Perhaps you’re a marketing manager eager to launch a new campaign to freshen up an existing product. Or maybe you run a manufacturing operation and believe a second production line would boost the bottom line by increasing output.
In both of these scenarios, you would need to get your ideas past someone in finance.
“The finance function in most organizations is often viewed as the area that always says ‘no’ to resource requests,” said Todd Milbourn, Olin’s vice dean and Hubert C. and Dorothy R. Moog Professor of Finance.
Unfortunately, one way non-financial managers can assure they get a “no” would be to misunderstand what their counterparts in finance actually do.
“It is important to have a perspective on what finance managers are trying to achieve,” Milbourn said. Toward that end, he teaches a daylong seminar aimed directly at the non-financial manager titled, appropriately enough, “Finance for Non-Financial Managers.”
The idea: Bridge the gap in understanding between the finance function and other corporate leaders. “Having this bridge is critical as finance touches everyone in the organization,” he said.
Once managers take the course, Milbourn can’t guarantee participants will always get a “yes” on their requests, “but they’ll know how to better position their own requests to increase their odds of getting funded.”
How non-financial managers can “increase their odds”
Become conversant in the language.
“Managers from outside of finance are often intimidated by the language and terminology of finance,” Milbourn said. “That limits their effectiveness in the organization.” If you can speak the language, you work from a common frame of reference. Milbourn’s course walks participants through a variety of scenarios demystifying concepts such as “shareholder value,” “cost of capital” and “return on investment.”
Understand your company’s big picture.
Know how to read and interpret a balance sheet and other financial statements. Learn how to relate the company’s strategy to the numbers. Milbourn walks participants through the financing, performance, and continuation decision of a company that participants will help finance themselves, putting them in the shoes of actual investors.
Understand what finance managers are trying to achieve.
“The finance function is responsible for allocating resources to a number of initiatives,” Milbourn said. “This balancing act is typically one that cannot say yes to every request.” An appreciation for how finance tracks a company’s historical performance and forecasts its future performance can help you frame your initiatives for the finance manager.
Appreciate why sometimes, the answer is “no.”
You can’t win ’em all. Understanding the components of value creation for shareholders means you may learn how to pick your battles when you have an idea. “This seminar will give participants a sense of the ‘portfolio problem’ financial managers face,” Milbourn said.
The next session of “Finance for Non-Financial Managers” is set for Sept. 19, 8 a.m. to 4 p.m. at the Knight Center. Visit Olin’s website for registration information and for our other executive education offerings.
Guest blogger: Kurt Greenbaum