Speak simply but carry some big numbers
Healthcare CFOs can enhance their relations with boards and finance committees by following these effective communication tactics.
Speaking the same language literally and figuratively is the secret to effective personal and business communications. We all know that. But do we practice what we preach when it comes to communicating financial information to the people we report to?
That’s the challenge facing healthcare CFOs when communicating financial information to their organizations’ governing boards and finance committees of those boards. Why it’s challenging is directly related to the unique complexities of financial transactions in healthcare.
For the most part, transactions in all other industries are immediate and between buyers and sellers at a known and previously agreed upon price. Transactions in healthcare, meanwhile, are anything but immediate (unless they’re upfront cash payments at the point of care) and among three parties (buyers, payors, and sellers) at an often unknown and not previously agreed upon price. Transactions in healthcare are unique while transactions in other industries are standard.
The communication challenge for CFOs arises because most volunteer members of hospital and health system governing boards and on boards’ finance committees come from other industries. They’re familiar with standard transactions in their industries. They expect balance sheets, which report assets and liabilities, to generally mirror income sheets, which report profits and losses. That’s not the case in healthcare, where balance sheets and income sheets can be wildly different.
As you go up the corporate chain to the board and board committee levels, the level of knowledge and appreciation of the nuances of net revenue diminish. That’s not a knock on the board or a board committee; it’s just how it is at most hospitals and health systems.
That creates a communication tightrope that CFOs need to walk. On one side, providing too much and too granular financial information to explain what’s happening will lose the attention of the board and finance committee of the board. On the other hand, providing too little and too broad of strokes of financial information to explain what’s happening will only raise more questions. CFOs must be able to circle the rabbit hole but not go down it or run away from it.
It's a communication skill that CFOs must master to enhance rather than strain relations with the board and finance committee of the board. CFOs need to be able to make the complex sound simple and give the board and finance committee the ability to harness the power of information to make informed decisions. Not a lot of people are good at that.
To that end, we’ve seen what works and what doesn’t work in our work with leading hospital and health system CFOs around the country. Here are seven lessons that we’ve learned from watching CFOs do their thing with their boards and finance committees.
- Translate what’s happening in the industry. Board and committee members don’t live in isolation. They know things are happening in healthcare from their own lives, their own organizations, friends, family, the media. The CFO needs to be able to explain what’s happening externally and how it applies to their organization. That will help put all the financial information the CFO is sharing into context.
- Identify root causes behind the numbers. It’s easy for CFOs to get bogged down in the data that shows board and finance committee members what’s happening. CFOs who are skilled communicators can explain the “why” behind the numbers. They quickly move past the data, which the board and finance committee members can see in front of them, and focus on the root causes of what the data says.
- Ask staff for the story behind the numbers. The CFO’s job is to effectively communicate financial information to the board and finance committee of the board. That starts with the finance staff that sits below the CFO. CFOs shouldn’t just ask for the numbers from their staff and take it from there. Effective CFOs ask for both the numbers and for the story that the numbers tell. It’s up to the CFO to decide what story the board and finance committee members should hear.
- Embrace the numbers for what they are. CFOs must be realists to be effective communicators. Not just when the numbers are good but, even more importantly, when they’re not. The numbers are what they are. The CFO must embrace them. This is why knowing the root causes of the numbers and having the ability to tell the story of the data are critical. Don’t gloss over the numbers to avoid difficult conversations. Board and finance committee members may not know net revenue as well as the CFO, but they do know when someone is trying to change the subject.
- Focus on the right thing. Conversely, giving board and finance committee members too many numbers and too many stories in order to hide the real story isn’t good either. The CFO shouldn’t leave it to them to pick the story or just pick the story the CFO thinks will resonate with them. The CFO knows the most important story, and it’s the CFO’s job to steer the board and committee to that story to make the best use of their time and to make the most informed decisions moving forward.
All of the above sounds simple. It’s all common sense, right? But as we said at the top, healthcare finance is more complex than finance in any other industry. It’s easy for CFOs to make their communication with their boards and finance committees complex. Resist the temptation.
CFOs who communicate effectively with their boards and finance committees work hard to keep it simple but know exactly what they’re talking about.
We’re going to be talking more about how CFOs can enhance board and finance committee relations at this year’s Summit Elevate conference. Held April 23-25 at the Grand Hyatt Tampa Bay in Tampa, Florida, this exclusive invitation-only event is specifically designed for healthcare CFOs.
If you’re attending, come hear me speak, and together we can add to this list of ideas for CFOs who want to communicate effectively with their boards and finance committees. Not attending? We hope to see you at another upcoming Kodiak event. You can also contact us anytime for new ideas and strategies for simplifying how you tell your organization’s healthcare finance story.
