's financial situation. Mary Shacklett explains why.
After I was promoted to my first managerial post, my boss made it clear that gaining management experience and continuing my IT education wasn't my only priority. Since I was a non-financial manager, he also expected me to become equally comfortable with understanding how to read the company's balance sheet and income statements, how to understand asset depreciation and cash flows, and other financial topics. Upper management made it a constant (and terrifying) exercise to review corporate financials in group meetings with managers--and to then randomly call upon those of us who were non-financial managers to interpret some of the numbers and to explain their significance within the context of the business.
It wasn't until several years later that I began to appreciate the purpose of the exercise, because in myself and in other non-financial managers, there were definite shortfalls in our understanding of the financial side of the company.
Perhaps this is why educating non-financial managers in the fundamentals of finance is important within companies, and why there are supplementary education programs in which managers in non-financial disciplines enroll. This supplementary training enables managers to better interpret financial reports, income statements, important financial ratios, costs and budgets, working capital, pricing strategies, and capital expenditures. It also enables managers to hold more productive discussions with CFOs and other financial professionals.
Of course, the inability to communicate with financial professionals is not just a non-financial manager's problem, either.
On the other side of the fence are financial professionals (often beginning with the CFO) who are poor communicators. They can sharpen their pencils and cut costs, but they might have very little knowledge or on-the-job experience about how to organize and run a project--or what it takes from a resource standpoint to keep a project going. For these financial experts, being able to clearly communicate and to develop effective relationships with people in the business is highly relevant. This is what makes it a top priority for financial executives and managers to develop relationship building, communications, and other important non-financial skills so they can overcome the financial divide in knowledge that all too often creates obstacles between them and non-financial managers.
Can this financial divide be traversed?
In one case at a high-tech company I was managing in, finance projected that the company would likely fall short of our revenue projections, which meant that there had to be a downward adjustment in expenditures. The CFO ended up being an instrumental catalyst in finding ways to keep a major project funded and running at full speed while IT found offsetting savings to help pay for it. Neither side had the total set of problem-solving skills needed to address the situation, but by bringing together our respective skills and also our general understanding of the other side's perspective, we were able to navigate the financial divide--and find a way to make both the project and the corporate balance sheet succeed.
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