Module 8.5 What Do the Numbers Mean to Various Audiences?
Financial information provides a specific type of message. Like all messages, it can have different meanings for different people. Again like all messages, it can be tailored to a specific audience. You have to know what the numbers mean—or could be interpreted to mean—to each segment of your audience before you release them.
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1. What Do the Numbers Mean to Various Audiences?
Financial information is a specific type of message. Like all messages, it can be tailored to a specific audience.
Your annual report will mean one thing to your employees and could mean something totally different to your stockholders. The same numbers could also have different meanings entirely for the organizations you do project/programme purpose with as partners or vendors, to governments and different regulatory agencies, and to the organizations with whom you compete.
You have to
know what the numbers mean—or could be interpreted to mean—by each segment of
your audience before you release them.
Some financial information—such as your annual report—goes to anyone and everyone who might be interested in them. Even if it is not sent to someone, copies of the annual reports of publicly traded organizations are easy to acquire.
Other financial information will go to specific audiences. This can range from internal or external auditors who can re-create you entire organizational history just by studying complex columns of numbers to people who are confused or intimidated by numbers and want it all as simple as possible.
One of the most important financial documents within any organizational structure is the budget.
2. Everyone Knows What a Budget Is . . . Or Do They?
We can
sometimes get trapped by our own assumptions. This is especially true when it relates to
what we do for a living.
If you’re a widget maker, and spend most of your life with others in the widget sector of activity—designers, manufacturers, vendors, sales staff, marketing, and widget users—you automatically begin to assume that everyone in the world knows about widgets. Until, of course, you run into someone who doesn’t even know what a widget is.
This also happens when you are dealing with financial information.
Just because someone owns stock in a organization doesn’t mean they know how to read an annual report. Just because they work for the organization doesn’t mean they now how to read a budget. Just because they work for the organization doesn’t mean they are really sure what the budget actually is.
In other words, sometimes “the numbers” don’t mean anything to various audiences, and your job is to explain it all to them. This is an example of the COIK Principle—Clear Only If Known. If you know what the concept is, it is perfectly clear. If not, it is a total mystery.
When you do explain, however, you have to walk a fine line between giving your audience too much credit for understanding what the numbers actually mean and giving them too little.
At times you will have to be able to teach people something without letting them know that you’re teaching them. You have to learn to present the information in such a way that they can figure out what it all means without feeling that they have been “talked down to” or lectured.
3. Explaining What a Budget Is
We all tend
to use the same terms—speak the same language—that the people around us do. That
is, we often use jargon that our colleagues understand.
As a result, if we spend a lot of time talking about financial information, we can have a tendency to sound like CEOs, CPAs, CAOs, bookkeepers and other number crunchers. This is fine when we are talking to CFOs, CPOs, CAOs, bookkeepers and other number crunchers. It might not work, however, if we are talking to engineers, designers, doctors, the sale staff, the line foreman, investors, vendors, or the media.
If we have
information that we feel that others need to know and understand, we have to put it in
terms they understand. One way to do this is to look for a completely different frame of
reference. In other words, find a t1otally different way to talk about it.
Although the Alliance for Nonprofit Management, which can be found online at http://www.allianceonline.org, aims its budget lessons and tips at the nonprofit sector, the information they provide serves as a simple explanation that can be inorganizationald into your own communication to help people understand what it is they are reading and how you arrived at the numbers and the conclusion you give them.
When you are talking about the process of preparing a budget, you need to make sure that your audience understands it.
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4. Explaining What a Budget Is (Continued)
You may
have a complete and thorough knowledge of the budgeting process. Those you want to
communicate budget information to might not. This information is not being presented,
then, because you need to understand what a budget is. It is being presented as a way to
explain it to those people who do need it; a way to do so in fresh language.
The
Find and insert your own core purpose. Use the name of your own products or the services you provide:
“The first step in the budget process is a review of program and management achievements and fiscal performance over the year just ending. This includes, but is not limited to, reviewing objectives achieved, comparing budget to actual figures, and looking at the number of people served in each program.
“By dividing the true cost of each program by the number of people served, you can also analyze the cost per unit of service. Based on this review, new goals and objectives should be discussed and agreed upon in a preliminary way. These goals and objectives should fit into your strategic, long-range plan and help you progress towards your mission.
“Then, estimate the costs required to achieve your objectives, including staff, supplies, and other resources.”
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5. CASE STUDY: The Budget of the
project/programme purpose
and organizational budgets can be large, complex documents, but no organization has a budget staff,
or budgetary process as complex as a government. Nor will any organizational budget ever have
to undergo the public analysis or scrutiny of a government’s budget.
