Why should non-financial executives care about financial aspects?
What does it mean to have financial knowledge especially in current globalization?
With globalisation capital and human resources have become a lot more mobile and with the advent of the 4th industrial revolution technology has brought about new competitors and a greater possibility of new and better products entering the market and substantially lower cost. As a result, there is a greater focus on costs and efficiencies within companies and a need for managers and staff to be innovative and to contribute at all levels to the organisations success. The most important thing for each person in the organisation to understand is that every action, decision and sometimes inaction has a financial implication. The question is how do we expect staff to act in a way to accomplish this if we don’t give them the tools to do it?
Why should non-financial executives care about financial aspects? How will it ensure higher chance of their business's survival and success?
No matter where you find yourself in the organisation you are surrounded by financial implications. Every decision has to be weighed up against potential costs and benefits. Every project has to be considered to determine its costs and revenue streams. As a non-financial manager every decision you take will impact on the company’s bottom line- it might not be so obvious but it is real. Also, no non-financial manager wants to feel stupid or ignorant when managers and superiors discuss financial matters and you have no idea what they are talking about. This will certainly not improve any promotion prospects.
What are the benefits of acquiring financial knowledge for non-financial executives?
Every manager needs to be able to make financial forecasts, present a budget, deal with monthly variances and be able to cost projects. No manager can be effective without a solid working knowledge of finance. Finance is the life blood of an organisation and if you don’t understand it you don’t understand business at all. You are then limited in your career growth and future potential.
What would you say to those CFOs/heads of finance who say non-finance executives don't need the financial knowledge?
Unless you have managers who collectively understand both the strategies and processes required to manage finances, you will have a difficult time achieving the level of business success you want. That does not mean that your non-finance managers need to know how to calculate challenging contracts or negotiate deals, but there are specific key factors that training should cover.
For instance, all your managers should have a good understanding of how your specific business generates profit. In other words, they need to know what drives the revenue your company makes. They should also know the way your business invests capital. Through in-person education, you can explain to your non-finance managers the different ways that your business increases the generation of cash flow. Managers need to understand the way your company measures and manages performance, how it uses KPIs as a driving factor, what products it considers critical for ensuring a positive financial outcome, and so on. All your managers, including those who work outside of finance, play a critical role in the daily operations of your company. For that reason, providing them with a basic understanding of the business financial landscape is essential.