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Financial Literacy and Intelligence

One of the first positive steps that enterprises can take to encourage more boundary spanning, analytical intelligence is to internally encourage greater and wider financial intelligence. It's surprising how few knowledge workers actually have a direct, line-of-sight understanding of the relationship between their work and the bottom line. Similarly, few people have a direct understanding of the relationship between the analytical work done in the backroom and their own work on the front lines of the business. right

If we are to bring about greater analytical competitiveness, we probably should start with financial literacy. There's a clear correlation between such literacy and the performance of organizations, contends Dr. Karen Berman, Founder, President and Co-owner of The Business Literacy Institute and co-author of the book Financial Intelligence. When employees understand how success is measured financially, they are more able to contribute to those results, according to her research.

But that's not the only benefit of higher financial literacy. "Motivation also increased, commitment increased, and turnover decreased and people felt better about where they worked," she says. "They realized that they were an important part of the organization and its success; that the leadership team trusted them, considered them important and included them by sharing the information on the business."

Berman focuses on teaching non-financial managers about key financial matters such as understanding an income statement, a balance sheet and a cash flow statement. As she explains, "it is not complicated, although maybe the finance people in your organization present it in a complicated way."

It's a bigger challenge than one would expect. "I think one of the problems is that as you are moving up the ranks in the organization, at some point you are expected to know this stuff," Berman says. "In many cases there is no formal training and it is very hard for people in a management meeting to raise their hands and say, 'Wait a minute! I don’t understand what you are talking about.'”

What's the payoff of a financial literacy program? The same payoffs we can expect by promulgating operational analytics programs that help people understand and act on the numbers from their front line positions. "By understanding the numbers, people at all levels can make better decisions," concludes Berman. "They can understand how their actions and decisions impact the bottom line."

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