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Posts Tagged ‘communication’

What Are The True Symptoms? – Part 2

December 17th, 2012 Comments off

As I mentioned in my last post, I had the enjoyment of sitting down with my sister to help her through a hypothetical hospital P&L walk. Although her interest in the subject was forced due to a Hospital Finance course she was being forced to take, it was still enjoyable to walk her through what I do on a daily basis. As with any P&L, we started at the topline and discussed revenues, or in her case, the billings a hospital would recognize in their delivery of services. I explained to her that the hospital will assemble a Budget based on certain historical trends that would likely include patient volume, service offerings, anticipated growth/decline in the surrounding community, and other similar factors. That the actual billings would be tracked against these figures and any changes would be reflected as a variance. We discussed the possibilities that might significantly affect the billings of a hospital, which might include natural disasters, significant weather impacts, major accidents (airline), or possibly a viral outbreak. While these might seem extreme, they are examples of what could drive variances in a hospital’s P&L.

We kept the walk very simple and segregated only between billings and the operating expenses of the hospital. With that in mind, we started discussing some of the common elements to a hospital P&L. The biggest factor in this portion of the walk being labor. We discussed how a hospital, based on historical activities, would likely set up a labor matrix for the staffing of the hospital, and what the effects would be if admittance rates drastically increased or decreased, and the subsequent variances this would cause. She started to see the pattern here and started drawing similar analogies to the use of supplies, as well as what the effects would be if inferior supplies were used….& the potential liabilities this would create for the hospital. I could sense that her grasp of the subject was taking hold and she was actually becoming enthused about the topic.

As we walked through a number of the other P&L elements she actually commented that I seem to have a pretty interesting job. I told her that the biggest key to executing on the original Budget, and the ability to address changing market conditions, was ongoing communication & transparency with the staff. It’s the job of the Finance department to provide the proper level of transparency and help keep the team informed and educated on the results being achieved. It’s the obligation of Finance to communicate with the rest of the staff, and as I advised my sister, it’s critical to understand what the true symptoms are of the variances that are being presented.

Thanks for reading…

Jeffrey Ishmael

Finance is from Mars…all others are from Venus.

May 6th, 2009 Comments off

     If you work on the Finance side of the table, how often have you been trying to explain certain strategic planning elements or changes to the Forecast and all you seem to get is a slight tilt of the head from your audience as if they’ve just adopted that dear-in-the-headlights look? I have learned enough from earlier situations that I’ve been able to effectively cater my discussions to the audience that I’m presenting to. The key comes down to understanding who you’re audience is and communicating technical data in a way that they can relate it to their function area.

     Recently we revamped our compensation and bonus plans for the 2009 fiscal year to be split between personal performance goals and corporate financial goals. It’s one thing to explain the achievement of personal goals to staff, regardless of their function. However, try taking that broad-based staff group and tell them their going to be incentivized on Revenue, Gross Margin, Operating Expenses, and Operating Income. Ok, the Revenue part is a slam dunk….that’s the easy one. Once you move on to Gross Margins or Operating Expenses, well….that’s a whole different story. It really comes down to not explaining the formulas or discussing the percentage goals, but discussing the different elements that make up that portion of the income statement. The same approach goes for the Operating Expenses.  Especially when it takes a little more commentary on explaining how you purchase new software or a trade show both but the expenses are amortized over a multi-year period!

     As frustrating as the process can be sometimes, or as many times as you might need to review the data with staff, the effort is entirely worth iftso that Finance and the rest of the company are on the same page.  It’s worthwhile for all members of the company to truly understand the financial results that are being presented to them and what their bonus is being calculated against. Did I say BONUS? As a matter of fact…I did!  Yes, we pulled all employees together at the close of Q1 and paid out bonuses based on both personal and corporate performance. As discussed with our employees when the Budget was presented, we communicated the expectations, and while I don’t believe fully understood, the new plan was embraced and pursued with vigor by our team. That made it all the more gratifying to pay out a bonus when revenue goals were surpassed and operating expenses were under plan.

     More often than not, it’s just a common fact that Finance will be speaking a different “language” when working with the other areas within a company. It’s that same “language” that will prompt staff to seek you out for clarification or guidance.  The cooperation and support you will get by keeping the conversation straightforward will be noticeable and it will eliminate any of the expected contention points between Finance and “everyone else”.  It’s probably worth your time to establish contact with new planets 🙂

Thanks for reading . . . .

Jeffrey Ishmael