Knowledge is power?

The truth of this statement depends on where the knowledge is housed. If confined to specific individuals or within specific departments the knowledge power equation can be significantly diluted.

So what’s the Holy Grail, we call it common knowledge. The core competency of any organization to create, maintain and enhance knowledge and understanding of the key business ingredients.

Those that posses this skill have a definite competitive advantage.

One of these key business ingredients is the company’s financial statements or its ultimate scorecard. Approximately 50% or more of mid to senior managers do not have an appropriate understating of the
integrated workings of a standard set of financial statements. Think about the significance of this finding, could it be a key driver to why business fail or the reason or why business can’t get finance under the new bank scrutiny régimes.

How does the absence of common knowledge manifest itself sometimes even unknown to most business to the point that the creation of common knowledge is actively discouraged?

The finance department headed by the CFO is usually considered in its own island with its very specific expertise that in the main only has relevance under specific circumstances and conditions.

This culture is most frustrating for the modern dynamic CFO who knows that permeating the fundamentals of the discipline in financial performance management throughout the organization is one of her most important tasks.

So where is the learning constraint, is it in the process or content. We believe it is both. The fundamentals of what creates powerful organizational learning include.

• Relevance, people connect to learning that will enhance their career or ability to perform. For this reason on the job training is still one of the most effective ways to transfer knowledge
• Real time feed back, the more instantaneous the feedback loop the better.
• Interactivity, the ability to simulate scenarios without any consequence promotes creativity and innovation.
• Simplicity, the ability to deliver complex material in a format that makes it look easy and thus creating an environment for participation and contribution.
• Familiarity, learning is significantly enhanced if the learning is customized to the participants business environment

Most people would agree that there is a close relationship between financial statement knowledge and

• Good decisions
• Awareness of opportunity
• Reduction in waste
• The consequence of time, cost and quality management
• How cash is created or destroyed
• How value is measured
• What banks are looking for and why
• The difference between good and bad debt
• What need to be done to have a strong balance sheet
• Differentiation between balance sheet actions and income statement actions.

The challenge is to use financial statements as a core learning platform that is relevant, provides real time feedback, is interactive, yet simple and uses the business own numbers (familiarity).

The most powerful way to achieve this is through the Global Financial Bridge one page scorecard.

Figure 1 Interactive financial statement communication platform $’000

This process transforms the standard financial statements into an integrated environment facilitating the ability to communicate all the financial statement components in a single platform.

The process uses the business own financial statements which immediately changes the communication dynamics as it becomes personal.

The one page fully integrates the actual statements as well as how those statements are performing. The original meaningless numbers are translated into a story about the business. Chapter 1 of the story starts with growth, communicating the difference between good and bad growth. Chapter 2 evaluates the income statement performance and how growth has created or destroyed value. Chapter 3 reflects how both growth and the income statement impacts working capital. Chapter 4 discusses cash, how it’s created assessing the cash quality and the key ways to measure cash from a proactive and reactive standpoint. Chapter 5 deals with structure and value creation, what creates and destroys shareholder value.

Interactivity and real time feed back is empowered through the “what if” or stress testing ability. Any variety of strategic alternatives can be entered into the scorecard to quantify the consequence of the decision. The net change capability isolates the financial impact of the decision to simplify the how the income statement, balance sheet and cash statement changed and what are the drivers that created the change.

The learning experienced is driven by the standardized platform that creates familiarity. This same familiarity encourages spirited collaboration driving innovative ideas and performance enhancing solutions.

Due to the way the education process simulates reality (business’s own numbers, real time what if analysis and the real time ability to isolate and measure strategy) true common knowledge is created and over time actually becomes cultural.

So if creating common knowledge is the Holy Grail I am definitely not the first person to identify this. Companies are continuously developing human capital with large amounts of money being spent on “training”. Unfortunately there are little value measures around these investments yet they know it’s important.

So where is the possible dysfunction between the cost of learning and the benefit delivered based on the investment made?

The first area of dysfunction is the difficulty in measuring the cost benefit ratio. The other relates to what happens when the knowledge transfer process is done. There is usually no tangible evidence that produces ongoing deployment of the learning.

This is where Global Financial Bridge delivers a unique value offer. We provide the knowledge transfer using your numbers making the learning very relevant. The integrated learning is facilitated with the use of the Global Financial Bridge financial statement intelligence tool producing two key outcomes

1. Attendees learn how to use financial statement as a way to connect operational performance to financial performance

2. We leave the attendee’s with the Global Financial Bridge tool for their ongoing use after the learning process is completed.

Our customer feedback shows this is exactly what they want, the ability to for attendees to have a way to show that the training “sticks” leaving a system that is deployable long after the training is completed.

Contact Andre Gien on 925 323 2802 or agien@gfbridge.com

Ken Fleishman on 301 785 0330 or kfleishman@gfbridge.com