The Financial Value Process

In figure 14-1, you can see the steps in the financial value process. In this chapter, the review of each step will cover the goals and basic principles for that step. If you would like to update your work on any of the exercises in this book, you ‚ ll find handy references to the CD and Website to help you find the forms you need. The checklists (also available on the CD and Website) will ask you questions to help you adjust your work on the exercises. The checklists are meant to trigger new ideas for how, where, or when you can communicate with more effectiveness.

Figure 14-1: The flywheel of the financial value process.

Step 1: Define Audience

There are two communication goals addressed in step 1. The first goal is to identify with whom you should be communicating. The second goal is to identify the timeframe that each person in your audience is measured on to create value for the organization. This is the timeframe that they want to hear from you when you are communicating about the value you have brought to them.

To achieve these goals, you need to organize your audiences within the framework of financial value chains. Financial value chains consist of Senior, Mid, 1st/Ops, and Individual levels. Look at the names and positions of the people you want to communicate value to. Look also at their timeframes within the perspective of how the economy affects the urgency for results.

One of the fundamental tenets of the financial value process is that the people in your audience will not translate what your value means to them, or if they try to translate it is likely that they will not reach the same conclusion that you would like them to reach. To be successful in your value communication, you need to make sure you make important translations for them.

Exercise and Examples. Chapter 2 provides some examples of audience and timeframe definitions. The exercise and form for this step are at the end of that chapter in exercise 2-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/ publications ).

Checklist. Use the step 1 checklist to see if there are any ways that you can improve the definition of your audience. If you need help to complete any of the questions on this checklist, please review the concepts and exercise in chapter 2.

Step 2: Research Financial Information

Step 2 encompasses both a primary goal and a secondary goal. The primary goal is to identify what forms of business intelligence are most helpful to you so that you can gather them. The secondary goal is to keep a steady stream of updated intelligence flowing to you with minimal effort.

Step 1 Checklist. Define audience.

If you prefer not to write in this book, or if you ‚ d like to print out a larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

The amount of information available to you varies, depending on whether you are internal or external to an organization. It also varies according to the level of audience you are researching . It is critical to perform research because you must understand what the most important financial priorities are for your target organization to know how to position, deliver, and communicate the most value.

Make sure you give yourself enough time to locate the information you need and to get others into the habit of supplying you with new information regularly. Enlist the help of others and make sure to give them enough time to learn that you are trustworthy and will keep information confidential.

Exercise and Examples. Examples of business intelligence research and a case study of how one consultant managed the task can be found in chapter 7. The exercise and form for this step are at the end of that chapter in exercise 7-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd .org/astd/publications).

Checklist. Use the step 2 checklist to see if there are any ways that you can improve your financial information research. If you need help to complete any of the questions on this checklist, please see the concepts and exercise in chapter 7.

Step 3: Identify Financial Imperatives

The measures and concerns of the Senior management of an organization will drive the measures and focus of everyone else in that organization. Senior managers must manage three fundamental types of financial priorities, as well as the balance between them. These priorities are profit, position, and cash. Collectively, these priorities are known as the financial imperatives of Senior managers. The goal of step 3 is to help you document what measures are of the most concern to your Senior managers and then help you translate those measures through the financial value chains of an organization directly to the value of your intervention.

Profit is calculated by taking the revenues of an organization and subtracting out the expenses required to run that organization. An organization tracks and reports its profit on its income statement. There are several ways to draw financial value chains based on the different profit lines or expense lines shown on the income statement.

Position is the amount of assets versus the amount of liabilities and owner ‚ s equity an organization maintains in order to make its profit. Position is tracked and reported in the organization ‚ s balance sheet. The organization needs to always maintain a solid position of being able to repay any debt that it may have incurred to earn its revenues. Too much debt, or leverage, places the organization in a risky financial position that could collapse under adverse business conditions. There are also multiple financial value chains that can be connected to assets, liabilities, or owner ‚ s equity.

Step 2 Checklist. Research financial information.

If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

Senior managers must manage the relative size of each asset, liability, or owner ‚ s equity item to ensure they maintain an optimal balance and enough return for their efforts. Balance is calculated by using ratios ‚ the comparison of one item of profit, expense, assets, liabilities, or equity to another. Operating ratios tell a Senior manager if the organization ‚ s day-to-day activities are staying within acceptable boundaries. Financial ratios tell a Senior manager if the organization is maintaining the appropriate returns for its efforts. Financial value chains can use a ratio as the Senior manager measure in a financial value chain.

