Companies are in business to make money. So why shouldn’t everyone working for a company understand how money is made?
Armed with such knowledge, salespeople could sell in a way that better boosts the bottom line, while other employees could appreciate the importance of pitching in on cost-saving efforts and recommending new efficiencies.
“When you improve finance and accounting acumen across the company, good things happen,” says Jonathan Schiff, an accounting professor at Fairleigh Dickinson University and a longtime adviser to corporations. “It should be part of the CFO’s job to make sure everyone has a baseline understanding of those topics.”
That’s the goal at Marsh, where “everyone” means everyone. Starting this year, all 25,000 of the global insurance broker’s employees (“colleagues,” in Marsh lingo) must participate in a finance-education program called “Making a Financial Impact at Marsh.”
First launched in 2011 on a voluntary basis, the program consists of 27 video blogs in which Marsh executives explain topics ranging from financial statements, investor strategy, and “thinking like an owner” to the company’s growth formula, scorecards, and more.
Such financial-literacy efforts aren’t uncommon in the financial-services sector, observes Schiff, though they are far less prevalent elsewhere. But the programs that do exist are often of low quality, he adds. “Using internal people to convey the message is a big plus,” he says of Marsh’s program. “Marsh is taking a good position by not offering a check-the-box course provided by an outside vendor that doesn’t understand the company’s business.”
Schiff also applauds the company for making the program mandatory. With tongue partly in cheek, he says Marsh is making a statement that for an employee, a baseline degree of financial acumen “is just as important as knowing how to fill out your expense report or knowing where the rest room is.”
“I Kept Hearing Funny Comments”
The idea for the program came to Joe McSweeny, president of Marsh’s U.S./Canada division, during a town-hall tour of company offices in 2009. “It became evident to me that the broad swath of our colleague base did not understand earnings, and all that goes with that,” he recalls. “They did not understand how a public company functions or what its purpose is. I kept hearing funny comments like, ‘It’s a great day because the stock is up.’” (A company’s stock price on a given day, of course, is not necessarily a good indicator of financial health.)
Creating the program dovetailed with two strategies Marsh was pursuing. One was to link more employee compensation to the company’s net operating income. If total pay were contingent on earnings, the thinking went, then knowing how to boost them would help both the company and the employees. “It was also partly about awareness-building,” says Nick Hinton, Marsh’s finance director. “We wanted to help people understand that even though we were growing earnings, we were coming out of a very tough period, and they weren’t necessarily going to see major base-compensation increases.”
The other strategy was to rebuild the company’s client relationships following the recession, by having more-substantive conversations with clients about their risk factors. Many employees who dealt directly with clients didn’t sufficiently grasp how insurance products and risk-management services affected clients’ own financial performance, says McSweeny. Also, they tended to have a shallow understanding of clients’ annual reports, which, he notes, “contain a lot of information about the company’s strategies and risk profile that is often couched in the language and presentation of its financials.”
The program’s video blogs reside on Marsh University, the company’s education website. Videos generally run between three and seven minutes, and a lot of information is delivered in that short time.
This is where the program’s delivery through social media helps, since participants can ask follow-up questions and offer commentary. For example, after watching a video delivered by chief operating officer Pat Hagemann, one employee asked, “Pat, I’m curious to know more about clients’ needs for data and their desire to make fact-based decisions. What types of analytics are they looking for? Is this about premium or about their coverage, exposures, or something else? Also, how do you see the sales process changing as a result of introducing analytics into the conversation?” Hagemann provided a lengthy reply.
The social-media approach and the content delivery by company executives may make Marsh’s educational initiative superior to those of other firms, says Schiff. “From an efficiency standpoint, getting education out to thousands of people can be done using [social] media at a modest cost,” he says. “Many companies should emulate what Marsh has done.”
Meanwhile, Marsh is preparing to offer higher-level education that continues the theme of enhanced client contact. “Making a Financial Impact at Marsh” is now part of an umbrella program called “Driving Business Outcomes” that will include two more levels of learning. Each course will be a prerequisite for taking the next.
One of the new courses, called “Speaking the Language of Business,” will provide a deeper dive into financial statements for the one-third of company employees who deal with clients. The course will consist of four modules totaling about six hours. The highest-level course — a half-day seminar followed in six to eight weeks by a day-and-a-half session — will be aimed at about 500 executive-level employees.
Called “Driving Results for Clients,” the course will marry the financial-statement knowledge that participants have gained with exposure to sophisticated analytics. Among other activities, employees will take part in a board-game-like simulation, in which they will assume senior roles with companies facing an assortment of risks.
The courses are designed in part to ease interaction with midsize companies, which Marsh is increasingly targeting (its traditional clients are large companies). That inevitably involves working directly with CFOs, who are more likely to have hands-on responsibility for risk management at such companies.
“It requires that we understand how CFOs see risk in the context of financial statements,” says McSweeny. “How does it impact their reporting and the variability of their income streams? These educational offerings are a very high priority for us that are underpinning some key strategies we’re driving.”