In an exclusive blog written for Naukri Learning, Dr. Abhijit Phadnis – a Finance expert, who is a national rank-holder Chartered Accountant, Cost Accountant, Company Secretary, Chartered Financial Analyst (India Program), Ph.D. from IIT Bombay and has over 32-years professional and consulting experience, shares from his experience of how basic Finance knowledge is essential to move into leadership roles. Abhijit has worked for reputed firms like Johnson & Johnson, Grindlays Bank, UBS & Credit Suisse. Abhijit has conducted more than 300 finance workshops for over 55 companies from diverse sectors.
I was about to begin a two-day workshop for young business managers. Just for fun and also for breaking-ice, I asked them a question: “How many of you aspire to be in the same position 20 years hence that you are right now”, there was silence. “No volunteer?”, I asked and there was laughter.
Then I quizzed them why they are investing two full days in learning the language of accounting and finance. Someone said, it is the language of business. Another said, it will help in managing personal finances too apart from being a better decision maker in the context of business issues. Third said, every business is established for profit and unless one understands financial statements, it will be tough to understand how a business is doing. All these answers were right but there is much more to it.
I have been engaging business executives for facilitating financial learning for well over 23 years now. In early 90s, if I would ask a question to the audience, “who manages finances of your organization?”, the response would be overwhelmingly: CFO or finance department. If I ask the same question now, more than 60-70% of the audience would say, managing finance is everyone’s business. This is quite a change.
Awareness is rapidly growing that every business manager has a role to play in managing finances of an organization. Indeed, they are the ones who manage almost all resources of the organization whether people, manufacturing facilities, distribution network, warehouses, inventories, customer receivables.
It is the quality and efficiency of use of these resources which has a direct influence on the ability of a business to meet and exceed customer expectations. Further, effectiveness of management of these resources has a direct influence on the amount of funds that need to be sourced by the finance team and the cost associated with it. Thus, indirectly, business managers influence financial management.
Fortunately, there is an increasing shift in the thinking of finance teams too!! They are increasingly aware that they should not function like an island. Their role is to enable business growth and they need to partner with business teams to add value to the customer and thus, business itself. This two way need has increased conversations among business and finance teams and the spirit of growing together. For this conversation to be meaningful, it is important that business managers learn the language of finance and finance teams learn the intricacies of business and customer realities.
I am often invited to talk to young Chartered Accountants on a subject titled “journey of professional excellence”. One question I ask them: “Who of you, at the time of your naming ceremony as an infant, were identified to be born Chartered Accountants?”.. there is naturally a smile on participants’ face. Obviously none!! The same thing applies to other professionals too. Creating a box around us, retards our ability to grow further and do different things successfully.
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There are many accounting & finance professionals who have moved into organizational leadership roles and there are a growing number of professionals who came from business background, with no formal qualification in finance who have moved into CFO roles. In fact, many organizations actively encourage such lateral movements as a part of their strategy of creating talent pool within the organization.
Every professional, based on one’s own passion & interests, parental & others’ guidance, circumstances and aptitude tests decides to opt for a particular curriculum of learning. After graduating, each professional is recruited for the specific skills that she or he is trained in. Once recruited, a professional is expected to apply those very skills in the role which is initially assigned. Often it is a role that the person is required to discharge by oneself.
As a professional gains experience and demonstrates the capacity to grow, the organization starts assigning higher responsibilities to that individual. With higher responsibilities, often a few younger individuals are assigned to work with the professional as a part of the team. There are now other individuals available in the team who have a similar skill set that the professional himself has. A lot of tasks now can be delegated to others in the team and thus gradually, the need to apply the learnt specialized skill starts to come down, particularly in terms of the amount of time that a professional is expected to devote. Instead, a few other skills need to be learnt. One of them is the ability to inspire the team to achieve the expected performance and more.
The second skill required is to help our own team members to blossom and grow. As the responsibilities grow further and the potential impact in an organization grows, a few other skills need to be learnt too. One needs to hone the ability to understand big picture issues of business including the strategic aspects. In some sense, one needs to develop what I call as “Helicopter Ability”.. Just like a helicopter can quickly take off and take a big picture view and when needed can land into a specific problem area to solve it, without requiring a run way to land or take-off, similarly an executive needs to hone this ability to take a strategic view when required and an ability to delve into details to get a better handle of the problem at hand.
While these are all important, one must keep in mind that most discussions that happen at C Suite or Board level are those which have financial undertone and hence it is very vital that one is very aware about the language of finance. Most discussions that happen with external stakeholders including analysts are all financial in nature and hence, if one is to create a “pull” factor creating opportunities to move up in the ladder, mastering the language of finance is an absolute must. Understanding financial implications also helps to take both a strategic view and more informed decisions.
Thus, it is an absolute must for any ambitious professional to learn the language of accounting & finance, in the best self-interest as well as to make a meaningful contribution to a sustainable growth of an organization. The good news is that it is very easy.