The Financial Side of management: Why Do I Care
Below is a screen flow introducing this module on a few, key and basic financial concepts for managers. Watch the overview before diving into the subsequent library resources. Below the video is a transcript of what was said for easy reference. Let us know if you have any questions.
Transcript of the Above Screen Flow Video
Sure. It makes great sense for an executive to know the intricacies and inner workings of financial statements, budgets, and forecasts. But, most mid-level managers are never, or rarely, asked to consider such things beyond basic cost control. For most managers, a budget is simply a list of items one wants to spend money on over a 12 month period and their relative amounts. Most managers never think in terms of contribution or margin or how even a basic understanding of how costs work could positively affect the way they make decisions.
Managers’ duties center on planning activities, scheduling resources, and handling personnel issues. They conduct project management tasks usually quite well. But if you ask them whether they should take a project that has a higher gross margin than one that's smaller, they will invariably tell you to take the higher—without consideration. And, half the time, they would be wrong.
While most managers will never look at a P&L (profit and loss statement), good managers, effective managers, can use a basic understanding of costs and break even to make better decisions about their projects and every day tasks. Rather than think of finance as a jumble of numbers, managers should glob onto a few fundamental concepts, or tools, that will enable them to think more strategically about everyday managerial life.
For example… should you try and recoup the costs of a project after you know the project has failed? Should you change the price of your new product to reflect new feature investments? Should you accept an offer from a customer to buy a large volume of your widgets at a reduced rate? Should you run overtime? Should overtime be a regular part of your operating strategy, or should you hire more resources? A basic understanding of the numbers helps, but also understanding the short and long term ramifications, both financially and non-financially, help even more.
In this module, we will:
- Explore what a cost is
- Define Break even
- Use a tool called contribution analysis to make better decisions
- Identify non-financial reasons for ignoring financial benefits
- Link your daily work to the above concepts
Yes… many of you are not in a sales or externally facing world where pricing and product management matter directly. However, we will use product pricing as a platform for defining our terms and exploring how ideas like break even affect you. We will also use made up products like widgets to keep things generic and transferable. And, we will also kill a puppy or two. (I’m kidding… maybe.)
Unlike the other modules, this one is video heavy. Because of that, rather than repeating myself, I won’t create a separate overview video. Consider this brief introduction that. For this one module… however, I will post the actual webinar session.
The webinar for this module is actually very activity and case heavy. We will go over several scenarios. Two of which are covered intensely in the eLearning portion—one will be unique to the webinar. This is a tough topic and I urge you to spend time reviewing the videos, posting questions, and going through the cases a couple of times—in order to see my responses and those of your peers.
Like all modules, this one relies on how much effort you put into connecting it back to your job. Unlike those other modules, a bit more customization and discussion may be needed for you to make those connections. Please email or call me. I will happily talk with each of you individually about how this module is applicable to you.
Enjoy.