Understand the Four Steps of Learning

Think about the last time you tried something new. Perhaps you started a new job. Or maybe you took up a hobby that required a particular skill set, such as sailing.

Continually learning characterizes our growth and development throughout life. Early on we learn to communicate using gestures and language. We develop physical and cognitive abilities to overcome obstacles and accomplish our objectives. Especially in the modern world characterized by rapid change, we constantly have to adapt to new challenges and opportunities.

I was recently talking with someone about emotional intelligence and its contribution toward career success. Just as I had been ignorant of the topic prior to reading articles and delving into a study course recently, this person had never heard of EI or EQ.

After explaining emotional intelligence on a cursory level and sharing a resource about the topic, I mentioned the following four-step paradigm that I was exposed to in a training course:

  • Unconsciously incompetent – You don’t know what you don’t know. If you are ignorant about the existence of an area of study or a skill set, you are incompetent without even being aware. Someone who has never heard of accounting doesn’t even realize his ignorance of debits and credits, general ledgers, and account reconciliations. Or perhaps you mistakenly believe you are proficient in some area, so you don’t realize that you need further training and development. A person in that state is unwilling and unable to learn until progressing to the next level.
  • Consciously incompetent – You know what you don’t know. You have some depth and breadth of knowledge about the subject matter, but you remain ignorant of many basics and details. If you have heard of accounting and know about terms like debits and credits but are unaware of what they mean and how the concepts are applied, you are consciously incompetent.
  • Consciously competent – You know what you know, but you have to focus and think about the subject matter. If you have a working knowledge about the mechanics of debits and credits and can clearly explain the concept, perhaps while pausing to think about it, you are probably consciously competent. You can still progress one step further.
  • Unconsciously competent – Your mastery of the knowledge and skills has become “second nature.” You know the subject matter “like the back of your hand,” and you can perform “practically in your sleep.” If you can explain and apply concepts such as debits and credits, ledgers, reconciliations, revenue recognition, and more, without missing a beat, you are an unconsciously competent accountant.

To put this in perspective, consider someone who didn’t know about emotional intelligence and had perhaps unconsciously developed habits that ran counter to sound EI principles. Becoming aware of emotional intelligence could be the first step toward new levels of professional success.

Soon I will share some practical tips on applying the four stages of learning.

Seven Practical Ways to Gain Confidence

I wrote previously that a finance professional should always be confident. This is certainly enhanced when you are prepared. I had a few job interviews early in my career for which I was not adequately prepared, and this showed in my level of confidence. I did not get a second interview in those scenarios.

My success has always been enhanced when I have been confident. Here are seven insights drawn from Kent Sayre about increasing your confidence:

  • “What’s the worst thing that can happen?” Step back from your stressful situation and have a dose of reality. Compared to what you might gain if you successfully navigate through a stressful situation, the worst case scenario might not be so bad after all. Do your very best, and if you can’t control a particular variable, there is no sense stressing about it.
  • Vividly (i.e., using the five senses) imagine yourself achieving success in doing something for the first time. Consider a past situation in which you were successful, and relate your new experience to your past success.
  • Copy a confident person. Talk with confident people and be around them. Try to carry yourself in the same way.
  • Consider what you would be thinking, saying, and doing “as-if” you were confident. Act confident, and develop these patterns of thinking, speaking, and acting into habits.
  • Maintain a proper perspective. Ponder how important the situation you are facing will be to you when you are on your deathbed. You may not worry so much when you consider the big picture and understand that your current situation isn’t as important, long-term, as it presently seems to be.
  • You will fail to achieve anything 100% of the times that you don’t try. Believe that you can get help from others, and then ask. This might or might not work, but you won’t know unless you try.
  • Your internal voice might nag you with negative thoughts and feelings. Think of this voice as a clown’s voice or Mickey Mouse’s voice. Laugh at it, move on, and conquer your fears.

I especially appreciated the tip about considering best and worst case scenarios. Sometimes we can stress over vague fears and lose our confidence. If we can quantify what we are concerned about, we can find ways to accept, avoid, reduce, or share risks. If we are unable to quantify our fears, we have no need to be afraid. Instead, we can focus on the positive benefits from success and leave behind vague, general dread.

