How One Company Teaches Employees the ABCs of Finance

To boost profits and improve the firm's interaction with clients, an insurance brokerage giant gives its 25,000 employees an education in finance a...
David McCannFebruary 16, 2012

Companies are in business to make money. So why is understanding how money is made — and core business concerns like risk management, financial reporting, and investor relations — almost solely the province of the finance department?

For salespeople, for example, it’s surely the case that knowing what makes their employers tick financially helps them sell in the way that most affects the bottom line. That advantage is multiplied by also appreciating finance and risk factors at client companies. It can even help non-customer-facing people realize the importance of pitching in on cost-saving efforts and recommending new efficiencies.

“When you improve the 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.”

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For Marsh, a global insurance broker, “everyone” means everyone. The company launched a voluntary finance-education program last year and has made it mandatory for all 25,000 of its employees — or “colleagues,” in Marsh lingo — for 2012. The learning is delivered through a series of 27 video blogs in which company executives range topically from financial statements, investor strategy, and “thinking like an owner” to the company’s growth formula, scorecards, and “reviewing products through a financial lens,” among others.

The idea for the program — which is called “Making a Financial Impact at Marsh” — planted itself in the mind of 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 says. “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.’ ” Of course, a company’s share price on a given day is not likely a great gauge of its financial health.

Nick Hinton, Marsh’s finance director, adds that many people didn’t have a very good feel for the decisions a company must make, what a company is held accountable for, or the purpose of budgets, for instance.

The program’s conception and execution dovetailed with a pair of strategies Marsh was pursuing. One was linking more of employees’ compensation to the company’s net operating income. If total pay were contingent on earnings, knowing how to boost them would help both the company and the employees, the thinking went. “It was also partly about awareness-building,” says Hinton. “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 motivation was a desire to rebuild the company’s client relationships following the recession by having more substantive conversations with clients about their risk factors. Many client-facing employees, says McSweeny, didn’t sufficiently grasp how insurance products and risk-management services affect clients’ own financial performance. And 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.”

Hinton says Marsh built the course on the assumption that participants would have very little understanding of finance concepts and terminology. But it’s hard to escape the notion that someone with no grounding in the topics might have a hard time following the discussions via the video blogs. A lot of information is delivered in short time frames; with only a couple of exceptions, the videos run between three and seven minutes.

But that’s where the program’s delivery through social media can help. The video blogs reside on Marsh U, the company’s education site, and participants can ask follow-up questions and offer commentary. For example, after watching a module delivered by chief operating officer Pat Hagemann, one participant 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, suggests Schiff. “From an efficiency standpoint, getting education out to thousands of people can be done using media at a modest cost,” he says. “Many companies should emulate what Marsh has done.”

While efforts to give rank-and-file employees financial literacy aren’t uncommon in the financial-services sector, they’re much less prevalent elsewhere, Schiff observes. But even where such offerings exist, they are often of low quality, he adds. “Using internal people to convey the message is a big plus,” he says. “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 Marsh for making the program mandatory, unlike most others. Somewhat tongue-in-cheek, he says the company 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 restroom is.”

Meanwhile, Marsh is preparing to offer higher-level education that continues the theme of enhanced client contact derived from financial education. “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, for the one-third of company employees who are client-facing, will be called “Speaking the Language of Business” and provide a much deeper dive into financial statements. Understanding that language should help in communicating the value Marsh can provide for clients “by, for example, smoothing earnings or making efficient use of capital,” says McSweeny. The course will consist of four e-learning modules totaling about six hours.

The highest-level course, a half-day seminar followed six to eight weeks later by a day-and-a-half session, will include about 500 executive-level people and be called “Driving Results for Clients.” The aim is to marry the financial-statement knowledge they’ve gained with exposure to sophisticated analytics. Among other activities, participants will experience a hands-on, competitive board-game-like simulation in which they will assume senior roles with life sciences, communications, or power companies facing an assortment of internal and external risks.

The courses are designed in part to ease interaction with midsize companies, among which Marsh, whose traditional clients are large companies, is making a stronger push. That inevitably involves working directly with CFOs, who are likely to have direct risk-management responsibilities at companies of that size.

“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.”

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