October 2016 | Finance
In his best-selling book Less is More, a study of some of the world’s most productive companies, Jason Jennings calls it a “dark little secret”: the majority of CEOs, managers, and business owners who were not schooled in finance and accounting, he says, can’t read a financial statement. Their lack of knowledge means they’re “forced to rely on the help of a cadre of people — the business managers, head accountants, and CFOs.” And those people end up helping to make high-level decisions that should be in the hands of senior leaders.
Wharton accounting professor Richard Lambert is all too familiar with this secret: he directs the Executive Education program Finance and Accounting for the Non-Financial Manager, and is the author of Financial Literacy for Managers: Finance and Accounting for Better Decision-Making. But instead of working with those who are keeping their need for financial knowledge to themselves, Lambert sees executives who recognize the gap and are working to overcome it.
“The people who come to the program already have experience, knowledge, and operational talents. To be successful up to this point in their careers, they haven’t had to encounter finance and accounting,” he says. “Now, they’re in positions where issues like budgeting, resource allocation, and performance evaluation are important. Our focus is on adding finance and accounting to their existing skill set. Bringing the two together helps them add much greater value to their organizations.”
Since participants are often intimidated by accounting jargon, the program starts with the basics, the language and principles of finance. When they are able to express themselves ably in financial terms, and understand what others are saying, it allows them to then engage in more complex financial discussions both during the program and back at work.
Building quickly on those basics, participants learn to read and interpret financial statements, not just for the sake of understanding the numbers, but to help them delve deeper into performance. Lambert says the numbers can help them see where the organization is doing well, and where they can improve. “By analyzing reports, you can think about your strategy and alternative courses of action in financial terms. You can create financial projections that calculate an economic value for potential courses of action and see which ones add the most value. It takes the guesswork out of the process.”
For Lambert, teaching in the program is rewarding because he sees a transformation each time it runs. It starts with a group of experienced executives who are apprehensive about the wealth of numbers they are about to encounter, and ends with empowerment. “They become very good at reading, interpreting, and analyzing financial reports. They come away with new skills and tools they can use.”
Finance and accounting should not just be left to the professionals, says Lambert. “It should pervade the organization. If you can think in financial terms and act on that knowledge, you can be much more effective as a manager and add more value to your organization.”
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