The Importance of Emotional Intelligence

How can you relate to people whose backgrounds and motivations are different from your own? How can you creatively tap into and channel others’ motivations for recognition and accomplishments beyond paying them more money? As a finance professional, should you primarily focus on numbers or people? How can you develop a reputation for being approachable and collaborative?

Developing emotional intelligence can help us become mentally active to recognize, analyze, understand, and manage intense feelings — whether our own (intrapersonal) feelings or the feelings of those around us (interpersonal).

Social and leadership skills can be developed over time, and they tend to become more important as a finance professional moves to higher levels within an organization. Technical skills and cognitive ability are vital, but don’t neglect emotional intelligence. Customers, employees, coworkers, and investors are among the groups with whom aspiring CFOs must learn to build relationships, channel motivation, manage conflicts, and develop win-win solutions.

I recently completed a Continuing Professional Education (CPE) self-study course on the difference between IQ and EQ (Emotional Quotient). The course helped me understand basic concepts and models of emotional intelligence.

Here is an outline of fifteen components of EQ organized under five major categories:

Intrapersonal Skills:

1) Self regard
2) Emotional self awareness
3) Assertiveness
4) Independence
5) Self actualization

Interpersonal Skills:

6) Empathy
7) Social responsibility
8) Interpersonal relationships

Stress Management:

9) Stress tolerance
10) Impulse control

Adaptability:

11) Reality testing
12) Flexibility
13) Problem solving

General Mood:

14) Optimism
15) Happiness

Daniel Goleman, author of Working with Emotional Intelligence, divides EQ between personal and social competencies:

Personal:

  • Self awareness – emotional awareness, accurate self-assessment, and self-confidence
  • Self regulation – self control, trustworthiness, conscientiousness, adaptability, and innovation
  • Self motivation – achievement drive, commitment, initiative, and optimism

Social:

  • Social awareness – empathy, service orientation, developing others, leveraging diversity, and political awareness
  • Social skills – influence, communication, leadership, change, conflict management, building bonds, collaboration and cooperation, and team capabilities

What are signs of a high EQ for a financial professional to recognize and develop? The course suggests several:

  • Express feelings with three-word sentences beginning with “I feel …”
  • Do not disguise thoughts as feeling by using “I feel …”
  • Do not be afraid to express feelings
  • Do not be dominated by negative emotions
  • Effectively read non-verbal communications
  • Let feelings lead to healthy choices and happiness
  • Balance feelings with reason, logic, and reality
  • Act out of desire, not duty, guilt, force, or obligation
  • Be independent, self-reliant, and morally autonomous

Among negative behaviors to avoid, the course lists blaming others rather than taking responsibility for one’s feelings, analyzing others when they express their feelings, trying to make others feel guilty, lying about feelings (or exaggerating/minimizing them), letting things build up, reacting strongly to minor issues, being unforgiving, acting on feelings rather than talking about them, and playing games and being evasive rather than direct.

Assess yourself based on the following questions that apply Goleman’s model from Working with Emotional Intelligence:

  • Do you understand both your strengths and your weaknesses?
  • Can you be depended on to take care of every detail?
  • Are you comfortable with change and open to novel ideas?
  • Are you motivated by the satisfaction of meeting your own standards of excellence?
  • Do you stay optimistic when things go wrong?
  • Can you see things from another person’s point of view and sense what matters most to him or her?
  • Do you let clients’ needs determine how you serve them?
  • Do you enjoy helping colleagues develop their skills?
  • Can you read office politics accurately?
  • Are you able to find “win-win” solutions in negotiations and conflicts?
  • Are you the kind of person other people want on a team?
  • Are you usually persuasive?

In summary, to develop EQ, the course suggests knowing your own emotions, motivating yourself, recognizing emotions in others, managing your emotions, and effectively handling relationships.

A Brief How-To Guide for Avoiding White Collar Prison

We are all familiar with examples of high level financial executives who landed in white collar prison due to their indiscretions. Think of Enron, WorldCom, and Madoff as just a few examples. How can these situations be prevented?

