How to get your employees financially fit and improve your business!
“What do you mean I don’t have money? I still have blank cheques!” As you know, a bank balance is not an indicator of personal wealth. And it isn’t a gauge for business success either. Unfortunately, not every employee understands this. It may be because they didn’t study finance or they simply aren’t good at managing money. The question is – does it matter?
Yes! A lack of financial literacy is often the culprit behind other inefficiencies within a company. The bottom line is this— increasing employee financial literacy improves employer profits.
Here are some ways to improve your organization’s fiscal fitness and boost your bottom line:
- Teach employees financial fundamentals.
Research suggests that finances are the number one source of employee stress. Let’s examine why. Most employees don’t come to you as financial experts. In fact, many are unprepared for the financial realities of the “real world” and that financial stress impacts both their financial and mental health and your bottom line.According to the National Institute of Personal Finance:
- Up to 50% admit to wasting 21 hours per month on the job dealing with personal money matters
- 66% say they “have trouble paying their bills on time and worry about money”
That combination can take a toll on company productivity. Help your employees manage their own money well and everyone wins. Later, we’ll examine some ways to help them bone up.
- Help employees know the numbers.
You can’t expect your employees to make fiscally sound decisions if they lack the proper information. In the same way, they can’t make good decisions if they don’t understand the relationship of their decisions to the company’s profitability. Once they understand how the company makes money, they start to make better decisions that positively affect the bottom line. Numbers like:
- The company’s key financial drivers and metrics (profit, loss, cash flow status)
- Indicators of profitability (gross profit, operating margin)
Once employees begin to comprehend the numbers, they make fewer mistakes. They connect the ramifications of their actions with the company’s performance. When you improve the financial intelligence of your team, things start to change. They begin to see how they can improve the profitability of their company and those of your customers.
- Encourage employees to think like an owner.
Employees tend to care about the business if they have “skin in the game.” That’s the premise behind Jack Stack’s “open-book management” theory: let everyone in on financial decisions. Equip your employees to manage budgets and negotiate supplier or vendor relationships.When employees think like the CEO, they:
- Take ownership and accountability for their actions and decisions
- Understand how their decisions impact the goals of the organization
- Challenge policies and procedures to drive greater return for the company
- Are more committed to the company’s success
That brings us full circle. To think like a CEO, employees need to understand the numbers. Achieving real financial intelligence changes the game.
You’ve convinced me. Now, what?
By now you should be convinced that upping your employees’ business acumen is critical to your business success, so how do you help them get there? November is financial literacy month. Organizations like Prosper Canada, the Financial Literacy Action Group (FLAG) and the Financial Consumer Agency of Canada (FCAC) and many others provide tools and resources you can tap into to help ramp employee skills.
If you decide to tackle the training yourself, think of ways to make training fun, interactive and applicable. Tie financial concepts to practical, personal financial situations. For example, concepts like vendor evaluation and purchasing policies can be demonstrated through the real-life example of evaluating or changing a mobile phone or long distance provider. The notion of restructuring debt can be explore through the practical example of refinancing a mortgage. Examine topics like retirement savings and long-term investing. Include real-life company issues like waste, inventory, control and safety that affect profitability and equity value. Calculations illustrate that for every dollar employers spend on financial education, they gain a return of $3 or more. That’s money well spent.
Tap into financial literacy, implement some financial management 101 “lunch-n-learns” and together your organization will be prepared to shape your company’s fiscal future.
 “The Economic Ramifications of Financial Stress: How Financial Wellness Benefits Boost the Bottom Line.” Financial Fitness Group. 2015. 10 Oct. 2015 < http://financialfitnessgroup.com/wp-content/uploads/2014/08/FFG_Economic-Ramifications.pdf>.