CFOs – What Language Do You Teach In?

I had an interesting discussion with Andrew Codd recently. Andrew, in addition to having deep expertise in FP&A and data analysis, runs The Strength in the Numbers Show, a weekly podcast focused on the development of finance professionals.

During our discussion we touched on a key skill that helps financial professionals grow into business leaders. Being multi-lingual in the languages of business.

The foundational language of business is based on accounting and finance principles. It is the universal language that connects all companies, industries and even economies. A strong grasp of this language is critical to building a successful career in accounting, finance or treasury (AFT). “Seeing” the economic essence of a company by glancing at the financial statements is gift finance professionals don’t give ourselves enough credit for. So first, don’t underestimate the value your training and hard work as a professional brings to your company. Have an opinion based on facts and let it be heard.

Taking those steps will provide you with the reputation as an expert in your field. To become a leader at your company or in your industry it’s important to become a teacher. To be an effective teacher your teaching should be done in the native language of your students - the commercial language of your company and industry.

Here is an example. When I started my AFT career, I worked for a grain trading company. I didn’t hear the word income statement or balance sheet uttered by a commercial manager during my first two years on the job. The concepts important to the success of the business had to do with terms like “long and short”, “basis”, “elevations”, “basic hedge”, “position”, “spreads”, “bullish/bearish”… I could go on. Even terms I thought I knew, like “margin”, meant something different than I had learned in school. (It was used to describe the cash we had to put up with the futures exchange to own futures contracts.) Oh, the team was very focused on earnings. They just called it the “P&L” (not profit and loss and, certainly not, the income statement).

Learning the commercial language of our company was important. Around it we could construct the communication tools that fit the P&L model our managers used in making their decisions. They did not look at our income statement. We developed a method using positions and inventory values that presented the P&L in their language. Our job was to translate the financial results into results our whole team understood and could use. The bottom line was the same but how we got there was totally different than how I learned to build an income statement in Accounting 101.

Our exposure to so many parts of the business puts us in position to be great resources (teachers) to our colleagues. Take the challenge, learn the commercial language of your business and teach in it.

There is an emerging language in business (many would say it’s already emerged) that revolves around technology. The days of an IT manager and their team managing the server in a data room and personal computers at our desk is long gone. In today’s world information moves at lightning speed. The CFO and their team have a choice. They can embrace this change and lead the digital transformation at their company or be overwhelmed by it and lose their relevance. In the past 500 years a key role for AFT leaders has been to convert data, into information, into action. A key resource enabling us to perfect that role was a deep and broad understanding of accounting and finance. Much of the insight we delivered came from deep analysis of the internal workings of our organizations through the lens of the financial statements. Not long ago, benchmarking added an outside twist to the teaching we could deliver and more recently, the development of financial tools lead to the creation of financial models that improved our foresight and increased the accuracy of our predictions.

Today’s technology gives us the resources that dramatically increase the data available to help us manage our businesses more efficiently.

Data is an asset to be converted into information that helps drive insight and better decisions. This has been the key to successful organizations for thousands of years. It’s only recently that the amount of data available to us has grown at a pace that is difficult to keep up with. The irony is, the data has always existed. We had no means to practically analyze much of it; so we never tried. Technology has given us the means to procure, warehouse and analyze data previously un-minable.

The basic three-step approach hasn’t changed:

1. Identify the data the company must capture and analyze

2. Determine how the data can be converted into information

3. Develop methodologies to incorporate the information into the decision-making process.

… but it has become more complex in today’s world of Big Data. This complexity will create huge value for businesses that learn how to manage it. Answer this question, “If our company doesn’t adapt to this new complexity will we quit growing or disappear?”

Technology is no longer cloaked in mystery or its power possessed by a few. The technology challenges we face today include:

• clearing the clutter to understand what technology can benefit our business most

• making the business case for our technological architecture

• implementing the architecture

And when implementation is complete, sometimes before, we face the same challenges with new technology and start process all over.

This brings us back to the emerging business language of technology. A broad understanding of technology available or on the horizon that could benefit (enhance profitability) or harm (increase competitive pressure) your business is critical to your success as the champion of delivering decision making information to your organization. Learn the language, leverage new technologies and reap the benefits.

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