Is A Financial Education The Key To Being A Successful Manager?
View of the logo of Brazilian FinTech startup Nubank outside its headquarters, in Sao Paulo, Brazil, ... [+] on June 9, 2021. - Nubank announced on June 8, 2021 that the investment company of US magnate Warren Buffett, Berkshire Hathaway Inc (BRKa.N), has bought a 500 million dollar stake in the digital bank, capital that will be invested in its expansion. (Photo by NELSON ALMEIDA / AFP) (Photo by NELSON ALMEIDA/AFP via Getty Images) AFP via Getty Images  When asked what traits are needed to be a world-leading CEO, the majority of people would likely opt for the managerial buzzwords like having strong leadership skills, thinking innovatively or being charismatic. In fact, if you take a look at some of the worlds most famous CEOs such as Jeff Bezos, Warren Buffet or John D. Rockefeller, all of them have either an education in finance, or spent their early careers working in finance. And its not just these three famous CEOs whose financial knowledge has helped them become successful - according to research from recruiters Robert Halff, over half of the FTSE 100 CEOs have a background in finance. Clearly this shows that an understanding of finance is a greatly valued leadership trait across all industries, but not every executive or manager comes from a finance education or background. This is where business schools and executive education programmes come into play. For many organizations, executive education courses can be costly and it can be difficult to measure their direct benefits to both the participant and their company. That is why, with colleagues from the Stockholm School of Economics and the Rotterdam School of Management, I explored how an 18-hour corporate financial executive education programme impacted executives decisions of companies financial practices and performance. The study was conducted between June 2015 and April 2019, involving 93 executives in Mozambiques capital, Maputo. Most participants were leaders of medium and large-sized organizations with more than 40 per cent educated to Masters level or above. We compared the practices and performance of executives who had completed a financial executive education programme, and those who were to complete the same programme only at a later stage. The results were remarkable, and showed exactly how much impact an executive taking time out of their business life to learn a new, vital business skill can have on their organizations. We found three striking conclusions. The greater the financial skills, the better the financial techniques  We found a strong link between the financial knowledge of participants and the financial techniques employed by them before the executive education programme was delivered. Executives without a finance background were less likely to use techniques to compare and evaluate potential financial returns from investments and were less likely to use techniques used to model how financial uncertainty might affect a business. Training made executives change their financial policy  We found that most participants intended to adjust how their organization managed working capital and risk management policies, clearly showing theyd learned something new from the programme. Furthermore, 42 per cent said they would adapt their investment valuation techniques and almost half responded that they would update their capital structure as a result of attending the programme. It was also rewarding to find that many of the executives followed through with their intentions to make changes after completing the programme. Improvement in managers financial performance  By focusing on two commonly used measures of company financial efficiency: Return on Assets (ROA) and Return on Invested Capital (ROIC), we were able to measure how efficient the companies were at earning income given the amount of assets they had and the amount of money invested in the company. We found that the companies led by executives who had been on the course saw greater ROA and ROIC performance in comparison to control rms. This finding suggests that company performance as a whole can be improved by investing in the financial expertise of senior executives. The future for managers and leaders  Our results show that relatively short and low-cost interventions, such as the Imperial College Executive Education virtual programme: Fintech: Foundations, Applications and Impact can improve executive financial decision making. Therefore, executive education short courses may benefit experienced executives who are seeking to advance their careers by gaining greater confidence in making financial decisions. This article was authored by Dr Claudia Custodio, Associate Professor of Finance at Imperial College Business School