Maintaining cash on hand is the third financial imperative of Senior managers. It is important to understand that profit does not equal cash. Profit can be tied up in non-liquid assets or, in other words, in forms like accounts receivable that are not necessarily easy to collect and spend . Cash is analogous to the oil in a car ‚ s engine. If an engine ever runs out of oil, even for an instant, the engine can be heavily damaged or destroyed . Running out of cash can damage or destroy the organization. Senior managers must ensure that the organization generates enough cash from ongoing revenues to sustain the organization long- term . Cash is tracked and reported on the cash flow statement. Financial value chains can use cash or another cash measure as the senior management starting point for financial value chains.

This book uses a fictitious company, ABC MediCompany to demonstrate basic concepts for profit, position, cash, and balance.

Exercise and Examples. Examples of financial measures and financial value chains for profit, position, and cash can be found in chapters 4, 5, and 6. The exercises and forms for this step are at the end of each chapter in exercises 4-1, 5-1, and 6-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

Checklist. Use the step 3 checklist to see if there are any ways that you can improve your knowledge of your organization ‚ s financial imperatives or improve the financial value chains you create to translate your value into the measures that each level of your audience cares most about. If you need help to complete any of the questions on this checklist, please see concepts and figures in chapter 3, 4, 5, or 6.

Step 3 Checklist. Identify financial imperatives

Step 4: Identify Intervention and Step 5: Clarify Perceptions

It is assumed that WLP professionals will use the best industry methods available to select, design, and produce interventions that bring the most value to the organization at every opportunity. Step 4 is not about how to select or design the intervention you wish to deliver. It is about focusing your communication on a chosen intervention. Step 4 asks you to choose an intervention to apply the remainder of the financial value process toward in your communication plan.

Now that you have chosen the intervention for which you will apply the remainder of the financial value process, step 5 asks you to examine the perception of your chosen intervention from the perspective of your audience. The perception of your intervention will be somewhere on a continuum of an unknown expectation (a surprise), a conscious expectation (a negotiable), or an unconscious expectation (a given). When your audience estimates the value you bring to an organization, they are often so delighted with the surprise that they rate the value very highly. They are less enthusiastic about negotiables because their value is already expected. Your audience is often extremely harsh in their estimate of the value of a given because the value is no longer apparent. The perception of your audience affects how easily they accept your claim of value.

Interventions will always slide from surprise to negotiable to given if their value is left unmanaged. Many WLP professionals work with a large majority of what they do in an invisible or given state. Because WLP expenses are easier to cut than many fixed expenses, you need to work diligently to keep the majority of your interventions in surprise or negotiable status.

Exercise and Examples. A more complete discussion of these steps as well as the introduction to a case study about an internal WLP professional working at ABC MediCompany can be found in chapter 8. The exercise and form for this step are at the end of that chapter in exercise 8-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd /publications).

Checklist. Use the steps 4 and 5 checklist to check the intervention you have chosen and your audience ‚ s perceptions about it. If you need help to complete any of the questions on this checklist, please see concepts and exercise in chapter 8.

Step 4 and 5 Checklist. Identify intervention and clarify perceptions.

Step 6: Develop Scorecard

To be able to state the amount of value you will bring or have already brought to an organization with your intervention, you will need to keep track of your numbers in a consistent, easy-to-read fashion. The scorecard you develop during step 6 can help you with this task.

Chapter 9 introduces the financial imperatives scorecard. The format consists of some basic scorecard heading information, plus benefits, costs, and totals. The names of the benefits on your scorecard are transferred directly from your financial value chains. Each time you change or improve your intervention is an opportunity to add more value to your organization. Each significant change on your scorecard is tracked with a set of columns called a value add. Your costs for each value add are tracked along with your benefits. You ‚ ll calculate totals for each value add that you create.

When working with scorecards, never present costs without corresponding benefits, keep your scorecards up-to-date, capture the data right away, be ethical by tracking the obvious and being consistent, and be conservative with your numbers. These rules will make the process easier and maintain a precious thing ‚ your credibility.

Exercise and Examples. A more complete discussion of how to complete a scorecard, as well as a detailed walkthrough of a completed scorecard for our fictitious character Marcella can be found in chapter 9. The exercise and form for this step are at the end of that chapter in exercise 9-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd /publications).

Checklist. Use the step 6 checklist to review your financial imperatives scorecard. If you need help to complete any of the questions on this checklist, please review the concepts and exercise in chapter 9.

