Learning Opportunities Through Financial Analysis

Learning Opportunities Through Financial Analysis
Summary: Leaders look to financial results to assess organizational performance. These results specify activities people are doing, or not doing. Financial results provide a starting point to discover underlying performance issues, providing insight to precise job tasks and skills to address.

How To Identify Learning Opportunities Through Financial Analysis

A Vice President of operations from a high-tech company recently called me in a complete panic. She said, “our operational profits have been declining for over 8 months! And if we don’t get out of the red in the next eight weeks, we might lose our major shareholders.” I immediately analyzed the financial results and concluded that some business areas weren’t functioning well. We then developed targeted training for these areas.

This interaction demonstrates that first, leaders prioritize financial outcomes and second, every financial outcome results from people doing, or not doing, something. Financial results provide a starting point to identify underlying performance issues providing insight to precise job tasks and skills to address. Here’s how you can do this:

Focus On Financial Results

First, focus on financial results. This gets you noticed by decision-makers...because you’re now speaking their language. But, more importantly, it directs you to the areas of concern driving the poor results.

Now let’s not get crazy! I know you’re not hired to be a financial expert – so make friends with your finance team or the operational director you’re helping.

Get familiar with their relevant financial forecasts and statements. Look for obvious trends when analyzing the financial performance over time. This will lead you to ask what the ideal financial or performance outcome is, to explain what operational activities contribute to the results. Then compare, or benchmark, reported performance with forecasted expectations.

For example, a company like Apple or Pfizer may focus on R&D, and quality. So, if product returns start to increase over time they’d possibly see a rise in manufacturing and customer support expenses.

Seek Out Areas In Need

Investigate the job tasks affected by the poor results. All organizational expenditures relate to specific tasks and responsibilities. Identifying expenditure or financial ratio trends targets specific tasks where management must focus on. This is where you get to be a performance consultant and apply a root-cause analysis.

Contrary to popular belief, performance improvement is not complicated. Performance consultants will begin with a vertical investigation. They start by identifying financial discrepancies asking direct investigative questions to those responsible. They continue asking “why” to the answer of the preceding question.

Take the Apple and Pfizer example. If product returns increased by 15% compared to the previous quarter, ask, “Why did it increase?” Assuming returns are defective, ask, “Why is the product defective?” Continue the process until you get to the root cause.

Focus On People Performance (Not On Learning Or Processes)

Finally, pay attention to “people” performance. Business leaders and consultants often focus on process performance over people performance, believing processes deliver the actual results. But successful leaders know lasting performance begins and ends with employees.

This is where your Learning and Development expertise gets to shine. Consider conducting a skills gap assessment to see if learning plays a role.

Using the Apple or Pfizer product returns example, here you’d ask, “What aspect of the process is causing the issue?” In many instances, performance issues stem from the lack of employee involvement, development, and training. Next, investigate the poor performance asking employees precise skill and process questions. When done well, the needs assessment leads to the true cause of the employee performance issue.

Using financial metrics to target specific performance concerns will always help to tangibly demonstrate performance improvement. Your business leaders recognize that performance improvement begins and ends with financial reporting; and that people, not processes, are the true path to improving performance. Bring the two together to demonstrate learning value. This will enhance the overall learning offering, and ensure you communicate in a way leaders respect.

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When it comes to what leaders expect, don’t always believe what you hear. Recognize how leaders perceive the role of training within the organization and what they expect. They know training is essential, but it’s up to you to prove them right. This is your time to shine. #alwaysbelearning