I wrote previously about the fraud triangle and followed up with a post about a model that expands this from three to five elements. Organizations can do their best to hire people who do not have the pressure to commit fraud or the desire to rationalize fraud. However, the bottom line factor that organizations can directly manage, largely through internal controls, is reducing the opportunity for theft, irregular financial reporting, and other frauds.

Although an organization’s management has the primary role of preventing opportunities for fraud, each employee can prevent the temptation of committing fraud by mitigating pressures and overcoming rationalizations.

Of course, one’s ultimate career goals, as well as ethical responsibilities, go well beyond staying out of white collar prison. So here are some tips for avoiding getting anywhere close to the line of unethical or illegal activity:

  • Eliminate the pressure to commit fraud by having your own financial house in order. This applies on at least two fronts. First, your temptation or pressure to steal from an organization will be reduced if live within your means and keep your debt levels low. Employees sometimes are driven to cross the line by having personal financial pressures. Secondly, if you encounter a situation in which someone pressures you to commit financial reporting fraud, you can more easily say “No!” and walk away from your job (and paycheck, bonus, and stock options) if you have savings in the bank and low personal debt levels.
  • Eliminate the opportunity to commit fraud by making yourself accountable. A value-adding financial professional will undertake implementation of sound internal controls. Top financial executives are not “above the law,” and they should demonstrate this by the tone they set through words, actions, and patterns of behavior. Some well known frauds have been perpetuated because senior management exempted itself from internal control standards.
  • Eliminate the rationalization to commit fraud by maintaining your integrity. Have nothing to hide. Make good on your promises. Draw a personal “line in the sand” that you will be unwilling to cross even if pressures and opportunities arise. Create options and alternatives for yourself in order to gain walkaway power. Be ready to take decisive action rather than hesitating and giving yourself time to rationalize what you know is a fraudulent course of action.

Again, go beyond the aspiration to avoid white collar prison. Maintain the highest levels of ethics and integrity. I will explore models of ethical decision making and behavior in future installments.

17 Principles to Safeguard Assets and Ensure Organizational Effectiveness

One of my favorite aspects of being a financial professional is knowing that others on the management team and in my organization are relying on me. I am expected to handle key functions within the business, and if I do my job well I can contribute integrally to the organization’s success. This can provide a constant sense of urgency but also a rewarding feel of satisfaction and significance.

Among the not so glamorous yet important features of an organization’s structure are internal controls. Accountants are expected to implement sound measures to safeguard assets and reasonably ensure that management’s objectives are achieved toward effective operations, reliable financial reporting, and legal and regulatory compliance.

Even if this sounds boring, take consolation in the fact that your organization’s survival and success depends on it.

The Committee of Sponsoring Organizations (COSO) first released its Internal Control-Integrated Framework in 1992. This document defined internal control and provided accompanying standards. Over twenty years later the framework is still highly relevant.

In May of 2013 changes were made that kept the core intact and added, among other things, seventeen principles to help with implementation of the framework in light of changes over the years. A recent article in The CPA Journal discusses these seventeen principles as organized under the five categories of internal control within the COSO framework.

    • Control Environment

1) Commit to integrity and ethical values – this largely entails setting an effective “tone at the top.”

2) The independent Board of Directors should oversee internal control – among other things, objectively evaluate managers and ask appropriate questions.

3) Establish appropriate authority, responsibility, and reporting structures.

4) Attract, develop, and retain the right talent to achieve objectives.

5) Hold employees individually accountable for fulfilling organizational objectives.

    • Risk Assessment

6) Be able to identify and assess risks by having first formulated objectives with sufficient clarity.

7) Identify and analyze risks throughout the organization to determine how they should be managed – choose whether to accept, avoid, reduce, or share risks.

8) Consider potential fraud risks, including misappropriation of assets and alteration of records, that could deter the organization from achieving its objectives.

9) Be ready for changes, including within the external environment, business model, or leadership, that could impact the internal control system.

    • Control Activities

10) Mitigate risks to acceptable levels by choosing and implementing appropriate control activities.

