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Training with Bottom Line Results

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A story about business literacy training with bottom line results:

A large commercial bakery was implementing a business literacy training program. Managers and supervisors attended the first training, in which the purpose of the new training was shared, the goals of the organization were discussed, and the income statement was reviewed in detail. Finally, key numbers were explained and examples were provided. One key number was the cost every time “extra dough” was thrown away. The average cost of 1 oz. of dough thrown away was 35 cents. If each employee threw away 1 oz. of dough a day for a year, it cost the company approximately $20,000. After that explanation, a supervisor stood up and made a commitment to his peers that he would never throw money away again.

Business literacy training can be powerful. This article will:

  • Define business literacy
  • Discuss why implementing a business literacy program is important today
  • Share the results of business literacy training
  • Illustrate the myths and pitfalls of business literacy training
  • Outline considerations when starting a business literacy training program

What is Business Literacy?

The idea of a business literate workforce was first introduced by the business sage Peter Drucker in 1954. He said:

“[The worker] should know how his work relates to the work of the whole. He should know what he contributes to the enterprise…if he lacks information, he will lack both incentive and means to improve his performance.” (p. 306)

“It is in the best interest of the organization that the worker have the information.” (p. 306)

Business literacy continued to be discussed in the academic literature in the 1960’s and beyond by such well known authors and researchers as Edward Lawler. Yet it wasn’t until the early 1990’s that business literacy became well known and implemented in organizations. Today, it is a best practice implemented in small and large organizations, in servicing and manufacturing environments, and with employees with all educational backgrounds and job responsibilities.

Business literacy training is known by several names, including economic education, financial literacy and business basics. In all forms, the idea is to teach employees about their business, how success is measured, and how they make an impact. In the words of Peter Drucker, giving employees the means to improve performance.

To be business literate is to have:

The ability to use financial and business information to understand and make decisions that help the organization achieve success.

A workforce is business literate when ALL employees have a working knowledge of the following:

1. The big picture. Employees know the organization’s goals and objectives (both measurable and global).

2. Measurement. Employees understand how success is measured. This usually means being able to read and explain one or more of the financial statements (income statement, balance sheet, cash flow statement) and understand the key measures of success for their organization.

3. Line of sight. Employees know how their work impacts the organization’s goals and objectives, financial statements, and key measures.

Topics in business literacy programs vary, depending on the organization’s needs and goals. Examples include:

  • Reading and using an income statement
  • Key elements in a balance sheet
  • Cash vs. profit and the importance
  • Basics of the cash flow statement
  • Capital budgeting and decision making
  • Key organizational measures and line of sight

Why Is Business Literacy Training Essential Today?

The myriad of changes that have occurred in the business world have made business literacy training an essential practice in organizations. Three of those changes that call for business literacy training are listed below.

Expectations of employees have changed from “just do your job” to “everyone is responsible for helping the company succeed.”

  • The business environment has become more competitive and faster paced.
  • Employees at many more levels have bottom line accountability.

These changes and others mean employees need more knowledge and more information. Yet most employees have never had an opportunity to learn how success is measured or how they make an impact on the numbers. Leadership now needs and is asking employees to help the company succeed, but is, for the most part, not giving them the knowledge or tools to do so.

Let’s look at a few examples. In the majority of organizations, when supervisors or managers are promoted to a position that has income statement responsibility, those supervisors or managers are not provided training focused on how to read the statement, the key numbers contained in the statement, or how to manage their area using the statement.

At the front line level, more than 60% of employees can’t read an income statement. If they can’t read an income statement, then they don’t have the opportunity to see the connection between their work and revenue, expenses and profit. Approximately 70% don’t understand the difference between profit and cash and why that difference is important. That means employees may not understand a cash crunch in the company if revenue and profit look good. Finally, 50% can not list any of the company’s goals. If they don’t know the goals, they may be working very hard, but in the wrong direction.

Business literacy training provides the knowledge and tools employees, supervisors, and managers need to be able to contribute to success. With business literacy training, efforts become aligned with goals, decisions are based on knowledge, and teams and departments are focused in the same direction.

