Should Managers Be Financially Educated?
Teams are becoming more and more cross-departmental in organisations. Pioneering companies such as Google and Microsoft among other (which are constantly ranked in the most admired companies) are utilising team structures that pull different members from different places in the organisations into ‘project teams’ which focus on solving specific problems, or perhaps the opposite – coming up with open-ended ideas.
These methods are not easy to replicate across all businesses, but it is possible. One advantage of such teams is that one member will always have a strong financial background, as they will be from finance, accounting or the risk management department. Such members either hold a minimum standard of financial qualification (e.g. chartered accountancy or management accounting), or they’re knowledgeable about the financial markets. I believe that having such a staff member is important, because as more and more companies become public – the emphasis is return on equity – how much profit are you providing to shareholders. This metric has a huge effect on what we think is profitable and what isn’t. Capital intensive projects suddenly look less appealing, due to the level of working capital and investment required upfront. Ideas which are easy, cheap and quick to implement can often surface as the winner even with modest profits.
So this raises the question: In organisations where cross departmental teams cannot be formed – should managers receives some form of financial training? I’m not asking them to recite how to invest in commodities but it would be useful if they understanding the fundementals behind accounting and reporting, and the basics of finance to do their job. What do you think? Should a manager just be good at their job? Or would a broader education including shares, commodities, and other elements provide a useful background for any management discipline?
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