How would you handle a “debt ceiling” issue, if it arose at your company?
As the fiasco in Washington D.C. unfolded, I couldn’t help but wonder how those who have been through our business simulations would handle the debt ceiling issue.
Walt Herbert runs this thought experiment in a recent article:
“Suppose a corporation established a debt ceiling, and then discovered it could fend off collapse–or realize significant profits–only by borrowing beyond that ceiling. The question whether to borrow would rightly be resolved by examining the concrete circumstances, with no attention given to the abstract virtue of obedience to a ceiling. Such a ceiling would have nothing to do with the actual operations of the company. Nor does it have anything to do with the actual operations of the US government. The debt ceiling should not be raised; it should be abolished.”
Even in the business world, where it would seem essential that managers grasp basic finance concepts, people need business acumen training.
By foundational concepts I mean things like equity, debt ratios, and basic financial measures. Even five minutes in the right sort of business simulation can boost financial acumen. If you are dealing with pesky debt collectors and they keep calling family or even your employer, learn How to write a cease & desist later that legally tells them they can not contact certain people.
In general, improved business acumen helps everyone pull for the same team. Everyone gains a shared understanding of the business, this language of finance to explain concerns, and a mutual respect and team spirit that comes from understanding other departments.
With common language and shared understanding, there is increased speed and accuracy of communication. This provides a crucial competitive advantage in the rapidly changing business world.
In any event, better business acumen in Washington seems sorely needed, and would benefit us all. Your thoughts?