What are the Results of Business Literacy Training?

Business literacy training is much more than just a finance course (basic or otherwise). It, therefore, impacts more than just employees’ knowledge of the financials. In 2000 the Business Literacy Institute conducted a survey to assess the organizational results of business literacy training. The participants were from a cross section of industries and company sizes. The results, in part, are outlined below.

Because of financial education (top 10 results):

Results of Financial Education Training
It is clear why, for example, expenses decrease after business literacy training has been implemented. Employees now understand the impact expenses have on the success of the company and understand their role in controlling those expenses. But why would trust improve? With business literacy training, management is proactively including employees in the business and sharing what was previously hidden, or at least not openly shared. Management is communicating trust, which begins to build trust.

Because a solid business literacy program provides a practical foundation for employees to understand their organization and how they make an impact, business literacy training can impact employee measures (e.g. employee satisfaction), operational measures (e.g. efficiency) and financial measures (e.g. profitability).

What are the Difficulties of Business Literacy Training?

Implementing a business literacy program has many obstacles. Teaching and sharing financial results can conjure up many fears and concerns. A few of the myths about business literacy are listed below.

Our employees know how to read the income statement; it is very straightforward.Most employees at all levels have never had an opportunity to learn how to read the income statement. If they have picked it up along the way, they probably have both good and bad information.
Employees understand the difference between revenue and profit.The vast majority of employees believe their company keeps anywhere from 20% to 70% of revenue as profit. Employees who have never seen an income statement simply don’t realize the percent of sales that goes to salary, benefits, materials, and so on.
Teaching everyone to read the financials is irresponsible — they’ll misuse the information.Given the opportunity and shown the trust, employees will use the information appropriately. Discussions are held about confidentiality and insider information (for public companies).
Our employees know how they impact the success of our company.Time is rarely spent discussing how financial success is measured or how employees impact that success. Do not assume they know.
Teaching employees the importance of their impact on the finances will cause them to lose focus on other important business practices, such as quality and customer service.Practices such as quality and customer service lead to financial success. However, employees are rarely shown this link. When employees understand the financial impact of non-financial business practices, they understand how everything fits together to achieve success.


Once the myths are overcome, there continue to be many difficulties for organizations. Some of the pitfalls that organizations fall into when attempting to implement a business literacy program are listed below.

Asking the CFO, Controller or other financial expert to teach the course. Financial experts are usually not trainers. And, because they are experts, it is difficult for them to teach non-experts. At a minimum, the CFO or Controller needs coaching by a business literacy trainer.

Assuming managers are comfortable talking about their income statement. Most managers have never had formal training. They may be comfortable studying the income statement on their own, but they are probably not comfortable sharing it with others.

Believing that sharing the numbers is enough. Sharing the results on a regular basis (whether it be by e-mail, memo, department or company meeting) does not mean employees understand the meaning of the numbers. And people shaking their heads “yes” when asked if they understand does not mean they understand.

Taking a “standard” approach to business literacy training. Business literacy training must be a customized program because every organization’s financials are different and every organization has different key areas. A generic program does not provide the line of sight or the key numbers for your organization.

Believing an ‘open door policy” is enough. Most employees will not ask about the numbers. Management must take the proactive step first.

Considerations When Getting Started

How does one overcome the myths and avoid the pitfalls? The number one predictor of success of a business literacy training program is top leadership commitment and active support. After leadership commitment is ensured, the recommended elements to consider when developing a business literacy training program include:

  • The current level of business literacy
  • The time and ability of internal resources
  • The expertise of external resources
  • The objectives of the program
  • The development of a complete, on-going program, not just a training session

Business literacy training is specialized. Developers and trainers must have an understanding of financial measurement, be able to make the topic relevant and interesting for the audience, and be expert facilitators. Their experience must go beyond just training or just finance because the topic is surrounded by fear and, sometimes, suspicion. It is not a program to be thrown together and handed off. Take time to build a program that is customized to your organization and your employees so that everyone truly contributes to success.


Drucker, P.F. (1954). The Practice of Management. New York: HarperCollins.

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