Leaders Must Have Command of Their Finances

Usually on this blog, I write about the human side of leadership. I write about the importance of caring for people on your team, serving them, casting a vision, and leading boldly into the future. That is the sort of thing that gets me up in the morning.

I’ve never written about the “joy” of spending countless hours pouring over hundreds of lines in spreadsheets and financial management systems. I haven’t expressed to my readers the importance of understanding depreciation, amortization, allocations, and variance. This article is about finance. For some, it is a necessary evil. For me, this is a critical skill and tool that should not be under-appreciated.

My beginnings

Early in my career, I was responsible for running an enterprise technology platform called Citrix, which was a shared platform used to host applications for various business units. Along with my technical ownership, I also ran the budget and allocations. I had internal business customers that paid for the service.

I need to make the hosting service cheaper and better over time. Because I understood the financial drivers, I became an early adopter of virtualization technology. It made my service cheaper, and I knew how to pass that value along to my internal business customers.

Mid-career

About 10 years later in my career I worked in middle-management, leading a sizable technology area for a business unit in a large financial services company. I indirectly reported to an executive a few layers above me that was known for having high expectations on financial management.

At the time, his financial management demands seemed excessive, but he defended his thinking to me. He told me that he had often encountered senior leaders who didn’t understand their finances. That lack of understanding eventually became their undoing. Because of this, he was determined to drive financial accountability and competency down his organization to the front-line cost center managers.

Today

Now, I insist on that same level of financial competency and discipline from those that report up through me. However, it’s not just for defense. Here are a few perspectives that I teach:

1. Be proactive. Finances can happen to you, or you can happen to your finances. We all have plenty of responsibilities, and if we don’t keep an eye on our finances, we will be surprised and confused. It’s worth taking the time to understand and question every line item.
2. Be a learner. If you don’t know the difference between amortization and depreciation, that’s okay. You probably went to school to become a computer scientist, and now you find yourself in management. You may have passed Finance 101, but that was a long time ago. There are no stupid questions. If you don’t know, be humble enough to ask.
3. Be a partner. Fortunately, I have fantastic colleagues on our Financial Planning and Analysis team. They do amazing work, but they don’t do my work for me. I dive into the books and check in with them often. 
4. Be efficient. In my entire career, I’ve never felt well-funded. I’m always under some kind of belt-tightening. Some people think that one day, more money will rain down from the sky, and we will get to do all of the things we want to do. It usually doesn’t work that way. The way I get to do the things I want to do is I find efficiencies and reinvest. I’ve found a lot of ways to become more efficient and will cover that subject thoroughly next week. Often, technology is a fantastic enabler for this endeavor. Many things are constantly getting better, faster, and cheaper.
5. Be a good steward. At CHS, this is crystal clear. We are a farmer-owned cooperative. Every dollar we spend comes out of a farmer’s pocket. I personally know a lot of farmers, and I know how good they are at stretching a dollar. Out of respect for them, I need to work as hard or harder to make every dollar count.

Information Technology is a value machine. The business invests money. Technology leaders use it build technology products and capabilities. The result is high-performance operations, business transformation, and market leadership.

There is nothing simple about this process. Finance isn’t easy. I wrote this article to challenge you, but to also challenge myself. The best way I know how to raise the bar on my own performance is to teach others. Together, let’s do a fantastic job managing our finances. The business and our owners are counting on us.

Read this article on my blog site or listen to it on my podcast???