About this Section
This section of the module focuses on Implementing financial management approaches. In this section you will learn how to:
- Disseminate relevant details of the agreed budget/financial plans to team members
- Provide support to ensure that team members can competently perform required roles associated with the management of finances
- Determine and access resources and systems to manage financial management processes within the work team
Resources
The following materials supplement the information provided in this section:
- Reading D - Coaching For Peak Employee Performance: A Practical Guide to Supporting Employee Development (2nd ed.)
“Management recognize what information their employees need to have and make sure that they receive it in the most appropriate form.”
(Hartley and Bruckmann 2002, 3)
Once a final budget has been agreed upon, it is the manager’s job to deliver details of the plans to team members. After all, there is no point investing significant time and resources in developing and finalising budgets if no one in the organisation is aware of them!
Depending on the organisation, there may be a number of different departments that a manager could be responsible for. Whilst it is important for team members in various departments to be aware of the overall budgets, managers should emphasize details specifically relevant to each team member. Put simply, team members need to be aware of the area pertinent to them – if every department is achieving and exceeding individual budgetary requirements, then overall budgets will be achieved.
There are various ways a manager can communicate budget information. McGovern and Shelley (2008) have developed a five stage approach they feel managers should adopt in order to effectively communicate complex information:
The 5-C Approach to Effective Communication
- Communicate with clarity. When it’s your job to convey information, say or write it clearly, leaving no room for misinterpretation or doubt.
- Be consistent. When communicating a message, it’s extremely important to get all the messengers on the same page. Additionally, make sure you have a full understanding of an issue before you communicate it to your employees. You don’t want to have to come back later and tell them you’ve given them incorrect information.
- Communicate constantly. It’s your job to keep members of your team informed of anything that might affect them or their jobs, as well as to continually communicate goals, values, and beliefs. When employees know what is happening at their company, they feel connected and accountable.
- Cascade information. Important information should start at the top, then cascade down from one level to the next until it has reached every person within the company. Despite good intentions, information often reaches a certain level and then dries up, leaving everyone below that level to speculate about what might be happening.
- Communicate with credibility. If employees can’t buy into your message, or can’t trust that what you’re telling them is accurate and true, they’ll make up their own version. It’s vitally important that you establish and maintain credibility in all cases with members of your team.
(Adapted from McGovern and Shelly 2008)
When deciding on a method of communication, various methods could be appropriate, these include face-to-face, written, oral and online, or even a combination of these methods. You could combine methods by giving a presentation with corresponding resources for reference. When making decisions on how best to communicate budgets and financial plans, be aware that the content may be difficult for some team members to understand. Many people tend to get overwhelmed by numbers and may not quite understand exactly why “this is added here” and “this is subtracted there”. If the information you need to present is of a complex nature, face-to-face methods such as a meetings or presentations are the most appropriate because they will allow you to answer any questions as they arise.
If you decide to give a presentation to team members you should follow Becker and Wortmanns’ (2009) four steps for effective presentations:
- Tell what tell. Tell your listeners what you’re going to be talking about—the length of your presentation, your topic, and any other special instructions. You have to do this because then they relax. They know what to expect, and they can settle into listening to you.
- Tell why they should listen. This is a brief statement about why these people should be listening to you. It’s not necessarily why they should agree with you or why they should buy what you’re selling them, but why should they be paying attention. This is the “what’s in it for me” step.
- Tell. This is the body of your presentation, where you will spend most of your time; it includes stories, examples, editorials, and emotional appeals to your audience. But remember, people won’t hear any of this if they can’t relax and understand why to listen to you because of Steps 1 and 2.
- Tell what has been told. This is your summarization. A summary includes two parts: first, you summarize your most important points, and second, you provide an action statement when applicable—what you want your listeners to do now that they know this information. A summarization includes the most important points—it does not contain everything, and you are not repeating yourself. None of us remembers everything we hear the first time, and repetition is essential for retention.
