By Rob Douglas, VP UKI & Nordics at Adaptive Insights
As businesses adapt to new technologies and intensifying competition, today’s corporate leaders are turning to finance leaders for better financial insight to help them make well-informed decisions. Unlike the internal finance team, board members may not have a deep understanding of their company’s financial data and key performance indicators (KPIs), and, more often than not, they don’t need that detail. Instead, they need high-level, holistic insights that they can use to formulate and execute financially sound business strategies.
However, many finance leaders struggle with communicating financial statistics to their company’s board of directors – striking the balance between strictly objective number-crunching and holistic story-telling is harder than it might seem. Here are five ways for finance leaders to make sure that this is done effectively:
- Putting yourself in their shoes
The cornerstone of any impactful presentation is a good understanding of one’s audience. Board members aren’t always financial experts, and for the most part, they do not even get involved with a company’s day-to-day operations. Many are busy, serving on as many as four or five other boards as well. What this means is that there is little chance of them being interested in, or able to grasp, an overly intricate analysis of the material being presented. Instead, they require actionable and easily understandable insights.
- Being transparent
Finance leaders’ biggest asset is their objectivity. Since that is what the board expects, there is no need to spin anything or make the sales forecast look rosier than it is. All relevant news, good or bad, should be reported as soon as possible and in a straightforward way. On a higher level, transparency also relates to the crispness of the overall message being presented. Any message should be informed by a single source of truth to avoid any debate over whose numbers are correct and overshadowing important discussion on insights and action. In short, it speeds and improves decision-making.
- Providing context
Rather than a snapshot of performance at a moment in time, board members need to be able to quickly grasp the company’s big picture. This can be accomplished by making sure that any presentation covers where the company has been, how it is performing now and where it is going in the future. The most effective way of doing that is to show four to eight quarters of past performance, the current quarter’s numbers and four quarters of the latest forecast. That way, board members can quickly and comprehensively understand how the company is doing.
- Being consistent
Having data points constantly change from one meeting to the next is sure to annoy any board. The sure-fire way to avoid that is to winnow down the KPIs chosen the same way, every time. Some companies track as many as 250 KPIs internally, ranging from sales metrics to marketing productivity—many which are not of direct interest to the board of directors. A good rule of thumb for board presentations is about 20 KPIs, related to the key financial details, to be effective. The ones chosen also need to be clearly defined to the board, and meaningful to the specific areas covered.
- Understanding their role
The bottom line is that finance leaders are often the only non-board member who attend the meetings. While any finance executives should cater their presentation style to the expectations of their specific board, it is usually best to keep a low profile and refrain from debating issues, taking sides, or inserting unsolicited opinions. If financial information is presented as objectively and accurately as possible, while adding valuable context, board members are going to be interested in the view of finance regardless.
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