To a lot of people working in large (and not so large) businesses, the word “Finance” means one of two things: the whole time-consuming, confidence-threatening mess of numbers associated with budgets, plans or – argh! – ratios (or even worse – Discounted Cash Flow); or the people who inflict the demands to work with these vicious numbers, the personnel of the Finance Department.
The fear ripples outwards:
- “It’ll take too much time”
- “I don’t know how to do it”
- “I’ll get it wrong”
- “I’ll look stupid”
- “I don’t dare ask”
- “I will hurt our results”
- “People will hate me”
- “I’ll lose my job”
- “People will hate me”
- “I will hurt our results”
- “I don’t dare ask”
- “I’ll look stupid”
- “I’ll get it wrong”
- “I don’t know how to do it”
Yet dealing with numbers is an essential aspect of business acumen. The language of business isn’t English, or German, or Chinese. The language of business is Finance. Every act in business either costs money, or it costs someone’s time – and that time involves their salary and is therefore money too. So everything must be represented in financial terms, in order to be analyzed: cost/benefit, investment/return, forecast/variance, benchmarking, Key Performance Indicators… they’re all financial, and they all need numbers.
The good news is that despite apparent differences in the format of financial statements in different countries, the underlying concepts and forms of analysis are simple, natural and universal.
Fear of Finance impacts the individual. It causes worry and stress, and it develops bad habits of avoidance and procrastination. It creates a negative perception of the motivations of those who ask for numbers: “They just use the numbers as a stick to beat us with.” “She just wants me to get all these numbers because she doesn’t know where to get them herself.”
Therefore Fear of Finance impacts the team. Not only is it corrosive for relationships, it either stifles the expression of valuable insights and opinions through fear of not being able to justify them in financial terms, or else it encourages blustery assertiveness of ill-founded opinions in an attempt to disguise insecurity of financial literacy. All of this is bad for the team’s spirit, wastes a lot time through incoherent discussions, and generates sub-optimal decisions.
Therefore Fear of Finance impacts the entire company. Bad decisions are made at the team level, and poorly understood requests for data from the Finance Department are answered with tardy and incorrect numbers and comments. Analysis is delayed, planning is done with inferior information, and achievable goals are missed.
Yet Fear of Finance can be overcome in a single workshop. What is necessary is to show people the simple underlying concepts of business finance: such things as
- the uses of the Income Statement and the Balance Sheet
- the difference between profit and cash
- how to visualize cost structure
- the impact of imbalances in supply and demand
and give them the experience of making decisions in running a simulated business, using numbers that are so round and simple that they don’t get in the way of conceptual learning.
At that point non-financial managers realize several things:
- the underlying concepts can be physically visualized
- and they are simple
- they all interrelate
- you don’t have to crunch the numbers, just understand them
- the Finance Department will crunch the numbers, they enjoy it
- actually, the Finance Department is useful
- in fact, you can treat them like a resource, and they’ll be your friends
- and you can always ask them, “What do you mean by that?”, and they’ll tell you.
Income/Outcome workshops from Andromeda Training achieve all this. We do it all the time, with people from all backgrounds, in all levels in a company, in countries around the world, in workshops ranging from 4 hours to 3 days. The keys are a physical board-game simulation, and clean and clear visualization of the financial structures (and this is where we are the best in the world).
Don’t despair. This is one area of business acumen that can be radically and rapidly improved.