Wharton@Work

July 2024 | Finance

Gaining a Strategic Edge with Financial Literacy

In modern business, where leaders are expected to be cross-functional collaborators and make decisions based on a holistic understanding of their organizations, financial acumen is not just a skill but a necessity. But many executives have limited training in finance and accounting and need to develop the specific expertise to decipher financial reports and engage in informed strategic decision making. That means they must rely on others’ expertise and can’t participate as meaningfully in steering their organization toward fiscal stability and growth.

Those were the reasons behind Dr. David Burmeister’s decision to attend Wharton’s Finance and Accounting for the Non-Financial Manager program. Dr. Burmeister is president of the Lehigh Valley Physician Group and chairperson of the Department of Emergency and Hospital Medicine at Lehigh Valley Health Network. He says, “I've been in a physician executive role for 13 years. My work as a chair of emergency and hospital medicine has been focused on managing people, spearheading projects, and developing business plans, and I've always looked at the financials. But I decided to take this course because I wanted to make sure that I’m asking the right questions to improve my understanding of my finance colleagues’ language and expertise.”

Like many of the participants in Finance and Accounting, Dr. Burmeister has familiarity with basic financial terminology and reports, and he says discussions about “net present value and the internal rate of return weren’t new to me. I had a relatively large base of knowledge, but the program was an opportunity for me to enhance and solidify it, and then to apply it more broadly.”

That application began on the first day of the program, as he reached out to his colleagues at the health network between classroom sessions. “I said, ‘I need to meet with you and talk about how we view this part of the balance sheet. I need to view this part of the financial statement. Let's talk about the statements of cash flow and how we think as an organization about what they mean.’ I met with our network accountant yesterday for two hours. I now have a better understanding of what he thinks and how he thinks when we assign our expenses and revenues. I developed a better understanding of how finance and accounting apply to me in this organization, and how to better connect with the right people to make sure that I understand their perspectives.”

Scaling Knowledge with Responsibilities

Wharton accounting professor Rick Lambert, who serves as academic director of Finance and Accounting, says, “The thing executives in the program tend to have in common is that they have not had to encounter finance and accounting to be successful, and they’re a little intimidated by the wealth of numbers and the jargon. Now they are moving into positions where understanding issues like budgets, resource allocation, and performance evaluation is important, so they want to add to their skill set. Some know a little, others may be rusty, and for others this is very new. They can all come together in the program and get a lot out of it.”

Professor Lambert stresses that while the subject matter may be intimidating, especially at a school known for its rigorous finance curriculum, the program is geared toward executives with little to no previous exposure to the topics. “We start by building from the basics — but we build very quickly. By the end of the week, they are very good at reading, interpreting, and analyzing financial reports. It’s very rewarding to hear them say, ‘Now I get this. I can take it back to my company and I can add real value.’”

Dr. Burmeister understands that value add well. “What the program did for me most was give me more insight into asking the right questions. I realized that finance requires judgment — there isn’t only one way to account for certain things, and your strategy can play a role in determining how you value and estimate future cash flows, for example. Many leaders don't always understand that nuance, even though they have to make decisions that affect where we allocate resources in our financial statements.”

He says his questions, informed by what he was learning, didn’t just help him gain clarity around certain financial issues. “With a better understanding of finance and accounting, I can help identify areas where we can improve. That's really what it's all about — everybody is just trying to get better. We have to constantly be more efficient. We have to figure out ways to approach things differently. And those are things I was able to take away from the program.”