(Becker and Wortmann 2009, Ch. 12)
In certain organisations where budgets and financial plans are used daily, weekly and monthly, team members may already be adept at interpreting and using them. In these organisations, budgets and financial plans are often released via e-mail and then reviewed by management on a daily, weekly or monthly basis. If team members are adept then e-mail, phone calls or brief discussions may be appropriate methods of disseminating budgetary and financial information.
Reflect
Imagine that you are the manager of a newly employed junior administrative assistant. What do you think you be the most appropriate method of disseminating budgetary information to this new employee and what depth of information do you think would be most appropriate?
Now, consider how you would disseminate relevant details of a budget to a team member of ten years’ experience in the role.
Reading D - Coaching For Peak Employee Performance
A Practical Guide to Supporting Employee Development (2nd ed.)
The manager of a team is not expected to complete all tasks relating to budgets and finances and cannot implement plans single handily. There are often times when delegating tasks to individual team members and departments is essential for budget implementation. A manager may delegate tasks such as:
- Arranging for use of corporate credit cards
- Banking
- Debt collection
- Ensuring security, accuracy and currency of financial operations
- Invoicing clients, customers and consumers
- Maintaining journals, ledgers and other record keeping systems
- Maintaining petty cash system
- Purchasing and procurement
- Wages and salaries payments and record keeping
It is important that the team member assigned to any of the above tasks feels supported and confident in what is expected from them. For this to occur, the team member must have all the necessary knowledge and skills to execute the task correctly. The list below outlines tools managers can use to build and support the necessary knowledge and skills of team members:
- Training including mentoring, coaching and shadowing
- Clear documentation of procedures (policies and procedures manual)
- A help desk or identified experts within the business to turn to
- Access to specialist advice (accountants, finance managers, IT)
- Feedback and briefing sessions
- Intranet based information
Depending on the task and the team member, the way in which you support them will vary. For competent team members with a specific task-related question, it may be as simple as referring them to a policies and procedures manual or intranet based information. For new employees who require a greater amount of development and support in their roles mentoring, coaching and shadowing would be most appropriate.
Reflect
If you were unsure of how to complete a newly delegated financial task in your current work role, which of the above tools would you prefer? Which would you least prefer? Why?
Each team member will have different needs, and as a manager, it is your job to identify and provide the support each team member requires. Some team members are intimidated by the thought of “budgets” and “numbers”. With these team members it is often important to not only train them in the technical aspects of their role, but to also manage any confidence issues. The following extract provides a great example of the power of instilling confidence in employees to rise to challenges and make decisions.
Case Study
“Kay was at the bottom of the management structure of a large food retailer, with responsibility for one section of the store. She had noticed that some produce was not selling and suspected it was the way it was displayed. She said nothing, however, because she assumed it was not her role, and that others would know better. One day, a regional manager visited the store and started to chat to her about her area. Feeling he had some interest, she asked him ‘Do you think this layout works?’ Expecting him to share his far greater knowledge of retailing by telling her what to do, she was surprised when he replied, ‘What do you think isn’t working?’ She told him her perspective, in order that he would solve the problem, and was flattered when he responded, ‘It sounds as though you understand what the problem is, what do you think we should change?’ Emboldened, she told him. To which he replied ‘So, what is stopping you from doing it?’ ‘I did not think I could’, she responded. ‘Who has told you not to use your initiative?’ he questioned. To which the truthful response was ‘No-one’.
Kay repeated this story to me many years after the conversation because it had had a profound effect on her, not only at the time, but in her subsequent management of staff. What she had learnt was not just that a manager can inspire confidence in the ability to act, but that a short interaction can have a big impact. She had never worked anywhere where managers had the time to sit down to coach, but she believed profoundly in the power of coaching for performance.
Although at the time Kay would not have recognized that she was receiving coaching, what she registered was:
- The manager had shown her the respect of listening to her
- He had challenged her assumptions
- He had encouraged her to identify a solution (which may not have been his solution to the problem)
- He had encouraged her to use her awareness as a motivation to act
- He had modelled an approach that she continued to use to great effect.”
