CHAPTER INTRODUCTION
All analytical projects are made up of several phases. First, the objective must be understood, the client identified, and the work flow planned. Second, the analytical work is completed, including research and “crunching the numbers.” The third and most important phase is to present and communicate the findings of the analytical work. The analysis should also call for some action and highlight alternative courses, and should recommend that a mechanism for monitoring progress be set in place. In this chapter, we will be focusing on the presentation and communication of the results of the analysis.
The greatest analysis will fail to achieve its objective if the results of the analysis are not presented or communicated effectively. In addition, financial managers should also recognize that, to a large extent, their careers may be limited if they cannot effectively communicate. What do you call a good accountant with excellent communication and presentation skills? The CFO!
There are a number of behaviors and practices that can enhance the effectiveness of communicating finance and business information. These include outgrowing the behaviors of a stereotypical accountant, knowing your audience, developing a messaging strategy, educating nonfinance managers, and choosing the best delivery method.
Accountants and financial types are often stereotyped as cold, dry, and impersonal. We are often seen as impediments to getting things done. We also often seem to be too busy to help operating managers; we are either closing the books, doing forecasts, compiling tax returns, or whatever. Finance folks also typically do a poor job in communicating. It is not emphasized in our formal education, nor is it developed as a core competency in most companies. Accounting tends to attract quantitative types, not orators. We speak in “accounting‐ese,” citing FASBs, journal entries, accruals, and other items that are foreign to operating managers. Many operating managers perceive finance as only focused on the numbers. Too often we are perceived as not understanding the business.
Obviously, these stereotypes are not fair to all finance professionals or teams. One of the greatest ways to overcome these weaknesses, either real or just perceived, is to improve our delivery, communication, and presentation of business information to operating managers. Additional measures to improve capability were outlined in Chapter 5, Building Analytical Capability.
To become an effective business partner, we must step back from our quantitative and technical orientation to develop a context of the overall business. Invest some time with operating managers to understand their challenges and objectives. Obtain and read marketing and strategic plans. Review investor presentations, analyst reports, and market reports. Inquire about areas where you may be able to assist by identifying opportunities or illuminating challenges. Our accounting jargon should be replaced by business terms; we should simplify the analysis rather than complicate it; we should act as players, not just reporters; and we should propose actions and solutions rather than only offer criticism or just identify problems.
In order to effectively present business and analytical information, the analyst should develop an understanding of how the human mind receives and processes information as part of evaluating options and making decisions. The analyst bears a responsibility to present findings in an objective manner that reduces bias and the tendency to reach less than optimum decisions. Michael Lewis, in his book The Undoing Project, does a great job of chronicling the lives and research of two Israeli psychologists, Daniel Kahneman and Amos Tversky. Together, they documented and exposed how the human mind works and errs when making decisions in uncertain situations, which of course describes most business decisions.1 Their observations strongly resonate with my personal experience. Analysts should consider the following in developing and presenting analysis:
Analysts will find themselves working on analytical projects that are confidential or highly sensitive. They must accept this responsibility by safeguarding this information and by being discreet when communicating and presenting. In many cases the analysis is documenting or reporting negative performance that reflects on a team or executive, perhaps leading to the termination of a project, business, or even someone's career. Analysts should be sensitive to this aspect of their role.
Effective communicators tailor the message to their audience. Whenever I am engaged to make a formal presentation, I always strive to obtain a list of attendees or at least a profile of the group. What functions and industries do they represent? How many years of experience do they have? If possible, understand what key issues they face. What language and cultural differences will I encounter? How should each of these factors affect my presentation?
Another important factor to consider is the level of understanding of financial concepts. In addition to contemplating this in developing and communicating presentations, consider improving the level of financial literacy of colleagues as described in Chapter 5.
Here are a few audiences to consider. Obviously, the level of interest, understanding, and detail will vary significantly across these groups.
Senior executives are highly intelligent, are fast learners, and process information very quickly, or they wouldn't be senior executives. They are also very pressed for time. Most will not be interested in how you did the analysis or how long it took. Out of respect for their time and position (and your career advancement), you should bring your “A” game to any interaction with executives. Summarize the analysis, including a brief description of the objective, key findings presented in graphs and charts, and a summary with indicated actions. The detailed analysis should not be presented but can be included as an attachment, should there be a need or interest in “going into the weeds.”
