I ran across an article on the Association for Talent Development site titled “Financial Skills Every Manager Should Be Able to Navigate”. It’s a good read. Got me thinking…if I had to come up with a list of financial skills that every manager should know, what would they be? These are financial skills that managers should learn in a management development program or during manager onboarding or perhaps even on the job through a mentor.
Read the company financials. I remember working for an organization where all new managers had a meeting with the controller to learn how to read the company financials. I was amazed that more organizations didn’t do this. After being exposed to the practice, I made it a point in every job I held to ask the controller for a meeting. They always said yes.
Analyze the company financials. It’s not enough to know how to read the financials. You have to know how to pull information from them and make business decisions based on what’s there. So, step one is learning how to read the financials but step two is being able to do something with them.
Understand business insurances. Risk management and insurance are big ticket items in an organization. I’ve been surprised a few times that managers didn’t know the company held employment practices liability insurance (EPLI). I’ve also surprised a few managers when I had to explain that the company’s EPLI insurance was being cancelled … and why.
Prepare a budget. Preparing a household budget and a department budget aren’t the same thing. Sad to say, but the budgeting process can be a bit of a “game” in some organizations. Managers need the financial skills to understand this and know how to budget so they can accomplish the department’s goals – and their goals.
Manage a budget. Like reading the financials, it’s not enough to simply know how to create a budget. Managers have to be able to work within budgetary guidelines. Especially when it comes to shifting expenses and re-forecasting revenues. There are do’s and don’ts within organizations, which are often not written down anywhere.
Create employee schedules. Payroll is a huge organizational expense, so understanding how to create a good schedule translates into proper resource management. Overscheduling and under scheduling impacts the bottom-line. It also gets tricky because managers want to create schedules that make employees happy too. And that can often create conflict.
Monitor employee time and attendance. Scheduling isn’t a “set it and forget it” activity. Once a schedule is created, managers need to monitor it and possibly make last minute adjustments – an employee calls in sick, someone is late, or the business levels aren’t at expected levels. Managers need the financial skills to know how to make schedule changes.
Understand employee compensation. Managers should at least understand the basics of compensation, such as how pay grades are established, what’s salary compression, and why red lining employees isn’t good for employees or the business. Managers are asked to make salary recommendations, so give them the knowledge to do it well.
Prepare an RFP (request for proposal). In today’s gig economy, an increasing number of organizations are using freelancers, contractors, or consultants for projects. While a company’s procurement or purchasing department might handle some of these tasks, they will often come to managers to get details.
Evaluate a proposal. And once an RFP has been issued, managers need to be able to review and evaluate what’s been submitted. Ask bad questions on the RFP and you’ll get bad answers. This will not help the organization make good financial decisions and get work completed in the most efficient way possible.
BONUS: There’s one other area in financial skills that managers would benefit from knowing, and that’s operational metrics, including human resources metrics. I’ve learned a lot from managers sharing with me how certain operational metrics they track impact the bottom-line.
Managers have a financial responsibility to the organization. And often their personal compensation is tied to their ability to manage the company’s finances. It’s in everyone’s best interest to make sure managers have the skills to do it well.
Maybe HR should create a manager’s financial skills training course? I’m curious. Has anyone done that? Love to hear your thoughts.