How Financial Fluency Can Fuel Growth
Linguistic relativity is a concept you might have learned back in your high school or college psychology class. Essentially, the hypothesis is that language shapes the way people view the world. Think about how you use the words “left” and “right” to describe directions. Other cultures may use other words for directions, like “north” or “south,” and even “uphill” or “downhill.” The point being: Different words hold different meanings to everyone. It’s a matter of establishing this shared language that makes language a powerful tool.
Don’t worry, we’re not diving into a Psych 101 lesson here. But linguistic relativity offers a good frame of mind when considering how language (and eventually, fluency) can shape how we understand our roles within a company and how we deliver value.
Our own Jake Chapman and Nick Lipetzky tackled this concept of financial fluency recently—be sure to watch the video, and keep reading on.
A shared understanding creates meaning
We’ve covered the basics of what linguistic relativity means. Now, let’s examine how that plays out in an organization, especially within financial functions. We’ll start with the concept of value. It’s kind of a vague term we all share an understanding of, but the meaning shifts and becomes more nuanced from organization to organization, and even person to person. What Disney considers value to a customer is entirely different than what a small accounting firm does.
We say this a lot, but CEOs and founders need to know their customer base inside and out. And that knowledge needs to be shared by the team at large. We can extend the concept of linguistic relativity here: the whole team needs to share an understanding of what value means to them as a company. This clarity around who their customer is and how they benefit from your product or service creates a common purpose. Your team will be in a much better position to succeed when they can define what your mission is and how each member can support it individually.
Financial fluency makes way for growth
What is finance if not a way to empower better decisions? Think of all the data, the acronyms, the forecasts that go into a company’s finances. These are all good tools, for sure. But there needs to be a language built within your company to really make them powerful. What do they mean for you? We can give a generic definition of a P&L sheet and explain its purpose. But interpreting it to a certain company, or even a certain function is another thing entirely. Understand what these concepts mean from a face value, and what they mean to your organization as a whole.
This is especially critical for leadership teams. It’s easy to shrug finance off as “not my job,” but having a shared understanding and language built into your organization is more powerful than you might think. If everyone on your team, especially within leadership, understands how their daily activities ladder up to the company’s financial success, they’ll become more conscious of their own decisions and will be able to spot opportunities and potential pitfalls.
Financial fluency means knowing what your sandbox looks like.
Let’s put the concept from above to work. Once your team becomes aware of how they create value, and they’re equipped with your language, they’ll begin to build a mental sandbox. They’ll know what they’re capable of, what they should avoid, and how to pitch opportunities for the organization.
This becomes a powerful tool in situations where you’re trying to hold on to working capital. If your team knows how to negotiate terms with suppliers and can enact a “collect early pay late” deal, you’ll be better positioned to keep reinvesting capital into the company.
Financial fluency can empower your employees to find and present new ideas that can fuel growth. If an employee approached you as the CEO about a tradeshow that required $5k, but didn’t really have a good reason to pitch it other than it seemed like a good idea, we wouldn’t blame you for turning down the idea. However, once your employees are speaking the same language, they can present ideas that are backed with financial logic. Being able to lay out how the $5k spent on the event will pay off will give your leadership team more reason to invest in new opportunities.
It’s time to create financial fluency.
Knowing your sandbox means knowing what tools you have to work with and what limitations are set. These boundaries allow for more creativity, scrappiness, and a better understanding of how daily action contributes to financial success. Your employees will get a stronger voice within the organization!
If you’re looking for other ways to inspire better leadership and financial strategy within your organization, contact the team at AmpliFi or explore our resources dedicated to helping founders and CEOs navigate the complexities of finance.