As an example, let us look at the Federal Budget for the United States of America for fiscal 2002/2003. It is a 426-page document, with an additional 702 page of analysis for a 1,128-page manuscript with an American flag on the cover instead of the standard government text.
The budget
actually covers the proposed spending plans for 26 separate federal departments and
agencies.
The complete budget itself is actually printed in several volumes since there is no necessity or perhaps even capability to produce and bind it in a single volume. For one thing, it would simply weigh too much.
Let’s look
at the budget of the
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6. CASE STUDY: The Budget of the
As with a
organizational budget in which each department or division has its own budget, and contributes
to the total budget package, there is a lot more involved in the 2002/2003 U.S. budget
than the 1,128-page manuscript.
Each of the 26 federal agencies and departments has it sown budget package, additional statistical and financial data, and background information, explanations, timelines, and rationale that go into greater detail about the specific programs that fall within your jurisdiction. All of these agencies and departments also have their own staffs whose job is to get the president’s attention in the hope that they may play a more prominent role in the final budget presentation.
Some information is purposefully prominent. It is impossible to miss it. That is done on purpose. You need to be aware of the kind of information you want to make prominent—and report—in your budget. What do you want to highlight for others to read in your budget?
Other information, although present and accounted for, is buried. This is also on purpose. It is hoped that people will either miss it, or treat it as a trivial matter, not worthy of attention or examination. Again, you need to decide what information you want to minimize in your budget.
After all, a
budget is more than just another financial document. It is also a statement of purpose and
direction. It shows what a organization—or government—considers to be important, and
outlines the focus of the next year’s efforts.
You could
call a budget an “annual” mission statement.
7. CASE STUDY: The Budget of the
Like
organizational budgets, the one that most people read in a government’s budget is the
introduction or “executive summary.” In the
As with CEOs, different presidents have different styles. Former President Bill Clinton’s last budgetary summary ran on to more than six pages and was filled with what many observers call economic, fiscal, lawyerly, and bureaucratic jargon.
By comparison, Present George W. Bush’s introduction to the 2002/2003 budget was about one-page in length, and was kept as simple and straightforward as possible.
In the same way that no one person in the government reads the entire budget, neither does any one person in the media. Nor, for that matter, does any one member of the U.S. Senate or House of Representatives, or any special interest group, watchdog organization, or “think-tank” that analyzes.
Instead, they all read the introduction, look at various departmental and agency summaries, and then talk to agency and department representatives. That is the basis of their interpretation and analysis. They will also pull whatever numbers they need to make whatever point it is they want to make.
In other words,
the media and the analysts look at the Budget of the
In the same
way, your need to decide how to frame the “executive summary” of your budget as
this is the one section most people will read carefully.
8. Developing a Strategy to Make Numbers Meaningful
The
strategy you develop to make sure that the numbers you release are meaningful, and are
understood by whatever audience will receive them, depends upon what they actually mean
and represent.
It is only
when you know exactly what you want to say, what meaning you want to attach to the
information, and to whom you want to say it that you will be able to develop any sort of communication
strategy designed for the specific information and audience you are dealing with.
Your communication strategy must be consistent and stable, able to handle all of the different messages that have to be sent without confusing the recipients. There must, however, also be enough flexibility built into the system to allow it to be adapted to whatever messages or conditions have to be dealt with.
Your strategy must also properly reflect your relationship to the people or organizations you are communicating with.
Think, for example, how you would justify your department’s budget and why it was important to the entire organization. Now how would you explain that to:
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9. Developing a Strategy to Make Numbers Meaningful
There are
five separate phases of a communication strategy or plan. These are the same no
matter what type of message you want to send:
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10. Avoiding a Common Budget Pitfall
One of the problems with explaining budgets is that some organizations try to make their budgets serve too many purposes, according to The Top 10 Traps of Budgeting, an article on the subject by Tad Leahy available online at http://www.bfmag.com.
Leahy says that many organizations ignore the fact that budgets need to be kept simple and focused on realistic goals. The budget is often used to motivate people to get to a goal by showing them what they have to accomplish—so many sales, units, and so on. By there very nature, then, budgets are often unrealistic.
Many project/programme purposees, however, see their budgets as their project/programme purpose plans.
According to
Kenneth A. Hilt, principal of Jay Alix & Associates, a organizational turnaround and
restructuring organization in
“When a bank asks for a organization’s project/programme purpose, the typical response if to turn over the budget,” Hiltz adds,
“A project/programme purpose plan is supposed to balance risks and opportunities. It’s meant to be realistic. A budget is not. Yet many organizations don’t distinguish between the two. So they end up with overly optimistic project/programme purpose plans. Or they’ll have a project/programme purpose plan that shows significant cost reductions, like cutting salaries by 20 percent, but no real plan for achieving that goal.”
