Is Business Literacy Holding Your Company Back?

As your teachers told you, the three R's—reading, writing and 'rithmetic—are fundamental to learning .

Now that you're out of the classroom and in the work world, you still use the three R's every day. But how are you dealing with the clashes they can cause—especially when everyone's skill levels are drastically different?

In the past few weeks, I've come across three situations regarding the third R: 'rithmetic. It's also like a third rail for some savvy workers. They aren't necessarily the most senior or highest paid. But they are pivotal to company operations. And they do know that the language of business is numbers, and everyone needs to do the math. Plus they also know what they don't know can hurt them. And in one situation, they also know that their co-workers' lack of basic finances is financially hurting the company and the salespeople.

Situation 1: Managers Who Know Technology, Not Finances. This fall in a survey of global tech company managers about communication practices, a number of managers made a strong plea for help. In an open-ended question about "What improvement would you most like to make in your communications skills?" a number of managers requested help in increasing their knowledge on a variety of topics, but especially financial matters. Some representative comments were "I want to be comfortable talking about financial results." "I need more knowledge on financials on how we're doing on our goals at the corporate level" so "I can talk with my employees" about our performance.

These comments tracked with two of the survey questions in which managers rated their knowledge of the company's financial performance and their interest in the company's financial performance. The gap between the two? 49%! Only 33% said they had a high knowledge, while 82% said they had a high interest level.

Helping managers brush up not on their Shakespeare but on facts and figures has two benefits. First, it makes them more knowledgeable and confident managers, as they themselves suggested. And second, it gives them critical skills they need if they want to advance into leadership positions. When it comes to numbers, you've got to be able to do more than put together a budget, monitor expenses and forecast revenue and other key numbers. You've got to know your organization's financial statements inside and out, and also understand what the financial analysts are saying about your situation.

Situation 2: Managers Who Don't Want to Hold Up Their Weight. Another organization decided that the leaders at one of the larger sites should conduct monthly business debriefs with all the front-line managers. The leaders decided they would rotate responsibility to lead the debriefs to share the load and give everyone exposure to the managers. Well, turns out the HR leader was suddenly missing in action every time it was his turn. He was traveling on business, recruiting off site, or attending a meeting off campus. Turns out, he didn't think he knew the financial information well enough to explain it. Rather than admit this and get remedial help, he deserted his fellow functional leaders.

Situation 3: Salespeople Who Get It; Buyers Who Don't; and Salespeople Who Suffer. A high-end retail store (which will go nameless to protect the guilty) is having a tough 2008, as is the entire industry. The store—and especially its salespeople—have been dealing with a double whammy. The store imports a significant percentage of its merchandise from Europe. Earlier this year, when the Euro was so much stronger than the dollar, the store was facing almost daily price increases—at least in what its Italian, French and British suppliers were charging. Now with the financial meltdown and credit crunch causing consumers to cut back, the store is facing decreased demand. It's trying a number of customer incentives to try to salvage the holiday season.

So what's the connection between these two issues? The prices customers pay, the salespeople's commissions and the store's margins. According to the salespeople, the buyers keep the computer system updated with all the product pricing information. However, the buyers don't bother to revise the price tags posted on the merchandise. So anytime there's a discrepancy between the price tag that the customer sees on the merchandise they select and the price listed in the computer, the customer pays the amount on the price tag. That's almost always lower than the price in the computer. The commission the salespeople earn is based on the price customers pay. And the store's margin is related to the price customers' pay. The salespeople and the store's managers are realizing they're getting the short end, but that's the extent of it. No one is fixing the problem. Believe it or not, no one is assigning the buyers or anyone else the responsibility for updating the price tags on the merchandise!

According to my sources, the problem is getting worse now that the holiday season is well underway and the store is handing out discount coupons to customers to encourage them to spend. For example, one coupon provides $100 off if you buy at least $300 of merchandise. One customer selected a handcrafted bowl with a sticker price of $325. The current computer price was $425. Nonetheless, the customer paid $225 ($100 off of $325) for a $425 bowl, basically a 47% discount instead of 24%.

The buyers may have exquisite taste for the finer things in life, but their business knowledge—especially around financials—should put them in the poorhouse.

Meanwhile, the salespeople are getting crankier and crankier as they and the store lose money on sales.

The Case for Business Literacy. In situations like this, business literacy is not just a nice-to-have skill; it's imperative if you want to avoid financial losses and try to eke out a profit in difficult times.

And how much time and money would it take to teach people some basics? The investment is miniscule compared to the return. And one more point to consider. With LEAN Communications, we're always striving to add value to customers—but not at the expense of the employees or the organization. Otherwise, the system can't sustain itself.

So ask yourself, do you have any skeletons like this in your work closets? If so, it's time to take them out and teach them how to dance and do the math.