As a performance coach, much of my work centers on “soft” leadership skills – influencing without authority, executive presence, giving meaningful feedback, etc. All of those skills are critically important for successful leadership, but none of them does much to help the leader struggling with a business fundamental like financial acumen.
While speaking at a recent forum for women leaders at the University of Southern California’s Annenberg School, I heard a talk from Moira Conlon, CEO and founder of investor relations communications firm Financial Profiles. She planted a powerful sentence in my mind: “Math is the language of business.”
For some business leaders, that’s obvious and easy. Business schools are full of “quants” with strong financial acumen who eat statistics for breakfast every day. But for others, particularly leaders in the “softer” departments like HR, communications, or legal, developing the business acumen needed to be comfortable with financial fundamentals isn’t always so easy.
Pairing strategic and financial acumen to succeed in business
Even for the mathematically-minded, business math can be challenging. Understanding the numbers and selling the numbers require two completely different skills. Those who are truly excellent at business can do both: translate the numbers to tell a story and translate a story into numbers.
To understand the value of the first, I want you to think about the last time you sat in a meeting where someone threw up a spreadsheet and droned on and on about the numbers. I know my eyes cross in a presentation like that. Really effective leaders have the strategic business acumen to analyze and understand the numbers, then communicate what the numbers tell us — what’s important or surprising or great or disastrous.
Here’s an example. A company was looking at their employee retention data to see if there was a pattern in when employees were most likely to leave — after a month, a year, five years? They also compared the data for employees with high performance ratings to those with medium or low ratings. They found that their highly-rated employees where at risk of exiting the company around two years of employment.
That’s the story. No need to focus on all the other data— the key finding was that after two years of investing in the on-boarding and development of these highly valuable employees, the company was losing them. Understanding the numbers and translating them into the story enabled the company to examine what was going on with those employees at the two-year mark and make changes to improve retention.
How to develop business acumen you can represent in hard numbers
The above skill will get you halfway to high-powered business leadership. The second skill requires you to translate the story into numbers — i.e. take an interesting idea or initiative and express it in quantitative language. I frequently coach innovative business leaders and tell them that their great ideas will go somewhere only if they can make the business case. Want to start a new Diversity and Inclusion program? What’s the business case? Want to add a new product line or open a new market? What’s the business case?
To answer properly, you need the financial and business skills to know which metrics matter to your company or organization, how to make educated guesses and predictions, and how to track the results. If you want the company to invest in your idea, you have to be able to tell the story in quantitative language.
Improving business and financial acumen is easier than it may seem
If you’re a leader who gets nervous looking at a balance sheet, never fear — there is hope for you. Some companies offer in-house classes to develop business and financial acumen — take them. If your company doesn’t, many universities offer executive education courses in finance. They are often expensive, but the investment in yourself and your career may be well worth it. Reading The Economist is a great way to learn about macro-economic issues. And Moira recommended the book Understanding Wall Street as a good introduction to the financial side of business.
Some years ago, I was coaching an outstanding high-potential leader. We identified that she needed to improve her financial acumen, and she deliberately sought out opportunities to learn. She put herself into uncomfortable, challenging situations where she had to master the numbers quickly. Building on her new expertise, she earned a substantial promotion and is now a highly respected senior leader in her firm.
As a smart woman once said, “Math is the language of business.” To learn how to speak it, email me.