These losses occur because executives either miscommunicate with each other, misinterpret financial analysis, or forgo using data entirely in the decision-making process. As leaders and finance teams struggle to find a common language to discuss the value of financial information, decisions are made without a full understanding of the wider implications. By the time the knock-on effects become clear it is often too late to act, resulting in reduced efficiency at best, and at worst, lost revenue.
Knowledge is power, but communication is key
Executives’ knowledge can be a “mile wide, inch deep”. They know their market, their industry and their customers, though they do not necessarily appreciate or understand the detailed financial implications of specific decisions. On the other side, financial analysts’ knowledge is often an “inch wide, mile deep”. While they have a detailed understanding of financial data, they are unlikely to appreciate the broader business context and may lack the consumer insight needed to accurately apply the data to business problems.
Financial analysis without decision-maker contribution is not intuitive; and business analysis without the oversight of a skilled analyst frequently lacks the financial acumen to factor key risks into profitability.
If finance and business partners each contribute to the problem, they should both own the solution. Finance can easily fix flaws in how it designs, conducts, and delivers analysis, but it cannot do so effectively without input from business leaders. But the answer is not for executives to resist financial checks and balances on decisions, nor is it for finance to push an oversight agenda into every corner of the organisation.
It is for both producers and consumers of analysis to establish a common “business language” in order to achieve their shared goal: the best possible business decision.
Establishing a universal understanding
To make better decisions, the producers and consumers of financial analysis need to partner together to:
*Create a shared view of business objectives and drivers;
*Enhance routine reporting with dialogue and discussion; and
*Reorient business and finance roles for joint decision making.
Encouragingly, organisations are already beginning to introduce “business interpreters” – an intermediary between a financial analyst and business executive – in order to develop clearer communication and better relationships between the two parties.
This ‘business interpreter’ can help foster more informed strategic business decisions focused on the problems the business is trying to solve. They are key to anticipating the needs of finance’s business partners and translating overly technical finance jargon into more compelling, business-friendly insights.
More effective communication between finance and corporate teams helps reduce inefficiency, improve partnerships and drive better collaboration. This formula also ensures that the work that both finance and its business partners perform is used more consistently. Companies that build better understanding between these two groups significantly improve their ability to do what’s most important: drive better business outcomes.
Thomas Roberts is finance practice leader at CEB.Image: ShutterstockMeanwhile, the ability to communicate through speech is one of the defining human characteristics and has helped to drive our development through millennia. In business clear communication is of course vitally important but for a myriad of reasons we seem to have lost (and are still losing) the required skills.
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