Watch the executive(s) for cues as to pace and reception. Make eye contact and look for signs of comprehension. If they start reading ahead, pick up the pace. Most conversations and presentations will be shorter than you expect. Be prepared to present the takeaways instead of working methodically through all of your materials.
The level of understanding of financial concepts across the executive suite varies significantly. For example, product development executives or technical scientists may have less exposure to finance and accounting than others, but no less cerebral capacity. Use commonsense, practical, business explanations.
The CEO and other executives must focus on the big picture and the next move. Always present the full implications of the analysis and be prepared to offer suggested actions. For example, if you explain a variance for the most recent quarter, executives will undoubtedly want to know the impact, if any, on the future projections and possible mitigating actions.
Many interactions with executives are impromptu (and brief!). The CEO steps onto the elevator with the analyst and inquires about some trend, issue, or projection. In these cases, you do not have an opportunity to prepare. Develop a way of formulating concise explanations…the so‐called elevator pitch. Do your best to respond with the major points in a succinct manner.
My first experience presenting to a full board of directors came when I was named acting CFO while serving as vice president and controller of a large publicly traded company. The board was very diverse: three CEOs of major corporations, two attorneys, two large company CFOs, and two university professors (one in business and the other in nuclear physics). The audience was brilliant and experienced, and most had deep business and finance experience. Information needed to be delivered in a concise manner and was absorbed at a rapid pace. Questions came fast and, due to the diversity of the group, they came from many different angles. It reinforced the need for deep preparation, including the need to anticipate likely questions.
Another learning experience occurred in that first board presentation: the flexible presentation. The financial presentation was the last item on the agenda and, as in most meetings, the board meeting was running behind schedule. I was often asked to condense a 30‐minute slot into 10 or even 5 minutes. Rather than attempt to rush through the full presentation, I decided to turn to the summary page at the end of the report. I knew that we had summarized all the key points there, so I stepped through these and took questions from the directors. This experience repeated itself throughout my career. I always included an “Agenda/Discussion Topics” to preview and an “Executive Summary” to wrap up. Make sure that summaries are effective wrap‐ups of the details of your presentation.
I am usually pleasantly surprised by the relative level of financial knowledge by many supervisors and managers and even many associates within an organization. The wide adoption of 401(k) plans and the availability of Internet financial resources have substantially increased knowledge and interest in financial performance. However, most will not have a deep understanding of business accounting and finance. Always provide a link from financial outcomes to the processes and activities in which the employees are involved. Be especially careful to use general terms and commonsense explanations rather than accounting jargon. For example, say, “We need to reduce our customer payment cycle” versus “We need to reduce DSOs.” Provide context for managers and supervisors if they are not generally exposed to this type of information. For publicly traded companies, the impact of a trend or variance can be linked to earnings per share (EPS) or even the share price.
Senior finance managers may present to a wide set of audiences, even within a few days. Take the case of a CFO at the end of a quarter. He or she will likely present the results and business outlook to senior managers, the CEO, the board of directors, investment analysts, and associates. In some cases, the same core presentation material can be used, but the presenter's “voice‐over” accompanying the visuals and supplemental information are tailored to each group.
If we were to talk to our marketing counterparts or a public relations firm about our communications and presentations, they would advise us to develop a “messaging strategy.” This can be done for both our overall communications (e.g. focus on execution – hitting our goals) as well as each individual presentation (e.g. why have margins declined from last year?).
For individual analytical projects, be sure to state the objective. Examine the analytical worksheets and extract key observations. Step back and view the work as a senior business executive would review it. What is the best way to present these findings? What conclusions and recommendations should be made?
Develop talking points that focus on the key findings and observations, as well as conclusions and recommendations. Make these concise and limited to the top three to five points. Do not dilute the message with minor details or distractions.
As with any message, repetition may be required. I recall becoming frustrated early in my career because we had repeatedly communicated a finding that didn't seem to stick and for which no apparent action was taken. We must be prepared to repeat and reinforce key observations; it may take time for managers to internalize the observations and even more time to address them. And it is important to repeat key themes such as progress on critical initiatives and critical success factors (CSFs) for achieving plans or other objectives.
One of the barriers to effectively communicating finance information is that many managers do not have a solid understanding of basic accounting and finance functions and terms. If the foundation is weak, then many of our analyses and recommendations will not be fully understood. Chapter 5 presented options to help managers gain a better understanding of finance and accounting, ranging from formal training to lunch sessions to including infomercials in our analysis.
