Why—and how—communicators should bolster their business IQ
Getting a grasp on financial terms and bottom-line budget matters can dramatically increase your internal authority. Here’s what you should know.
Most communicators are not quite fluent in financials.
That egghead math stuff’s for execs and bean counters to worry about, right? Not quite.. If you’re fine with being relegated to “order-taker” status, by all means, continue neglecting numbers. But if you’d like to secure a better, more influential seat at the corporate decision-making table, it’s time to beef up your brass-tacks business savvy.
Karen Vahouny, who teaches a “Fundamentals of Business and Finance for Public Relations Professionals” course at George Washington University, shared vital tips for communicators at Ragan’s Business Fluency Boot Camp for Communicators event on Jan. 14. She explained the “trifecta of financial reporting,” which every communicator should be able to interpret and analyze:
- Income statements, which show what an organization earned from its operations and measures results over a period of time. Income statements track performance, typically over a quarter or year, and they usually list metrics such as sales, gross profit, general and administrative expenses, earnings before taxes and net income.
- Balance sheets, which reveal the financial condition of an organization at a specific time. Typically issued on the last day of the quarter or year, balance sheets list assets (what you own), liabilities (what you owe), and equity (what you’re worth).
- Statements of cash flow, which “provide data regarding all cash inflows a company receives from its ongoing operations and external investment sources.” This crucial data analyzes all the reasons net income “didn’t produce the same increase in cash in the bank,” according to Vahouny.
Vahouny listed common finance terms communicators should nail down—and, ideally, tie their work to:
- P/E (price-to-earnings) ratio
- Margins
- Valuation
- Variance
- EPS (earnings per share)
- P&L (profit and loss)
- Liquidity
- KPI
- Market cap (which reflects the value of a public company and is calculated by the price of a share of stock times the number of shares.)
- ROI
If any of those terms are unfamiliar, that’s your cue to hit the books (and maybe the QuickBooks).
Learning from excellence in action
Grasping basic business and financial terms is important. But Vahouny suggests that communicators should actively seek inspiration from those known for spinning messaging gold from content straw.
She lauds leaders such as:
Target’s CEO Brian Cornett, whose heartfelt letter to employees in the wake of 2020’s unrest solidified his reputation as an empathetic, compassionate leader who understands his people and cares for his community.
Berkshire Hathaway’s CEO Warren Buffet, whose warm, engaging shareholder letters are the stuff of winsome copywriting legend.
She also applauds the comms efforts of former Ford CEO Alan Mulally, Mary Barra of GM, Helena Foulkes of CVS, Zoom CEO Eric Yuan, and Adena Friedman of NASDAQ.
For more specific instances of bold and compelling executive communication, Vahouny references this poignant memo from Airbnb’s top executive, Brian Chesky, as well as this powerful note from J&J’s chairman.
How to bolster financial literacy
How should you start building your own business IQ? Vahouny recommends:
- Listen in on the quarterly earnings call.
- Learn as much as you can about other companies and organizations. “How are they handling issues and crises?” she says. Follow what they’re doing, and see what might work at your own organization.
- Subscribe to the (free) New York Times’ DealBook
- Pick at least one business periodical, and read it regularly.
- Read, watch and listen to local business news.
- Write down and look up terms you don’t fully understand.
- Pick a public company and subscribe to Google Alerts.
- Build and follow a list of your own credible sources.
- Take a class in business, economics, finance or accounting.
- Build your personal finance education through seminars, apps or podcasts.
Why learn about finance? Vahouny shares four compelling reasons:
- You’ll get smarter.
- You’ll make yourself more valuable.
- You’ll contribute more to your org’s strategic plan.
- You’ll improve your ability to measure results.
Vahouny’s last tip: Say thank you. Freely express gratitude to mentors and those who’ve made a positive difference in your life. Gratitude notes can change your life—and career. If that’s of interest to you, put that on your to-do list—right next to improving your financial literacy.
