It’s a fact of life, you can’t explain everything to everyone. But many times we ignore it and we try to do exactly that. Maybe we think that the more we explain, the more likely we are to get our message through. Or maybe we just do it because it’s easier than explaining less.
Business controlling is a lot about understanding the effects of decisions and actions and sharing that understanding. When presenting results, I want to keep the focus on what is most relevant and trigger the right discussions. But how to get there?
So, at some point before a monthly financial review, I asked my boss:
- How do I choose what effects do I present? I mean, from everything that happened in this time, how do I select what to show?
I thought there was a “best practice” way of doing it. I had a list of about 10-15 points, some effects positive and some negative and I was supposed to present a few, maybe five. These points should summarize best how things went last month. It seemed pretty straightforward, I had some ideas myself, all I needed was a crosscheck with my boss, maybe get some hints and off I go.
Instead I get a question back:
- What is the story?
- Well, the story depends on what we think is relevant to present (in my head: “daaaaah!”). First we pick the relevant points and the story flows from there. Right?
- Hmmm...let’s look at it a bit differently, what was your expectation of the result?
- Aaaaa…expectation? Well, I knew about most of the things happening in the month, also here we almost always underspend and…
- I mean a number, do you have a number?
- Not really a number, but I knew the direction and some major items…
- Ok, ok...then each month from now on send me your result expectation before the financials are in. That will help you understand the business.
So I left a bit disappointed that I didn’t get an answer and on top of it, got some more work to do. “Help me understand the business”, he said, when nobody knew more than I did about those numbers. But ok, the exercise was actually interesting and I didn’t question it too much. Instead I thought “You know what? I’ll be spot on each month with my estimate. That will show him I do understand the business”.
And so I started doing that and sometimes I was on, sometimes rather far off. But there was no applause or ass kicked either time. Why?
I was more focused on getting my monthly estimates right that I didn’t realize what happened while doing them. When building my expectations, I started to investigate why things turn out one way or another. I began to figure out what triggers a result and in what magnitude. Every time my expectation was different from reality, I started asking questions and I wanted to understand more so that next time I’ll get closer. I learned to separate between what was relevant and what was not. It was easy: if it’s not something that can make my estimate land far off, it’s not important.
Instead of analyzing results line by line in the financial statements, I began with understanding why things turned out differently from what I expected. Before I had a list of points to choose from, now the choice became obvious.
Another thing happened: I started to build a common ground with my audience. By focusing each time on a few key points, it became easier for them to understand how things are going. Instead of getting homework to put puzzle pieces together, they got a message that they could remember and use later on.
So yes, now I think that building an expectation is a key exercise for gaining business understanding. It seems to have other good “spillover” effects, but the main benefit of putting down a result estimate is to flex that thinking each time and get sharper and better at grasping what really makes a difference.