Just a few short years ago, most reports and presentations were developed on paper and sent or presented in person to the recipient. While this still occurs in many situations, technology and other changes have added additional delivery channels, ranging from online access and query capabilities to dashboards to formal reports and presentations. Some reports are pushed by notification or alert; others are pulled (user initiated) as needed. Consideration must be given to client comfort with technology and whether clients will access information on their own initiative. We should never underestimate the potential importance of in‐person communication to ensure that the information is understood.
The outline presented here is very effective in many situations, but should be tailored to fit the requirements of each specific situation. Context and structure are very helpful to the audience (and the presenter!). In addition, the inclusion of an “Agenda” and “Summary” can facilitate schedule and time change. Most business presentations are enhanced by visual aids such as handouts or PowerPoint slides.
The Agenda/Discussion Topics is essentially a preview of your presentation: Here is what I'm going to tell you. This is a vital start to the pitch:
Do not assume that the audience, whether a single manager or a large group, understands the objective, scope, and context of the analysis. This overview can and should be brief, but developing a context and defining the objective of the exercise are very important.
I often present the Executive Summary at the beginning of my presentations (as a preview) and at the end (to wrap up). I find it very effective to tell the group right up front the key findings and conclusions. The presentation then provides the basis of support for these findings. In other cases, especially where the findings are controversial or unexpected, I will hold the Executive Summary until the end of the presentation.
Distill all the analytical material to high‐impact visual summaries of your key findings. Do not include extraneous materials that are not relevant to the topic and key findings. Determine the best way to present your findings. Generally, this will involve graphs, tables, and other visual depictions to summarize the results of your detailed analysis. The order and flow of material are important. Avoid including detailed worksheets and tables in the presentation. These can be included in the appendix or as exhibits.
Briefly explain the methodology employed to complete the analysis. Did you review all transactions or just a sample? What was the scope? What period was covered? Be sure to credit others who assisted and provided input to the work. If the project involves projections, highlight the key assumptions utilized in the analysis. Do not describe the process in detail; no one cares!
The analytical tools used during the project are likely not the best tools to use in presenting the findings. Develop a few presentation slides that document and/or support key findings. Use highly visual tools to report findings. Graphs and charts with annotations are far superior to spreadsheets and tables. Eliminate any information that is not relevant or important to the objectives and findings of the analysis.
In most cases, the objective of the analysis is not simply to report on a subject. The ultimate objective is to understand the implications of the findings and to develop and recommend one or more alternative courses of action. The value of the analysis is often exponentially increased if the analyst can recommend how to address the findings. Do not assume that the audience/reviewers would make the same observations or reach the same conclusions that you have reached. Since you have researched and studied the subject, your ability to understand the issue, implications, and possible actions is likely to exceed that of many managers.
In some situations, it may be desirable that conclusions and actions be determined by the audience, rather than presented as an outcome of the study. This can be especially important where you are trying to build consensus or have the team reach conclusions and develop indicated actions. In these situations, you should summarize findings and then facilitate a discussion and evaluation of solutions and alternatives.
The Executive Summary, including recommended actions, is the most important part of your presentation. It is here that you will boil down and distill the results of your analytical work into key findings and recommended actions.
Often, there are alternative courses of action to address a problem. In this case, it is advised to list various alternatives and provide a financial evaluation of the various choices, in addition to your specific recommendation.
In our efforts to provide a very effective visual presentation of our findings, many supporting schedules and analyses are deemed not to be useful in the actual presentation. These can be included as an exhibit or in an appendix, should anyone wish to drill down.
After following the guidelines outlined, the analyst needs to prepare to present the material and should consider using these best practices to improve delivery of the presentation. Preparation leads to confidence and successful presentations.
Talking Points: Script out your talking points for each slide. Do not read content on the slides, since the audience will be viewing the material as you speak. Instead, use your “voice‐over” to complement and guide the audience's visual process.
Rehearsing: Rehearse, but do not memorize your points. Time yourself as you rehearse to ensure that you can complete your presentation and address questions within the allotted time. If possible, visit the location of the meeting or presentation to familiarize yourself with the room.
Complex Slides: Introduce complex slides with a quick description of the tables, charts, and other material on the slide. Then walk through the observations and takeaways. Tables and graphs should be accompanied by bullets highlighting key points.