If the organization itself is confused about what its budget really is and means it’s no wonder the people they present it to will also be confused.
Multiple-Choice (2)
1. Your annual report can have different meanings to your
a. Employees
b. Stockholders
c. Vendors
d. All
of the above
2.
Sometimes the ________ do not mean
anything to various audiences, and your job is to explain it all to them.
a. Numbers
b. Job
c. Finances
d. None of the above
3. _______ budgets are complex documents but not as complex as a government.
a. Personal
b. organizational
c. Public
d. None of the above
4. A ______ is a statement of purpose and direction that shows what a organization considers to be important.
a. Financial statement
b. Executive summary
c. Budget
d. All of the above
5. An “annual” mission statement could be called a ______.
a. Budget
b. Financial statement
c. Executive summary
d. All of the above
6. The introduction of a government’s budget is called the ________.
a. Executive
summary
b. Financial statement
c. Budget
d. None of the above
7. A _________ must be consistent and stable and able to handle all of the different messages that have to be sent without confusing the recipients.
a. Planning strategy
b. Communication
strategy
c. Financial statement
d. None of the above
8. This is where you start to actually develop your strategy for achieving your objectives, and choose the media that you will use to achieve your goals.
a. Preparation
b. Production
c. Action
d. Planning
Matching the Columns
1. Preparation |
A. This is where you start to actually develop your strategy for achieving your objectives, and choose the media that you will use to achieve your goals. |
|
2. Planning |
B. The messages are sent. |
|
3. Production |
C. Various methods are used to determine of the strategy actually worked, and if there is a need for the process to continue. |
|
4. Action |
D. The plan must be based on a thorough analysis of the current situation, everyone involved in it and a clear picture of the objectives that you hope to achieve. |
|
5. project/programme purpose plan |
E. Here is where the actual messages are produced. |
|
6. Assessment and analysis |
F. Balances risks and opportunities and is meant to be realistic. |
Answers:
1.) D
2.) A
3.) E
4.) B
5.) F
6.) C
As we have
seen, financial information is a specific type of message. Like all messages, it can
have different meanings for different people. Again like all messages, it can be tailored
to a specific audience. You have to know what the numbers mean—or could be
interpreted to mean—to each segment of your audience before you release them. You
also need a communication plan to make sure that your audience understands the meaning you
want then to focus on.
Test
1. ______ A budget is suppose to balance risks and opportunities and is meant to be realistic.
2. ______ The budget is used to motivate people to get to a goal by showing them what they have to accomplish.
3. ______
The media and the analysts look at the
Budget of the
4. ______ The first step in the budget process is a review of program and management achievements and fiscal performance over the year just ending.
5. ______ We all do not tend to use the same terms – speak the same language – that the people around us do.
6. ______ When someone owns stock in a organization it means that they know how to read an annual report.
7. ______ Just because someone works for the organization does not mean they are really sure what the budget actually is.
8. ______ Financial information is a specific type of message that can be tailored to a specific audience.
9. ______ One of the problems with explaining budgets is that some organizations try to make their budgets serve limited purposes.
10. ______ A communication plan makes sure that your audience understands the meaning you want to focus on.
Answers:
1. F – project/programme purpose plan
2. T
3. T
4. T
5. F – We all do
6. F – It does not necessarily mean they know how to read the report.
7. T
8. T
9. F – Serve too many purposes
10. T
Bibliography
Nice, D. (2002). Public
budgeting.
Premchand, A. (1983). Government budgeting and expenditure controls: Theory
and practice.
Wildavsky, A. (2001). Budgeting and governing. New
Glossary
Federal Budget for the
Executive Summary – The introduction in the U.S.
Federal budget that is “The Budget Message of the President” or an introduction
to any budget that provides a summary.
Communication Strategy
– Must be consistent
and stable, able to handle all of the different messages that have to be sent without
confusing the recipients, and be flexible enough to allow it to be adapted to whatever
messages or conditions that has to be dealt with. This
strategy must also properly reflect your relationship to the people or organizations with
which you are communicating.
Learning Objectives
Q&A
1. What does the
The
2. What are the steps in the budget process?
The first step in the budget process is a review of
program and management achievements and fiscal performance over the year just ending. This includes reviewing objectives achieved,
comparing budget to actual figures, and looking at the number of people served in each
program. Second, new goals and objectives
should be discussed and agreed upon in a preliminary way.
Third, estimate the costs required to achieve your objectives, including
staff, supplies, and other resource.
3. How can we explain terms in the budget, so the
audience understands?
One way to help your audience understand the budget is
to look for a completely different frame of reference.
In other words, find a totally different way to talk about it.