It’s All in the Numbers: Financial Acumen

Janice Molloy

March 28, 2022

Along with strategic thinking and market orientation, financial savvy is a key aspect of business acumen. Yet as Rebecca Knight wrote in How to Improve Your Finance Skills (Even if You Hate Numbers), “If you’re not a numbers person, finance is daunting.”

Even those who are good with numbers, like the friend whom everyone relies on to divvy up the restaurant bill, may not find their organization’s finances all that interesting or relevant to their work. However, they’d be mistaken.

Why financial acumen matters

When Knight asked several experts why financial savvy matters to professionals throughout an organization, they shared a similar sentiment: All employees must be able to “contribute to a discussion on the company’s performance.” Without this ability, you are vulnerable to making incorrect assumptions and uninformed decisions—something that may end up limiting your career over time.

“If you speak the language of money, you will be more successful,” Harvard Business School Professor Richard Ruback told Knight. After all, Ruback noted, “Finance is the way businesses keep score.”

“Finance is the way businesses keep score,” Harvard Business School Professor Richard Ruback says.

And keep score they must. Obviously, if an organization runs low on cash, it won’t be able to pay its bills. Even a high-flying company that, thanks to its investors, can withstand repeated losses must eventually make more than it spends. Otherwise, that high-flyer will come stumbling back down to earth—and bring lots of people with it.

On a day-to-day basis, managers who know the ins and outs of their organization’s finances have a better sense of where to reduce costs, increase investments, or both. They also have deeper insights into the financial implications of their day-to-day actions.

Get to know your organization’s financials

You can get to know your organization’s fiscal health—and the factors that influence it—by familiarizing yourself with its core financial statements. These are:

• Income statement: A summary of revenues, expenses, and profits over a specific period of time. This statement is also called the profit and loss statement, or just the P&L.
• Balance sheet: Your organization’s assets and liabilities at a specific point in time.
• Cash flow statement: Where your organization’s money comes in from and flows out to.

Your organization likely has other measures it uses to determine its financial health, too. You’ll want to learn what these are and why they matter to your company or your industry.

Another source of information about your organization’s financial health is its annual report. This document includes both financial statements and narrative sections. It provides not just financial details but also insight into your organization’s strategy and market orientation—important information as you look to increase your overall business acumen. (And for those who still find numbers daunting, those narrative sections may come as a relief!)

Apply your financial acumen

Whatever your role, you have an influence on your company’s financial performance. For starters, everyone with budget authority needs to keep a close eye on expenses. Even if an expense is budgeted for, you may realize the money could be more wisely spent on other projects or elsewhere in the organization. That kind of proactive thinking is good for the business and for your team.

Depending on your function, you can take other actions. For instance, a plant manager can develop ways to decrease the burden of unsold inventory on the books. An HR professional can devise an onboarding program that accelerates time-to-productivity for new hires. And if you’re in sales, you have an opportunity to make a financial impact by, for example, negotiating a 30-day payment schedule rather than a 45-day option, bringing in cash sooner.

Getting to know the numbers doesn’t have to be daunting. It will help you make connections between your job and your organization’s financial picture. And it certainly will be valuable to both you and your organization.

In your current role, how might you boost your financial acumen?

The post It’s All in the Numbers: Financial Acumen appeared first on Harvard Business Impact.

Strategic Thinking: Because Good Ideas Can Come From Anywhere

Janice Molloy

November 7, 2017

We asked Mason Weintraub, former Director of Digital Engagement at Oxfam America, about the importance of strategic thinking. Here’s what Mason had to say:

I often think I’m expected to have all the answers about what to do with digital strategy. But the reality is that I lead a very talented team, and one of the ideas that we have tried to engender on the team is that good ideas can come from anywhere.

“Good ideas can come from anywhere.” Most of us recognize the wisdom embedded in that statement, yet we still see strategy as the realm of our organization’s senior leaders. That may be because of our tendency to equate strategic thinking with strategic planning. Although these practices are related and equally necessary for organizational success, they are actually quite distinct.

Strategic planning vs. strategic thinking

In strategic planning, leaders gather data and decide on the path the organization will take to achieve its goals. With strategic thinking, employees at all levels and in all functions continually scan for new ways to contribute to the organization’s success. They apply those insights as they carry out organizational priorities and provide input to the overall strategy. In this way, strategic thinking is part of everyone’s job – whatever their role or level of responsibility.

Why is this ability to think strategically especially important now? Today’s organizations are more dispersed and less hierarchical than ever before. With the pace of change continuing to rise, it’s no longer feasible for people to wait for “orders from above.” All employees must keep an eye on the future, not just react to what’s happening in the present. They need to look beyond their functional areas to become aware of the bigger context in which they operate. And they have to be agile learners who identify opportunities by challenging their own and their team’s assumptions about how things work in their organization and industry.

Becoming a strategic thinker

With strategic thinking taking on even greater importance in organizations, we’ve made key updates to the Harvard ManageMentor Strategic Thinking topic. The content we’ve added is geared to helping people boost their productivity and effectiveness by making strategic thinking a habit, and includes practical ways that enable them to do so.

One practice is simply making the time to think strategically – something that’s not always easy in today’s fast-paced business settings. Another involves inviting dissent on your team. To make strategic decisions, you need people on all sides of an issue to speak their minds. By letting team members know that speaking up is an important part of their jobs, you free them to provide important input.

Other strategic thinking practices are useful for training yourself to see opportunities and threats well before they happen. For example, most of us are comfortable using convergent thinking – analysis, logic, and reasoning – to come up with the “best” option from a set of choices. We tend to be less adept at divergent thinking, which involves generating lots of ideas with the goal of finding innovative solutions. This isn’t an either-or process: When you first diverge as a team to generate ideas and then converge on a path forward, you improve your ability to design and implement strategic actions.

Don’t let the future surprise you

The future will undoubtedly look a lot different from today. No one can predict tomorrow, but by identifying different scenarios, you and members of your team stretch your thinking about what opportunities and threats might emerge, how they might impact your organization, and what you can do about them. You learn to enact truly meaningful change rather than make incremental improvements. And it all begins with strategic thinking.

How do you foster strategic thinking throughout your organization?

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