Flexibility: Be prepared for questions, changes in allotted time, and even appearances by “Mr. Murphy” of Murphy's Law: “Anything that can go wrong will go wrong.” Time allotments may be reduced. Audiovisual devices may fail. Stay cool and develop a plan B. Always fall back on your primary objective and three to five primary talking points.
Brevity: Be as brief and concise as possible. Respect people's time, and remember that most people will stay more attentive if the pace is crisp. As Blaise Pascal, Mark Twain, Ben Franklin, Henry Thoreau, and others have said, in effect: “If I had more time, I would have made this shorter.”
Eye Contact: Effective presenters make eye contact with the audience. This keeps the audience engaged. Also, effective eye contact allows you to determine the reception to your material, delivery, interest, and pace. Make adjustments as indicated.
Anticipating Questions: Consider the questions members of the audience may ask, and prepare responses. This is where knowing your audience is critical, since questions will generally be based on the participants' roles, responsibilities, and backgrounds.
Avoidance of Technical Terms and Explanations: Where possible use business terms, not accounting terms.
Stand‐Alone Value: The report or handouts are often passed on to others who were not present and are without the benefit of your “voice‐over.” While it is not possible or desirable to include all your remarks, consider whether the printed material stands independent of verbal remarks. That is, could someone follow the main points of the presentation and follow observations and key takeaways? The use of bullet points to summarize key points and takeaways can be useful in achieving this objective.
Objectivity: It is important that analysts remain objective in fact and in appearance. Avoid tendencies to be negative or critical. Provide balance by highlighting both “What's going well?” and “What needs improvement?”
Confidentiality: If any of the information presented is confidential or is considered material nonpublic information, a cautionary statement may be warranted at the beginning of the material.
A well‐designed graphic, visual, or dashboard is worth a thousand words. “Data visualization” is the new label for this important concept. Our objective should be to determine the data or information that is important and then develop the best method to present the information to facilitate understanding by the viewer, including highlighting trends, variances, and other insights. If not properly presented, these key insights may not be evident or easily discernible by the client. Consider the revenue process dashboard shown in Figure 6.1.
This dashboard presents the trend in receivables level and days sales outstanding (DSO) and also includes graphs representing the key drivers and leading indicators. The graphs facilitate understanding trends and relative magnitude that would not be easily determined by looking at a table containing the raw data. Effective use of charts and graphs can significantly improve the presentation product:
The graphs presented in this chapter are available on the book website. Refer to the “About the Website” for additional information.
Utilizing charts, graphs, and other visuals is essential to developing effective presentations. However, the inclusion of graphs does not necessarily increase the effectiveness of the presentation. Providing graphs of flawed analysis or extraneous information is not the objective. Equally important is to select the best graphic form for presenting the information or analysis.
The pie chart is one of the most commonly used charts. In fact, it is sometimes overused or misused. It is best used to visually represent the relative size of component parts to a total population. It generally is not effective for comparing or presenting two sets of numbers. It is also important to limit the number of slices in the pie to six or seven. If a large number of slices are included, the pie chart is difficult to interpret and the audience will get lost in matching slices to the legend description. It can also be hard to interpret the relative size of each slice compared to other slices.
An alternative to the pie chart is the histogram. The same data from the pie chart in Figure 6.2 is presented in the histogram in Figure 6.3. Data are clearly labeled and the relative size of each expense is evident. Presenting the segments in descending order also helps to focus attention on the largest and likely most important items.
The histogram can also be used to effectively present comparative information as illustrated in Figure 6.4. Without any comment, the most significant expenses are evident and comparisons to prior years are also easily made.
The doughnut or ring chart is a variant of the pie chart that has gained increasing popularity in recent years. This chart is illustrated in Figure 6.5. Some prefer this presentation, since the proportions are easier to determine than the slices of the pie. The same cautions that apply to pie charts also hold for doughnuts: too many segments complicate the visual effect and processing of the information.
Line graphs are most suited to presenting trends over time. A classic application is the price of a stock over time. Line graphs can also be used to illustrate cumulative progress toward a goal, for example annual sales, as shown in Figure 6.6. This example highlights a frequent situation where actual results trail planned results until the end of the period, in this case annual sales.
The basic column chart is a great way to present comparative data sets, for example actuals to budget. It is also useful for presenting trends. Subsets of data can be presented by stacking the columns. The stacked column illustration in Figure 6.7 presents the value and mix of revenue over time.
