WOW: Money Matters
(Originally published by TDWI) By Maureen Clarry
(This article is available for download, as a PDF document.)
W - Who is your audience?
O - Own the translation
W - What keeps them awake at night?
Step 1 - Who: Define your audience
Different types of executives generally care about different measures. To whom in your organization do you need to demonstrate value? Who influences the support and resources required for the business intelligence initiative? What measures do they care most about?
When people ask, “What’s my return on investment (ROI)?” sometimes they are asking for a certain percentage, say, 125 percent (calculated as the net return as a percentage of the investment). Frequently, however, they are using ROI as a code word-it means something different to each person who uses it. What they are really looking for is some measure of value. Keep in mind that what is described as valuable in an organization changes as it moves from the top executive to the individual performer.
The principle of cascading metrics has been described from the 1970s to current times in such famous business management methodologies as the Hoshin Process and the Balanced Scorecard movement. Using these principles, the financial measures at the top (profit, liquidity ratios, cash flows) are always broken down into more specific measures for the next layer of management. Management layers break the metrics down again until, eventually, the financial measures of the top officers become the performance metrics of the individual contributor.
If it sometimes seems that you can’t quite understand what your audience is asking, it may be an opportunity to step back and reexamine what you know about value. Although the following chart is not all-inclusive, it may give you some ideas about what different people in the organization define as valuable.
Title |
Examples of measures they care most about |
| CEO | Valuation, shareholder value, competition/ differentiation from competition, profitability |
| CFO | Expenses, return on assets, return on equity, return on sales |
| COO | Quality, process efficiencies |
| VP Business Development | Product and service innovation, ability to launch new products/ services; high development costs, time to market, reacting quickly to business and market changes, sales growth, market share |
| VP Human Resources | Employee satisfaction, turnover, recruiting costs |
| Your executive | What does he/she care about? |
Step 2 - Own the responsibility for understanding the numbers
You probably did not go into the information technology profession to be a “numbers person.” But before you convince yourself that you hate the numbers, consider the following:
- Communicating value depends on a command of financial terms and a clear, concise message that summarizes the most important points in 30 seconds or less.
- Value must be communicated in terms that correspond to the measures the audience pays attention to every day.
- Financially based communication has been shown to significantly increase persuasiveness, recognition, respect, resources, and professional success.
“Show them the money” and OWN the responsibility of translating the language of business intelligence to the language of finance. If you choose not to learn that language, you’ll risk being left behind, being dismissed, or being perceived as incapable of playing at some levels.
And, at the risk of insulting your intelligence, make sure you know the following financial terms. In addition, figure out the hot-button money topics and terms of your organization.
Revenue |
Also called gross sales; income |
| Cost of Goods Sold/Cost of Services | Expenses directly related to products or services such as material costs, service costs, etc. |
| Gross Profit | Profit before subtracting overhead expenses |
| Operating Expenses | Overhead-including salaries, expenses, interest, depreciation, etc.-that is not attributable to sales |
| Net Profit | The proverbial bottom line |
These terms can be expressed in a mathematical formula:
Revenue - Cost of services and goods sold = Gross profit - expenses = Net profit
What exactly is return on investment? Net return divided by investment, expressed as a percentage. Return may refer to earnings, income, profit, gain, or appreciation in value. Investment means the amount of money used to generate the return.
It’s likely that there are other critical financial terms in your organization; take time to learn and understand them.
Step 3 - What keeps your executives awake at night?
If you want to get your executives’ undivided attention, educate them on your true value to the organization. Top executives demand to know the value of business intelligence investments, and they want to receive the information in language they can understand. The ability to discuss the business aspects of business intelligence in a results-driven organization is essential for BI professionals. Put yourself in the executives’ shoes, so you have an appreciation of what keeps them awake at night.
When you put these three steps together, a WOW message for the CEO in the elevator might sound something like this:
“Over the last three months, the business intelligence initiative increased overall corporate profitability by 5 percent. We were able to accomplish that because, based on data from our business intelligence initiative, we discovered some economies of scale that allowed us to decrease expenses in our recruiting process by $10,000 per month.”
Be confident! This is not rocket science. Prepare your message. Understand your audience, get comfortable with the numbers, and make a commitment to educate your executives on the true value of your BI initiative.
Maureen Clarry has been on the faculty of TDWI since 1997 and regularly consults and teaches on business intelligence leadership and organizational issues.
Maureen is CEO of CONNECT: The Knowledge Network, a results-driven business that cares first-hand about value from their internal business initiatives.