There is an old saying, “Ignorance is Bliss?” But is it really? I often see key managers in organizations operating with little or no knowledge of the company’s financial situation. While this may allow them to go about their duties without the burden of understanding the financial position of the company, it doesn’t allow them to help the business as much as they should.
While I’m not suggesting that everyone in the organization have a detailed understanding of financial performance, it is important for key managers to have a working knowledge of the financial facts so that they can make business decisions with that perspective in mind. Too often (particularly in poor performing organizations), I see companies where the CEO tries to shelter the rest of the organization from dealing with the facts.
On the flip side, successful organizations tend to share financial performance measures much more broadly than do poor performing organizations. I don’t think this is coincidence. Nor do I think it is because successful organizations are proud to share their results while poor performing are ashamed to do so (although that is likely true). I think there is a cause and effect relationship.
Organizations that find a way to share financial performance measures and, more importantly, reward employees for overall performance, get better results. Employees throughout the organization can work toward a common goal and have a financial perspective (if not a detailed understanding) for decision making. They better understand why management takes certain actions and can make decisions that are consistent with those of senior management.
If the “grass roots” of the organization has no appreciation for the financial performance of the firm, you often find them making decisions that are in direct opposition to those that more senior management is making. Nowhere is this more apparent than in struggling organizations where employees are “empowered” to make spending decisions but lack the proper context with which to make those decisions.
Imagine trying to row a boat with other people if there was no agreement on which direction you wanted the boat to go. How effective do you think you would be compared to a boat with people all rowing in the same direction at the same pace?
Think about your organization. Is ignorance really bliss?
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to
your cash is flowing. know where.®
Copyright @ 2010 Homza Consulting, Inc.