(Pemberton 2008, 11)
As demonstrated in the case study above, Kay was an experienced employee who still required support in order to gain the confidence to perform her role to her fullest potential. The support came in the form of an informal quick coaching discussion, but had a lasting impact. Lengthy training may not be required for most roles associated with the management of finances – instead, like the case study, instilling confidence in an employee may be more than enough support.
“The bottom line: Reliable, results-oriented coaches can always take pride in the knowledge that they inspired people to perform at higher levels than they otherwise would have if left to their own devices.”
(Nigro 2008, 4)
Team member training and support is a large component of a manager’s responsibilities. Part of the support process should be the formulation of goals for team members. Imagine you are the manager of a sales team and you have delivered the budget to your team. One way you could provide support to ensure your team performs competently, would be to create goals that meet or exceed the budgeted expectations. When setting goals, SMART principle should be used:
What makes a goal “SMART”?
As you set both unit and individual goals, you’ll want to write them down. Doing so can help you more clearly define what you hope to accomplish, and it strengthens your and your employees’ commitment to reaching goals. Use the following five “SMART” criteria to draft clear goals:
- Specific: You can describe the details of what must be accomplished to achieve the goal
- Measurable: You can measure the goal using either quantitative assessments (for example, number of new customers or number of new products introduced) or qualitative assessments (for instance, higher workforce morale).
- Achievable: You and your employees can achieve the goal
- Realistic: The goal is realistic, given existing constraints, such as time and resources available to devote to accomplishing the goal
- Time-limited: You must achieve the goal within a specified timeframe
(Harvard Business Press 2013, 12)
If the budget for the sales team was to achieve gross revenue of $100,000 per month, using the SMART goals principles, you could create daily and weekly goals that include reasonable targets that would amount to the budgeted $100,000 by months end. Below are examples of “SMART versus Not-So-SMART” goals:
Not-So-SMART Goal
Add new sales people who are capable of using the new sales package. (This goal is not specific, measurable or time bound)
Improve net profit over the next year. (This goal is not specific or measurable)
Reduce average errors by 98% over the next 6 months. (This goal is not likely achievable or realistic)
SMART Goal
Add 12 new sales people in the next 9 months who are capable of using the new sales package.
Raise net profit 15% annually over the next 3 years.
Reduce average accuracy errors by 20% over the next year.
(Adapted HBP 2013, 13)
SMART goals do not have to be used solely to support team members – they are also a useful tool to use as a manager. For example, if you were responsible for thirty team members, it would be impossible to support every team member at the same time. Creating some SMART goals for yourself with relation to developing and supporting your team will keep you organised and focused.
Implementing budgets and financial plans requires various personnel to work and communicate well with each other. This is particularly relevant in large businesses where there are many departments. Once budgets have been communicated and team members have been provided with the necessary support and goals to achieve such plans, how does a manager determine and access resources and systems in order to effectively manage their plans and processes?
Every organisation is unique, however the most common resources available for managers to access will include:
- Specific IT hardware and software: There are many accounting tools that managers can use to generate reports and budgets. Examples include QuickBooks online, Xero, Reckon and MYOB.
- Human Resources: Internal capabilities of a team should be leveraged wherever possible. Team members need to be trained well so they can correctly follow procedures to produce the desired outcome.
- Financial Resources: This relates to a manager having access to sufficient financial funds to effectively achieve objectives for that particular department.
- Specialist Advice and Support: Wherever necessary, managers should seek clarification or support from specialists within the business such as accountants, financial controllers and financial managers. Accountants are generally responsible for generating reports that communicate how well a business is performing for a particular period financially. Financial controllers typically determine where capital is dispersed Finance managers are in charge of the financial systems and processes of a business. They are also responsible for providing support in these areas to co-workers.
Determining which resources and systems to use will be heavily dependent on the type of process you are managing. If, for example, you were managing the process of invoicing, you would need to access specific programs such as MYOB or other accounting software. If you were managing the process of ensuring security, accuracy and currency of financial operations, you may determine that human resources needs to be accessed in order to train staff in these processes.
