The Enron fiasco has led to an outbreak of corporate candour, in the US at least. General Electrics latest accounts were 30% larger than usual, with lots of space taken up explaining a few innovative financial moves.
If you as HR director dont understand the figures, how can you fulfil your responsibility for corporate governance? Now is the time to overcome prejudice and nervousness, and get much more financially literate. Even if your firm isnt about to go bust in a sea of bogus accounting, there are lots of reasons why HR needs to get its financial act together.
Financial literacy means being able to take a full part in business discussions, says John Pearson, an associate of the Henley Management College, and an experienced trainer of managers new to the basics of finance. This is now a core competency for any senior manager. Being financially aware is as important as being commercially aware.
Non-accountants need to be able to feel comfortable when dealing with finance, Pearson adds. You dont have to become an expert youve got financial people for that. But you have to be able to ask the right questions, and judge the quality of the answers you are getting. On a three-day residential course, Pearson says, he can equip managers to be competent in finance and able to understand what a balance sheet means.
Business planning, resourcing, bids for investment all these arguments end up revolving around money. People are the most expensive resource for any company, Pearson points out. If you want to present a business case for what you are doing, you will need to have the right numbers at your fingertips, and be able to present them convincingly.
Norma Bresciani, director of HR and operations at the Barkland Group, a contract cleaning company, went through the Henley course and is now far better equipped to do her job, she says.
I went in to the course knowing little about finance, and came out feeling I could really take part in financial discussions at any level, Bresciani says.
HR can be so undervalued, she adds. If you can stand up in a meeting with your CEO, who may be trained as an accountant, and talk sensibly in terms of percentages, ratios, turnover and so on, you certainly get their attention. And if you want to be a serious contender for a board level role, you need to be able to have this kind of conversation.
I never cease to be amazed how financially illiterate some senior managers are, says Pearson. They think that doing the books is pretty boring stuff. My job is to disabuse them of that. After Enron, nobody should need too much persuading.
Why you need to know about numbers
- To take part in business and operational discussions without the need for simultaneous translation
- To be equipped to provide cost benefit analysis on proposed HR initiatives
- To make more impact internally and at key meetings
- To understand better the financial imperatives dictating corporate decisions
- To avoid getting hoodwinked by colleagues using fuzzy maths
- To find out more quickly when its time to leave a sinking ship