What does it take to be a successful leader?
Toronto-based business strategist and management consultant Brad Fauteux agrees with many of the qualities that grab the most attention these days as being necessary for excellence in business leadership.
Confidence. Creativity. The ability to communicate. Honesty. A positive attitude. The ability to inspire and engage others. The list can go on at length. With that said, Brad Fauteux believes that sometimes such less tangible characteristics get so much attention that the tangible skills that are equally important get lost in the shuffle.
On that front, he says, financial leadership skills rank high as must-haves, whether you’re an entrepreneur or advancing the corporate ladder, as he explains in more detail.
If the need for financial skills is glossed over by the media, do you think it’s something that managers themselves don’t recognize is a necessity?
Bradley Fauteux: Well, I believe that too many managers in areas outside of the finance department don’t have enough of a basic grounding in finance to understand the financial implications of their decisions. There are any number of decisions that can impact their organization’s financial performance – and that spans those made not just by operational managers, but by managers in the “softer” disciplines, like human resources and marketing.
What are some of the most important financial skills that every manager should put in his or her toolkit?
Bradley Fauteux: I think it starts with the basics. You would be surprised by how many managers don’t understand basic financial statements for the business, for example. It’s important to know what they contain, how they reflect particular decisions and how they can be used as a guide for what needs work to improve future performance.
Preparing a budget is too often seen as a requirement to keep the bosses happy, when, in fact, it’s crucial for quantifying the resources you’ll need to meet your business goals. Another basic is learning the difference between cash versus accrual accounting, which you use as a key determinant to how you manage everything from your cash flow to your accounts payable.
In addition to the basic skills, though, shouldn’t having a solid grasp of financial issues make a difference in the kind of perspective you bring to bigger management and leadership matters?
Bradley Fauteux: Absolutely. It’s not just knowing the numbers and cash flow and balances and the metrics that help you determine your objectives and how you’re staying on track that’s important. You use your financial expertise to dig deeper and gain better insights. What do customers really value and what and how much will they pay for it? Better understanding what really drives your profits will lead to smarter investments to create more profits.
What are the risks to a manager of an inadequate grounding in finance?
Bradley Fauteux: Where to start? It starts with the risk of holding your department or business unit back. There’s a lot of competition for resources today, and whether you want to fund a marketing campaign or a cool new widget, you have to make a business case for it.
A compelling business case is grounded in the numbers. But, you’re also holding yourself back. Show that you can develop accurate competitor insights based purely on their financial statements, and you’ll be demonstrating the kind of financial savvy that earns promotions. The fact is that finance is the language of business. If you aspire to be a leader, you need to be able to speak it fluently.