11) Technology is a special category of importance for implementing control activities that help enable the organization to achieve management’s objectives.

12) Policies establish expectations and procedures put these policies into action in order to deploy control activities.

    • Information & Communication

13) Support internal control functions with relevant and timely information – capture data, transform it into information, and protect its availability and accessibility to appropriate parties.

14) Communicate internally regarding internal control objectives and responsibilities.

15) Communicate with appropriate external parties regarding internal control, carefully considering the timing, audience, and nature of the communication.

    • Monitoring Activities

16) Have ongoing evaluations to determine whether internal controls are working effectively.

17) Communicate internal control deficiencies to senior management and the board of directors so that they can timely take corrective action.

In short, internal controls help management set a proper tone, define organizational objectives, and run the business effectively. A leadership-oriented financial professional who wants to be indispensably valuable within an organization should study and understand how to effectively choose, implement, and monitor internal controls on an ongoing basis.

Be Fully Aware of Every Detail of Your Funding Agreements

I previously wrote about the importance of getting agreements in writing. From personal experiences and observations I have seen great detriments in relying on vague verbal assurances. Among other things, reducing an agreement to writing ensures commitment and helps clarify important details between the parties to the agreement.

Written financing agreements are particularly important because the financial function is a key enabler of business strategy and operations. When the organization’s existence is riding on the line, a controller or CFO cannot rely upon flimsy verbal promises from potential lenders or investors. Senior financial leaders must take charge in clarifying the exact nature and requirements of the funding agreements.

A recent CFO.com article details the importance of looking for quirks in financing agreements. Here are some takeaways:

  • Be prepared for stringent documentation requirements and financial covenants, especially if your business is a first-time borrower or has a checkered credit history.
  • Don’t assume that the math will be straightforward in calculating credit limits for asset-based borrowing. For example, lenders might discount certain categories of receivables such that the company is unable to borrow against them.
  • Banks can use their own judgment and criteria, seemingly without a tight quantitative basis, for excluding certain assets from the collateral base. This effectively reduces the amount of credit available for the borrower. Factor this in when making decisions about managing working capital and short-term cash flow.
  • Have an eagle eye for fees. Don’t base your borrowing decisions exclusively on the quoted interest rate while ignoring hidden expenses that drive the effective borrowing costs higher.
  • Be aware of initially odd requirements such as segregating inventory used as collateral from other inventory in a separate warehouse. Rather than having to worry about a padlocked warehouse and drawn-out, expensive litigation, banks want easy access to the security in case the borrower goes bankrupt. This places added complexity, requirements, and (likely) expenses on the borrower.

Communicate effectively to make sure all relevant details are negotiated and finalized in the lending agreement. Both the borrower and the lender need to be clear on making sure their economic interests are served by the agreement. Both sides have to exercise due diligence to ensure that they are getting a workable deal.

Four Ways to Be Detailed and Thorough to Tie Up Loose Ends

The best leaders can see the big picture and articulate a clear and compelling vision for their teams, along with clear strategies, goals, and action steps. To balance this, I have appreciated from personal experience the value of a leader who minds the details. I am not talking about micro-management, but rather a thorough attentiveness to the key underlying drivers of success.

Letting things “slip through the cracks” is inexcusable for a finance professional upon whom others are relying to handle many details. Every matter subject to your oversight must be managed effectively. Have a zero nag threshold so that your coworkers and superiors know they can rely upon you.

Make persistence a matter of personal policy. For example, I have frequent processes that require information from colleagues on the other side of the world. Sometimes it takes them awhile to obtain the necessary documents, so I have a policy to follow up routinely and systematically. This is always done politely and professionally; they know that if they need something from me, I will reciprocate in being approachable and providing them timely information.

