October
2003 — NumberSMART Newsletter©
by Jason Orr
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Why you should be financially literate…
Recently, while delivering a financial literacy course to a group of General Managers, one of the participants asked me why financial literacy was relevant to his job. "A fair question," I thought to myself, as I proceeded to answer his question by inviting the group to consider the following scenario.
You've just returned to your office on a blustery Monday morning after vacationing in Acapulco. As you settle back in your chair, still reveling in the memory of tequila shooters, your phone screams out, startling you back to reality. It's your boss. He tells you he'll be meeting with the President in thirty minutes to discuss the financial results of your department. But instead of inviting you to explain (or defend) your performance, he nonchalantly tells you that one of the bean counters from accounting will attend the meeting to speak on your behalf. "After all," he quips, "without a basic understanding of your numbers, you might confuse the facts and sound the alarm bell."
At this point, I turned to the group and asked them how their President would have likely interpreted their absence from the meeting if this had been a real-life scenario? Then I asked them whether some degree of financial acumen would improve a manager's chances for career success? Their collective smile reassured me that they got the point.
Regardless
of where you hang your hat in your organization, your job as a manager
is quite straightforward: maximize shareholder wealth. And when you
help your organization make money by allocating resources in the most
efficient and effective way possible, you are maximizing shareholder
wealth. The 2nd Principle in my book How To Make Your Numbers Talk
states that you must understand what financial impact your decisions
will have before you make the decision. It's too late to close
the barn door after the horses have fled. And it's too late to lament
a bad decision after it's been made. Each and every decision must be
analyzed if you are to maximize shareholder wealth. Admittedly, this
proactive philosophy takes some of the excitement out of managing. But
it also serves to keep you gainfully employed. Remember, your decisions
invariably show up somewhere in the Income Statement.
| NEXT MONTH: What is financial literacy? |
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