How to sharpen financial competence for directors and executives


Financial competence is not a static variable, in that it is something that is ever-changing, and the skills associated with being financially competent must be sharpened consistently.  The fact is that failure to have financially competent decision makers can be highly destructive to an organization.  What is meant by “financially competent” goes well beyond being able to identify credits or debits or being able to properly read financial reports. Being financially competent should focus on one’s ability to er down the financial information provided in those reports and analyze how they should be used to determine the financial path of the organization going forward.  Furthermore, a person must be able to understand how risk factors into the financial decision making matrix and how that risk should affect the courses of action taken by the company.  These are the things that separate competent financial management from incompetent financial management.  This is likely a major reason why roughly 21%  of all CEOs serve in a financial oversight position prior to becoming a CEO and why almost a third of CEOs have served in a financial capacity at some point in their careers.


It is also important to realize that the outcome of certain situations has no bearing on the competence of the decisions that have been made.  The fact is that poor financial leadership can still yield success from a periodic standpoint.  In the same manner that an unskilled Poker player can have a run of “good luck” and win big in a night of gambling, so to can incompetent financial managers “GET LUCKY”.  The problem with depending on luck to manage the financial infrastructure of an organization is two-fold:

1.            Luck does; and will always run out at some point in time

2.            Financial management isn’t gambli