The Path To Profitability: Why Financial Literacy Learning Is Essential For Managers

The Path To Profitability: Why Financial Literacy Learning Is Essential For Managers
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Summary: What process do organizations go through when deciding to build a true learning game? This is a fable if you will. The company, AshCom, is fictional, but their story is based on a real company that wanted to increase its managers’ financial literacy. The learning team’s challenge is to find a way to increase management’s understanding of corporate finance ⎯ not a subject that is near and dear to most peoples’ hearts.

Why Financial Literacy Learning Is Crucial For Team Leaders

This article is part of a series on building a true game to increase managers’ understanding of corporate finance. What you are about to read is a fable. The company, AshCom, is fictional, but the learning challenges faced by Kathryn, AshCom’s CLO, and her team are real and commonly shared by learning teams in large organizations. It is our hope that you will be able to connect with the characters, their challenges, and the solutions they discover. We also invite you to read the first eBook in the series.

eBook Release: Building A True Learning Experience Game: Decision Points, Design Steps, And Development Tips
eBook Release
Building A True Learning Experience Game: Decision Points, Design Steps, And Development Tips
What process do organizations go through when deciding to build a true learning experience game?

The Path To Accounting

Alone in his office, Kurtis carefully studied the latest cash flow report. His right hand gripped his mouse as he scrolled through the weekly report. Meanwhile, the fingers of his left hand were expertly arched and silently tapping the bass notes to Mozart’s Piano Concerto No.21 on his desk as it played softly in the background. He was laser-focused on the financial but didn’t miss a single beat of the concerto.

Kurtis was a precise man. His wife would describe him as fastidious. This trait was present in him since his childhood. When his mother introduced him to the piano, he took to it immediately. As he grew, he found that music was a system. He knew where he was, where he had been, and where he was going as he played. There was a period of time after high school when Kurtis considered a career in music. He began college by majoring in piano performance. Although music was his passion, Kurtis wondered if he could make a career from it. That wondering led him to accounting.

He was attracted to math⎯accounting specifically. One day, in his sophomore year, he made the connection. What he so enjoyed about music, he also enjoyed about accounting. Its systemic nature was compelling. Knowing where a company had been, where it currently stood, and where it might be heading fit well with his precise and even fastidious mind. It all fit into a system, and accounting allowed those who understood it to see how well the system was functioning.

Thinking Long-Term

Originally from a small town in Indiana, Kurtis’ first job out of college was with one of the Big Four accounting firms in Minneapolis. The idea of working for a huge company appealed to him and being in a city with opportunities for further education fit his plans perfectly. In his first five years with the firm, Kurtis passed the CPA exam, completed an MBA at the Carlson School of Management at the University of Minnesota, and learned a great deal from his colleagues.

It wasn’t long before Kurtis began to think about long-term goals for his career.  He decided he wanted to be a chief financial officer.  To do that, he would need more experience in management. He built a detailed plan that included spending time in a treasury role at a large retailer which helped him learn how to manage cash and risks.  This was his first job after leaving the accounting firm.

His next job was as the controller for a small manufacturing company about 20 minutes outside of Minneapolis. Although the company was much smaller, he was responsible for a much larger piece of the financial pie. In his eighth year as controller, he saw what he thought would be a good fit: CFO of the manufacturing company, AshCom.

The Financial Literacy Dilemna

Now in his mid-forties, Kurtis had been at AshCom for six years. He was instrumental in their recent acquisition of Globex, a company of 2,500. The acquisition was intense, and the hours were long, but he enjoyed the challenges. Just over a year into the acquisition of Globex, the effort and time were paying off, and AshCom was seeing the kind of sales, market share, and efficiency gains that motivate acquisitions in the first place.

One thing still bothered Kurtis. It was not specific to AshCom but had been a concern of his in every company he had been part of since his days at the accounting firm. He worried about financial literacy.

7,000 Members Strong

AshCom’s workforce was now over 7,000 members. That meant that hundreds of people were making thousands of decisions every week that would have an impact on the financial well-being of AshCom. Worrying to a precise person, he realized that he had very little insight into the metrics of how even the smallest financial decisions were made in the company where he played a leading role. It was part of the system he could not see except in the aggregate. He knew the results of all those decisions, but he did not know how they were made or if the people making them were using sound financial reasoning.