Step 7: Deliver Intervention and Step 8: Evaluate Results

Step 7 is a step that many WLP professionals are very comfortable with. It is assumed that the WLP professional will use the best industry methods available to make sure his or her intervention is delivered to the highest standards. Step 7 exists to mark the point where a critical threshold is crossed in the minds of your audience. Up to this point, you could talk about the value that you were planning for. Now you must talk about what you actually accomplished. From this point forward, you must invest the effort to evaluate your results.

Step 6 Checklist. Develop scorecard.

It is also assumed that as a WLP professional, you will use the most appropriate, industry-standard evaluation techniques to verify the value that you have brought to the organization. Because this book is about communication, step 8 focuses on mapping types of evaluation data to the types of data each level of your audience needs to hear. In this book, the mapping of evaluation data to the levels of your audience is based on the evaluation models of Kirkpatrick and Phillips.

Individuals need levels 1 and 2 evaluation data. 1st/Ops needs level 3 data, and Mid needs levels 4 and 5 evaluation data. Senior managers need level 5 data until they are satisfied that ROI can be reliably proven. At that point, level 5 data becomes a given for them, and they are most interested in knowing how you will optimize performance in terms of penetration, sustainability, and speed.

Exercise and Examples. For a discussion of crossing the threshold and for a full explanation of matching value and the levels of evaluation, please see chapter 10. The exercise and form for step 8 appear at the end of that chapter in exercise 8-1. (There is no exercise for step 7.) If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

Checklist. Use the steps 7 and 8 checklist to document any special circumstances about your delivery and to ensure you have the appropriate levels of evaluation data for each level of your audience. If you need help to complete this checklist, please look back at the concepts and exercise in chapter 10.

Steps 7 and 8 Checklist. Deliver intervention and evaluate results.

Step 9: Plan Quarterly Context

The goal of step 9 is to make sure that you not only communicate value, but that your audience wants to pay attention to that value right now. That is accomplished by tying your value to an urgent and important, or relevant context of today.

What is urgent and important for today follows a predictable pattern. That pattern is driven primarily by the quarterly fiscal lifecycle. The behavior of your audience is predictable within the implementation, validation, vision-setting, and budgeting quarters of the year. Urgent and important activities can also be driven by the new product introduction lifecycle and seasonal sales lifecycles of an organization.

Communicating value is even more effective when others communicate your value for you. By mapping your quarterly context to specific dates, you can plan to have your value statements in front of the right people at the right time to show how you have helped them do an even better job. This is news they ‚ ll want to share with others, because it helps them look good too.

Exercise and Example. To read more about relevant context and fiscal, new product, and seasonal sales lifecycles, please see chapter 11. The exercise and form for step 9 is in exercise 11-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

Checklist. Use the step 9 checklist to verify that you have taken full advantage of all relevant contexts for each level of your audience. If you need help to complete any of the questions on this checklist, please see the concepts and exercise presented in chapter 11.

Step 10: Create Value Themes and Step 11: Create Value Statements

The purpose of step 10 is to help you create concise , powerful communication about your value.

Value themes are a form of general value communication. Value statements give more detailed information about the value you bring to an organization. Both value themes and value statements translate from the language of performance to the language of finance by choosing a performance measure and a financial measure from a financial value chain. Value themes rely on either a specific performance measure or a generic base driver for the performance such as time, a count, or money. Value themes are used when a general value claim is appropriate as a descriptor in conversations, memos, brochures , or other media.

Value statements have four segments: performance value, financial value (thereby), relevant context (which means), and your goal. Value statements pull information from your financial value chains, financial imperatives scorecard, financial statements, evaluation data, and quarterly context plans. Value statements are customized to meet the needs of each level of your audience. In addition to communicating your value, the goal segment of your value statement is critical to helping to build your influence.

Exercise and Examples. For value theme and value statement examples and discussion, please see chapters 12 and 13. The exercise and form for step 10 is in exercise 12-1. The exercise and form for step 11 is in exercise 13-1. If you prefer not to write in this book, or if you ‚ d like to print out larger versions or multiple copies of exercises and forms, you can find a complete set of all forms on the CD or on the companion Website (www.astd.org/astd/publications).

Step 9 Checklist. Plan quarterly context.

Checklist. Use the steps 10 and 11 checklist to help make sure you have the most powerful value themes and value statements possible. If you need help to complete any of the questions on this checklist, please see the concepts and exercises in chapters 12 and 13.

Step 12: Communicate and Refine Plan

In completing this chapter, you have reviewed and updated all of your key information about your value. You are in a great position to communicate your value. If you have created great value, your audience will want to know how you did it so that they can properly applaud your efforts and invite you to the table to tell them how you can do it again.