Being able to determine and access resources and systems is an important part of managing financial management processes. As a manager, it is essential that you are able to identify and utilise resources within your organisation that can contribute toward achieving goals and objectives. This will, in turn, ensure that processes are managed effectively within the work team.
Reflect
Think of the different types of resources that you use in your personal finances. For example, do you use multiple bank accounts, online banking, direct debits to pay bills, an accountant, or a financial advisor?
Do you think that having access to all of these resources makes the management of your personal finances easier?
What impact do you think having access to adequate resources would have on your ability to manage financial processes as a manager within a business?
The case study below outlines how Darren, the sales manager of Daisy’s Drink Company, implements a financial management approach for a budget.
Case study: Daisy’s Drink Company
Darren, the sales manager, had recently been given a finalised budget by upper management. The sales department consists of sales representatives, order processors and accounts administrators. Upon receiving the budget, Darren needed to decide how he was going to disseminate budget information to all team members.
The sales representatives and order processes used budgets daily as a key performance indicator and were very confident in interpreting and using the information embedded in the budget. The accounts administrator, who was responsible for invoicing customers, had only been employed with the company for one month and had little knowledge regarding budgets.
As such, Darren decided to e-mail all of the sales representatives and order processing team details of the budget relevant to them and spoke with them briefly face-to-face during their weekly meeting. For the accounts administrator Darren prepared a short presentation incorporating the 5C approach to communication and the 4 “Tells” of presentations in order to provide full clarity on the budget and the corresponding expectations.
Once all team members were aware of the details of the budget, it was then time for Darren to ensure that they had the relevant support to ensure each team member was competent at performing their required roles. He sat each team down and set SMART goals that aligned with their particular area of the budget. He also explained to them that if the need was there, each team member would be able to access:
- Specialist advice (accountants, finance managers, IT)
- Clear documentation of procedures (policies and procedures manual)
- Intranet based information
- Training and coaching from Darren
In order to manage the processes within the work team, Darren determined that he would need to access specific software that generated reports for the sales teams and data processing teams. With these reports, he would be able to identify if the budget was being met and if any staff needed additional support. In relation to the administrative assistant, Darren determined that further training and coaching would be required, so he decided he would access the expertise of the senior administrator to mentor the administrative assistant.
Reflect
Do you think Darren provided enough support to team members?
What are some other ways he could provide support to team members to ensure they are competent in their required roles?
A Note on Technological Tools in Financial Management
The accounts department were once nicknamed ‘pencil pushers’ but not anymore. The emergence of digital technology has changed the landscape of financial management. While the theory has remained the same, there has been great progress in the way financial information is recorded, analysed, and reported. The biggest change has come from the emergence of spreadsheets which allows financial information to be recorded and manipulated with far greater efficiency than previous paper based approaches. This has allowed financial management to become more available to managers and other senior employees. A range of digital technologies and their impact of financial management are outlined below:
- Spreadsheets: A spreadsheet is an electronic document, often created in a program called Microsoft Excel. In Excel, financial information can be can be compiled in rows and columns of a grid. This allows the data to be easily manipulated, used in calculations, and presented clearly. This has greatly influenced the areas of accounting and financial reporting.
- Remote access to an office server: Because of the internet, data can be accessed from any location. This has allowed major advances in the efficiency of the auditing process, accounting, and financial reporting. The emergence of cloud computing has increased this ability even further.
- Accounts software: Accounts software has provided both a more automated and user friendly way of recording information in a ledger and developing spreadsheets. This benefits both everyone within a business because of the increase in the efficiency and automation with which daily accounts information is recorded.
- CRM Systems (Customer relationship management): CRM systems allow automated recording of customer activity. They also provide the ability to integrate and analyse the information that has been recorded on customer activity.
- Permanently updated databases: CRM systems and accounts software are connected to databases. These databases are constantly updated with new customer and accounts information. This information can then be accessed from another location by financial experts and used for reporting and analysis.
In this section you have learned how to disseminate relevant details of the agreed budgets to team members, provide support to ensure that team members can competently perform required roles associated with the management of finances, and access resources and systems to manage financial management processes within the work team.