The piano remained a passion. He often played a piece he knew by heart when he needed time to think through a thorny problem. Back at home, he sat and played Mozart’s Piano Sonata No. 11, and he stared at his own fingers. He’d been playing the piece since he was a young man. Sheet music was not required. As he played, it occurred to Kurtis that his fingers seemed to know what to do next without him consciously telling them to move to a specific key.  All ten fingers in concert. They fit together, each contributing to what the others were doing. No missed notes or timing. It was a beautiful system.

Continuing to play, Kurtis lost himself in several questions. What if the majority of leaders at AshCom could work together, like his fingers on the keyboard, in their financial decisions? Were they all even pulling in the same direction? The truth was, he didn’t really know.

The Wins And Losses Of Financial Decisions

Budgets were created and sub-budgets were assigned to specific teams. Annual and quarterly financial goals were established. Some level of financial reporting was given to those in management and leadership positions, but he could not be sure that they understood what they were reading or if those reports made any difference in the decisions being made on a daily basis.

What Kurtis did know for certain is that some efforts had been made to bring up the level of financial literacy at AshCom. Beyond just the informational and budget meetings, people were incentivized to work more efficiently. A generous quarterly and annual bonus program for the managers was supposed to align economic interests. It was not clear that this was working.

He wanted managers to see that every small financial decision, down to buying coffee for an office, was an opportunity to win or lose. So were decisions about what to store and what to discard. This included small purchases like light bulbs all the way up to machines costing in the millions. Every minute of every day, someone on the shop floor was making a decision about reworking a used part or ordering a new one. These decisions were not being made by a group. Memos or control systems or team meetings don’t make such decisions. They were, Kurtis knew, made by individual people.

Embracing The Decision-Making Process

To get all these financial decisions aligned, the team members of AshCom needed to understand corporate finance, and they would have to embrace the financial decision-making process that AshCom and Kurtis wanted.

But Kurtis had a bigger and more audacious goal in mind. He wanted more than just efficiency gains and better purchasing discipline.

He wanted people to understand how their company actually worked. Kurtis wanted them to see the system like he saw it⎯where cash came from, how it was used, and how AshCom made a profit. He hoped they could learn about cash management, investments in research and development, and their share of the market in their industry.

AshCom had offered more than financial incentives. Learning opportunities were made available in the various plants led by people with financial knowledge and experience. Kurtis helped create some of these learning experiences. Profit/loss and income statements were examined. Terms like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) were explained.

A Good Grasp Of Company Finances

Historically, all this training was done in person. In the last couple of years, some of it had migrated online. Kurtis knew that effort was being put toward learning. He was unsure about whether that effort was moving the ball. His review of the numbers did not show much progress in either efficiency or deepening understanding of how AshCom functioned. His conversations with some of the managers confirmed his suspicion that they did not have a good grasp of AshCom’s finances or how they worked.

Kurtis was not ready to declare his financial literacy project a failure. In the best-case scenario, the results might not have shown up yet. In the worst-case, the way the learning was being delivered was not going to work. He was confident in the content. What was being taught was what people needed to learn. But his confidence in future progress was low because he wasn’t sure it was being taught in the right way.

Kurtis was unaware that he had played the same piece on the piano several times without stopping. This was not unusual, as his wife knew. When he was thinking, he might cycle through the same sonata multiple times, seemingly unaware of the passing of time. Sometimes this went on for nearly an hour.

Suddenly, he stopped playing. He needed to talk to people with a deep learning experience. Kurtis pulled up his laptop and sent an email to Kathryn, the Chief Learning Officer at AshCom. She would know what to do or at least be a good place to start down what he suspected would be a new path.

Conclusion

To read the rest of the chapters in this series on building a true game to teach financial literacy and to see Kathryn and her team solve their challenges, please download the eBook Building A True Learning Experience Game: Decision Points, Design Steps, And Development Tips.

eBook Release: Inno-Versity
Inno-Versity
Inno-Versity’s mission is to transform, empower, and inspire learners around the world. They create world-class learning experiences for onboarding new employees using exceptional creativity, the best of learning science, and innovative technology.