Fireside Chat: Financials in the Boardroom - How Non-Experts Can Engage

These are our key takeaways from our fireside chat with experienced board members Cindy Rampersaud, Julie Carlyle and Meinie Oldersma who discussed how today's board members can navigate the financial complexities they face in their organisations.

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We see more and more boards broadening their functional skill sets, with experts in data, marketing, cybersecurity and more now sitting alongside finance professionals.

A growing body of research suggests that such functionally diverse boards outperform (Kakabadse et al, 2019). But to shape strategy and challenge executives, all board members still need to understand the finances.

Whether you are an expert on the financials or not, every board member needs to know how to get the most out of the financial data - when it pays to dig deep and when it’s best to look through other lenses. 

1. Leverage Your Unique Background:

Your expertise, whether it stems from marketing, operations, human resources, or any other non-financial area, adds invaluable diversity to boardroom discussions. For instance, if you come from a customer service background, you can offer insights into customer satisfaction metrics that financial reports may not fully capture. Your questions and insights can illuminate how operational efficiencies or inefficiencies are affecting the bottom line, leading to richer, more informed strategic discussions.

2. Cultivate Trust and Open Communication:

Fostering genuine relationships with fellow board members and executives is foundational. For example, a non-financial expert can bridge gaps between complex financial strategies and their practical implications on the company's operations or employee morale. By establishing a rapport based on mutual respect and curiosity, you encourage a boardroom culture where challenging questions are welcomed, and diverse viewpoints are valued. This openness enhances decision-making processes, making them more inclusive and comprehensive.

3. Deepen Your Understanding of the Business Beyond Financials:

Take the initiative to learn about the company's products, services, market position, and competitive challenges through site visits, product demos, and direct conversations with customers and frontline employees. This hands-on knowledge will allow you to ask more penetrating questions about how financial strategies align with the company's operational realities and long-term vision. Understanding the narrative behind the numbers enables you to contribute to discussions on strategic investments, market expansions, or product innovations with confidence and clarity.

4. Adopt a Comprehensive Approach to Risk:

Expand the board's risk considerations beyond financial vulnerabilities to include operational, cyber, social, and environmental risks. For example, by applying your expertise in technology, you might highlight potential cybersecurity risks and their financial implications before they materialize. Similarly, insights into social trends could inform discussions on brand reputation and consumer loyalty, which are critical to financial success but often underrepresented in financial analysis.

5. Embrace Continuous Education:

Commit to learning about financial concepts relevant to your role on the board, such as the basics of balance sheets, income statements, and cash flow statements, through workshops, courses, or mentorship. However, also share your expertise with fellow board members, fostering a culture of mutual learning. For instance, conducting a short presentation on the latest trends in digital marketing or supply chain resilience can enlighten others and spark strategic conversations that balance financial considerations with operational realities.

6. Interpret Financials Through a Strategic Lens:

View financial reports as narratives that tell the story of the company's strategic execution. For instance, analyze revenue trends in the context of market changes or operational decisions you're familiar with. This perspective can lead to more nuanced inquiries about how strategic initiatives are reflected in financial outcomes, enabling the board to make more informed decisions about future investments, cost management, and strategic direction.

7. Champion Ethical Conduct and Integrity:

Use your position to reinforce the importance of ethical practices and corporate social responsibility. For example, initiate discussions on how the company's ethical stance on labor practices, environmental impact, or community engagement is reflected in its financial priorities and reporting. Your advocacy for transparency and ethical considerations can help align the company's financial strategies with its core values and societal expectations, enhancing its reputation and long-term sustainability.

8. Promote Flexibility and Forward Thinking:

Encourage the board to consider innovative approaches to business challenges and opportunities. Drawing from your experience, you might suggest exploring new business models or technologies that could open up additional revenue streams or enhance operational efficiency. For example, if you have a background in technology, propose evaluating investments in digital transformation initiatives that could improve productivity and customer engagement, potentially leading to stronger financial performance.

9. Advocate for Stakeholder-Centric Perspectives:

Ensure that the board considers the perspectives and needs of all stakeholders, including employees, customers, suppliers, and communities, in its financial deliberations. For instance, highlight how investing in employee well-being or community relations can drive long-term value creation, contributing to a more sustainable and financially robust business model. By emphasizing the interconnectedness of stakeholder relationships and financial health, you can help the board adopt a more holistic approach to decision-making.

10. Champion Comprehensive Reporting and Metrics:

Advocate for the inclusion of non-financial performance indicators in board discussions and corporate reporting. This could involve developing metrics around customer satisfaction, employee engagement, innovation capacity, or environmental sustainability. By illustrating how these indicators impact financial performance and risk profiles, you can help the board appreciate the full spectrum of the company's health and prospects. For example, high employee turnover rates might signal underlying issues that could affect operational efficiency and costs, warranting closer scrutiny and strategic action.

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