Many years ago, after completing my formal education, I trained in manufacturing as a Cost Accountant. More by accident than design, I learned something that stuck with me my whole career and influenced my ability to be effective at my job.
A Cost Accountant builds cost estimates for producing products. These are used to value inventory in the financial records and are a basis for setting selling prices to customers. Actual product costs can also be tracked and measured against estimated costs as a tool for measuring operational performance.
To do my job, I needed to know what raw materials were used and how much did they cost? What were the primary business activities involved in manufacturing a product? What were the costs associated with running those activities? How could I allocate those costs to individual products? This lead to a lot of questions. I had to be curious to do my job. Bottom line, I needed to “Learn the Business”. I couldn’t do this by sitting at my desk. I had to meet people, walk the production floor and understand how the business functioned.
Of course, the real learning is one level deeper. The awareness and insight from understanding the business was my passport to “Adding Value as a Business Partner”. For example:
- Since I understood the operational and financial data, I was often asked for my opinion on decision that were being made by production management.
- I took the initiative to advance high value projects that made sense for the business by knowing the financial triggers that had the biggest impact.
- I created financial and non-financial reporting that was relevant to the business.
I believe that “Learning the Business” helps us think like business owners or shareholders, beyond the boundaries of our functional areas in Finance, IT, HR, Production, Engineering, or in Sales and Marketing. Of course, this is easier said than done.
How can we do this? Here are a few ideas for Employees and Business Leaders:
Become habitual learners. Move from behind our computers and meet business partners and understand their challenges. Find out how we can add value? Ask if we can get closer to the customer e.g. participate in a customer visit. Participate in training and attend business information forums.
When we make decisions, ask ourselves “how can we make “informed business decisions”. How does my decision impact the business, not just in my own area of technical expertise, but in the broader business? What questions do I need to ask to become informed? What are the resource and financial implications? Not just now, but over the lifecycle of the decision.
For example, a Project Engineer may be involved in managing a capital investment project at a manufacturing site. Beyond the project management associated with the project, an engineer needs to make sure that a quality business case is built to justify the project. The project should be prioritized against other projects allowing scarce resources to be properly allocated in the business. Where appropriate, a justification should include an assessment of financial implications. This may require learning more about the impact of the project on the business e.g. operational resource impacts or financial risks to the business of moving or not moving forward with the project.
Create a culture of transparency for employees. Communicate about the business. What are the business goals and challenges? What is important for people to know? Create programs where staff can learn about products and customers. If the business is part of a larger corporation, share information about the corporation. Encourage interactions, Q&A and engagement.
Create a program for staff and key decision makers to learn about the finances of the business. What are the financial triggers that drive the business? Help staff in different functional areas understand how they can influence those triggers and make informed decisions. Integrate employee rewards to key business triggers, especially those that they control.
In summary, by making a commitment to ourselves or our staff to “Learn the Business”, we can create a broader view of the business. We can increase our decision-making agility supporting improved financial performance in the business. We can also grow as individual contributors, managers or leaders and advance our careers.
What are your thoughts and experiences with this subject?
I help mid-large manufacturing and financial businesses reach new heights of leadership and financial excellence.