The column graph can be further enhanced by presenting a variance column that appears to float. It is very effective in presenting variances in proportion to revenues and spending, for example sources and uses of cash and net cash flow as in Figure 6.8.
The bar chart is a variation of the column chart. In certain applications, the horizontal presentation fits better. In addition, by varying the mix of charts, we can create greater visual interest and attention. Figure 6.9 presents a summary of the performance evaluations for a company's associates.
The dual axis graph is a great way to present two related data sets. It is a very effective method of overlaying a relative measure (e.g. days sales outstanding) over an absolute number (e.g. accounts receivable balance). Figure 6.10 shows that although the absolute level of receivables is increasing and varies due to seasonal sales patterns, the DSO is declining (improving), indicating progress in managing the drivers of DSO.
The reconciliation graph, sometimes referred to as a “waterfall” graph, is a terrific way to compare, reconcile, or roll forward a specific financial measure. In Figure 6.11 it is used to compare next year's planned revenue to last year's result. The visual is extremely effective to present key changes, drivers, or other variables. The visual is more effective if you first start with the negative changes followed by the increases.
The sensitivity chart presents the sensitivity of an estimated result (base case) to changes in critical assumptions. In Table 6.1, the base case of a discounted cash flow (DCF) analysis indicates a value of 10.96 per share, assuming an 8% growth rate and 15% operating income. The table shows how the DCF value changes if you “flex” or change the two critical assumptions.
TABLE 6.1 Sensitivity Chart
DCF Value Sensitivity Analysis | ||||||
Stock Price | ||||||
Roberts Manufacturing Company | Sales Growth Rate | |||||
4% | 6% | 8% | 10% | 12% | ||
20.0% | $12.11 | $13.49 | $15.04 | $16.80 | $18.77 | |
Operating | 17.5% | 10.52 | 11.68 | 13.00 | 14.49 | 16.17 |
Income % | 15.0% | 8.92 | 9.88 | 10.96 | 12.18 | 13.56 |
12.5% | 7.33 | 8.08 | 8.92 | 9.87 | 10.95 | |
10.0% | 5.74 | 6.27 | 6.88 | 7.57 | 8.34 |
A variation of the doughnut chart is the speedometer or gauge chart (Figure 6.12). It can add variety and visual interest to a dashboard to present progress or status of a project or to forecast performance.
The default setting on many graphic software tools, including Excel, generally sets the axis at zero. This may hide or mask trends or variances, particularly if there is a mix of large numbers and small variances or other data points. The scale can be set at a different level so that trends and variables are more visible.
However, caution must be exercised so that changes in the scale do not artificially magnify small changes or otherwise distort the presentation of the data.
For certain purposes, it is useful to develop dashboards or summary charts that combine a number of graphs or charts into a single‐page presentation. They allow for a quick review of several key variables or metrics. They facilitate a quick, comprehensive way to see all parameters of a process or an activity. A few examples are presented here. Note the effectiveness of combining graphs and highlight comments in Figures 6.13 (Human Capital Management Assessment) and 6.14 (Valuation Summary). Incorporating a variety of different chart types creates more visual interest and holds viewer attention for a longer period of time.
Dashboards are not ideal for every situation or client. For formal presentations, it may be preferable to present each graph separately. Some clients prefer individual views of the graphs versus a dashboard.
These dashboards are effective because they combine multiple views of performance. As mentioned, some executives prefer separate pages or slides to view performance. Formal presentations should generally break down the dashboards into separate slides.
Images other than graphs and charts may also play an effective role in a presentation. They can be used to create visual interest and hold or extend the audience's attention. They can also add to or enhance the emotional attachment of the message. A photo of a team in a rowboat, a team in a meeting, a patriotic flag, or children living in poverty will evoke a response well beyond any spoken or written words.
Communicating and presenting the findings of our work is the most important aspect of the analysis. If not communicated effectively, the analysis is unlikely to achieve its objective. The quality of the presentation significantly impacts the credibility of both the analysis and the analyst.
Financial staff members are often called upon to present plans, project analysis, financial results, and other analysis. We should work to improve our ability to develop and present business proposals, issues, and results. The actual analysis is typically not a good way to present the findings and recommendations. Analysts should utilize graphs, charts, and dashboards to communicate and present the results of their analysis. Choose the graph that best illustrates the point you are making. Improving the ability to crisply deliver the message will improve the reception of the analysis and the standing of the analyst.