Why Your CFO Needs a Curriculum

Research suggests that open-book management yields greater profits and employee engagement. But sharing income statements and jobs data can’t move the needle if your workforce is financially illiterate.

Here’s why financial education matters, plus a strategy for pushing it forward.

When he coined the term "open-book management," former Inc. writer John Case called it the "coming business revolution." Nearly 20 years later, we’re still waiting for the uprising.

Though Case asserts that open-book companies enjoy faster revenue growth and higher employee productivity, most businesses today still refuse to share financial data with employees outside the C-suite.

This is problematic, because "when managers and employees don’t see financial data . . . they can’t make good decisions in their daily work," write Karen Berman and Joe Knight, co-owners of the Business Literacy Institute, in the Wall Street Journal.

"Sales reps may be tempted to offer hefty discounts just when the company needs to boost gross margin. Engineers may keep proposing additional bells and whistles for the company’s latest products even though cash is tight. Plant managers, kept in the dark about warranty expense, may cut corners on quality in hopes of meeting production cost targets."

The risks associated with veiling financial information are clear enough. So why all the foot-dragging? As Susan Windham, CEO of the EDSA Group, posits: Financial illiteracy in the workforce is a huge disincentive to open-book management.

"Do you want the guy who’s drowning in debt overseeing your budgets?" Windham asked The Build Network. "Employees today not only lack a basic financial understanding, [but also] waste company time managing their personal finances. That’s a huge draw on overall profitability, not to mention the high healthcare costs associated with a stressed-out workforce."

On the flip side, research suggests that absenteeism, healthcare costs, payroll taxes, and turnover all decline when a company teaches its employees basic financial literacy.

How can your company begin to better equip its people? Windham says the first step is surveying your organization to pinpoint the demographics that need the most immediate financial help. She recommends a tool called the Personal Financial Wellness Scale from the Personal Financial Employee Education Foundation.

Here are three sample questions from the survey. If you begin by polling your people, Windham says, the focus of your first financial literacy program will become clear.

  1. What do you feel is the level of your financial stress today?
    Overwhelming stress | High stress | Low stress | No stress at all

  2. How confident are you that you could find the money to pay for a financial emergency that costs about $1,000?
    No confidence | Little confidence | Some confidence | High confidence

  3. How frequently do you find yourself just getting by financially and living paycheck to paycheck?
    All the time | Sometimes | Rarely | Never

Article provided by thebuildnetwork.com ©TheBuildNetwork


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