You might be a pro at managing money, but that doesn't mean you have impressive financial leadership skills. Successful leadership requires several factors, whether you're a CEO, CFO or small business owner. Regardless of your job title, you can guide your team to financial stability by mastering the do’s and don'ts of strategic financial leadership.
Do: Share Your Company's Budget
Establishing a budget for your team is necessary, but don’t keep the information to yourself. Share your annual budget with employees so that everyone understands the company’s financial expectations. Explain how you came up with the numbers and why they are important. Holding a company meeting where team members can ask questions helps everyone stay on the same page.
Budget meetings can induce panic. Staff may have anxiety about losing their jobs or having their hours cut if communication isn’t clear from the start. If this is not the case, explain that you plan to cut costs in other areas and describe how you plan to stay within your goal. This may mean buying supplies from a different manufacturer, discontinuing products that don’t sell or reducing your marketing efforts.
Don't: Share Vague Financial Goals or Expectations
You’re not the gatekeeper of your company’s financial information unless you’ve been warned by higher-ups not to share specifics. You should look to provide clarity in the details when you share goals or expectations. It’s also important to keep morale high when you offer potentially upsetting news. Do this by pointing out some positive factors.
Let’s take a look at some examples of what you shouldn’t tell your team:
- “We really need to cut costs around here.”
- “The board is going to flip when they see these low sales.”
- “We’re going to make some big changes soon if things don’t get better.”
These are vague statements that serve no real purpose. Your staff won’t understand what you mean. In fact, they’ll probably go home feeling anxious about their future with your company.
The following are things you can tell your team instead:
- “This banana milkshake is delicious, but for some reason, customers just aren’t buying it. We’re losing money on ingredients, so next month let’s try a new flavor like pistachio or cinnamon and see how that goes.”
- “We appreciate your hard work and flexibility, but unfortunately, sales are consistently low during the evening. We don’t want to cut hours, but we may have to swap some shifts around to meet labor goals on the next schedule.”
- “The board is going to love that we stayed within our monthly budget and exceeded profit projections by 3%. Way to go, guys!”
These statements work because they are positive, clear and specific. Employees aren’t left wondering what happened or whether they’re doing a good job. Thanks to your transparency, they know what triggered the financial concerns and understand what your plan is going forward.
Do: Establish Trust With Your Team
Many people dislike a leader they can’t trust. This is true whether you’re a financial leader or running a country. Once trust is lost, morale declines and your team may lose faith in your financial goals.
If you want to build trust, be consistent and keep your word. Put simply, do what you say you’re going to do. Don’t tell the team you’re cutting marketing expenses and then put a hold on salary increases instead. This breeds hostility and demonstrates that you can’t be trusted.
It’s okay to be flexible and revamp financial goals when needed, but that doesn’t mean you can do unethical things or lie to workers. When your financial outlook is bleak, be honest with your team members, but also tell them how you plan to fix the situation.
Don't: Ignore Difficult Questions About Finances
Transparency builds trust. That’s why earlier we mentioned that you should discuss finances with your team during a company meeting and let employees ask questions. Remember, you should answer every question, even the ones that make you uncomfortable. When staff members throw difficult questions your way — and they likely will — don’t ignore them.
Before scheduling a meeting, think about any tough questions you might get. Here are some financial events and situations that may trigger negative feedback:
- A decline in sales or profit
- Increased expenses
- Budget cuts for some departments but not others
- Lack of financial assistance for work-from-home expenses
- Overworked employees who don’t feel they are paid what they deserve
- A lack of financial incentives for employees, such as bonuses or paid benefits
Brainstorm possible answers for these questions and write them down. It’s easy to get caught off guard by difficult questions and lose your cool. Planning ahead helps you remain calm and confident about the state of your company, even when things go wrong.
Do: Gain Inspiration From Other Financial Leaders
There are many financial leaders who openly share their wisdom with the world. Jamie Dimon, the CEO of JPMorgan Chase, and Warren Buffett, a well-known investment guru and philanthropist, have made many memorable statements.
You can share financial quotes with your team or use them for motivation and inspiration in your own workday. Here are some quotes you may find helpful as you embrace your leadership role:
- “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett
- “‘If you’re going to be a leader, you know what I ask myself? Would I want to work for you in this job? Would I let my children work for you?” – Jamie Dimon
- “Integrity Is the most valuable and respected quality of leadership. Always keep your word.” – Brian Tracy
- “The problem with your company is not the economy, it is not the lack of opportunity, it is not your team. The problem is you. That is the bad news. The good news is, if you’re the problem, you’re also the solution.” – Dave Ramsey
As you can see, many financial greats echo what we’ve told you earlier about good leadership, such as the importance of keeping your promises and making ethical choices. Great leaders also believe in personal accountability. Everyone makes mistakes, but you should own them and move forward.
Don't: Copy the Leadership Style of Other Professionals
As you review the work and goals of other financial leaders, you might catch yourself thinking, “Wow, I want to be just like them!” Don’t fall into the trap of comparing yourself to other leaders. Sure, you should consider their advice, but use their achievements as inspiration rather than a road map. You want to become a better version of yourself, not turn into someone else.
Authenticity is essential in the business world, and people can quickly spot an impostor. Be brave, be confident and be ethical — but most importantly, be yourself. You have flaws, but you also have numerous strengths. Embrace them all as you exhibit effective leadership.
Do: Provide Information the Right Way
Let’s be real: most of your employees don’t want a 50-page packet or PDF that details your company’s financial goals. Sure, it’s good to make the information available for those who actually want it but be concise whenever possible. For example, instead of sharing a 50-page packet, you can do the following:
- Email a brief of your financial goals with key points highlighted
- Create a brochure that addresses your goals
- Share user-friendly graphs or charts that express your plans
- Provide a quick rundown of goals along with a longer explanation of how they impact team members
- Put essential info in a PowerPoint presentation
If you feel you absolutely must share every detail of your financial goals, make sure you have several options available for accessing the information. Some employees are visual learners, while others do well with auditory presentations. You can create a quick YouTube video, print packets and email charts so everyone can interpret the information via their preferred method.
Don't: Bombard Your Team With Financial Jargon
When sharing financial information, make sure you talk to your staff and not at them. Convey information in user-friendly terms and avoid financial jargon and acronyms.
Let’s say you’re publishing an earnings statement for your company. Things are looking good, and you’re excited to share the news.
“EBITDA increased by 5%,” you happily type. “And we’re seeing EPS gains of 7%!”
That’s great news for your company, but does anyone other than you actually understand what it means? If you use financial jargon in company correspondence, make sure you clarify what acronyms mean. You may also want to give employees a handout that briefly explains key financial terms, such as earnings before interest, tax, depreciation and amortization (EBITDA).
Do: Manage Your Company's Finances With Lendzi
Even the best financial leaders need a little guidance sometimes. Reach out to Lendzi with your financial questions, whether you’re curious about the pros and cons of small business loans or need help determining the costs of a commercial mortgage. Knowledgeable leaders keep your company running smoothly, and we’re here to help you tackle your team’s financial goals.
About the Author
Kate Samano
Kate Samano is a copywriter and Head of Content at Lendzi. She believes in helping small businesses grow by providing access to viable financial advice.