Here are some tips for making sure nothing slips through the cracks:

  • Slow down. We have all heard the adage, “Slow down in order to go faster.” This is a true irony. Trying to accomplish tasks at breakneck speed can lead to costly mistakes and rework. I learned early in my accounting career that it is better to do things right the first time to avoid the frustration of errors.
  • Check everything twice. Sometimes you will have the luxury of a coworker who can provide a “second set of eyes.” Other times you will be on your own to make sure that your projects are completed accurately. Get in the habit of finding ways to reconcile and “tie out” every number you calculate as you complete your projects.
  • Survey the context of your project to determine what you are missing or what you should omit. Make sure that nothing slips through the cracks.
  • Have a system. For example, I double check my email inbox at the end of each day to make sure I did not fail to respond to a matter of importance. Occasionally I have found that I almost let something slip through the cracks, thereby demonstrating the value of taking a little time to quickly go over everything. Other times I will re-read an email to glean a tidbit of information that I had skimmed over previously. In any case, my simple system is an effective way to give myself peace of mind that I am not missing anything important with regard to my emails.

Mind the details. Be thorough. Tie up loose ends. Don’t let anything slip through the cracks. You must not wait for others to catch your errors or omissions. You must set your nag threshold at zero and earn the reputation for trustworthiness that every aspiring financial leader needs.

Four Ways to be a Principled Negotiator (Part 2 of 3)

We previously saw that principled negotiation differs from positional bargaining by separating people from issues and by focusing on interests rather than positions.

The third step in principled negotiation is to be creative and invent various options that could satisfy the interests of both sides. As a very simple example, recently I had two projects to complete — painting the walls of a room and thoroughly cleaning a floor that would later be painted. My wife asked which one I planned to complete first, and I told her the cleaning. She knew I would likely use a vacuum, which could potentially wake up the baby. When she calmly mentioned this, I knew we both had an interest in letting our baby take her nap, and I quickly invented the solution of painting while the baby slept — leaving the floor cleaning for later.

Negotiators lack creativity when they exercise premature judgment, try to find a single answer, assume that the pie is fixed (so the bigger one person’s piece is, the smaller the other’s piece), and “thinking that ‘solving their problem is their problem'” (p. 57). Instead, step back and use your imagination, try to broaden options, make the pie bigger rather than focusing on a “fixed-sum” game, and appeal to both sides’ interests.

To generate options, brainstorming is often quite effective and the authors describe potential rules and methods to use in the process, such as the no-criticism rule that encourages building upon participants’ openness and creativity.

A Key Gem to tuck away regarding creatively inventing options: “In almost every case, your satisfaction depends to a degree on making the other side sufficiently content with an agreement to want to live up to it” (p. 72).

The fourth and final step is to emphasize objective criteria in the negotiation. Basing the outcome of a negotiation on who has the stronger will is often costly in terms of time and relationship strain, and it cannot be expected to lead to a wise agreement. In contrast, objective criteria which is independent from the will of the parties involved can enhance the efficiency of the negotiation, lead to a wise agreement, and preserve the ongoing relationship between the counterparts.

Rather than yielding to pressure and threats, a principled negotiator bargains based on principle and reason. The objective standard should be legitimate and practical. One might think of the example of a dispute between young children over how to split a piece of pie. The time-tested solution is simple: One cuts, the other chooses.

In advocating objective criteria, one must avoid the subtle pitfall of using criteria solely to bolster one’s own position. Be truly flexible and open to reason and principle, even if the objective criteria differs from the standard you had initially proposed or works against the position you had originally sought to advocate. Negotiating on objective criteria provides a position of power because right makes might.

A Key Gem to tuck away regarding the difference between standards in positional and principled negotiation: “In positional bargaining, negotiators spend much of the time defending their positions and attacking the other side’s. People using objective criteria tend to use time more efficiently talking about possible standards and solutions” (p. 83).

We have seen that principled negotiation rests on four key ideas:

  • Separate people from problems
  • Focus on interests rather than positions
  • Invent options for mutual gain
  • Insist on using objective criteria

In the final installment of this review we will look at ways to deal with challenging negotiation situations.

Create Your Own Credible and Authentic Professional Image

Have you been letting others dictate your career progress, or are you taking ownership of your own development? As a subcategory of your career development, have you started thinking about your personal branding?

Instead of getting too wrapped up in day-to-day details and stress, it is helpful to step back and evaluate the big picture of career progress and personal development. Either you can take ownership over your thoughts and behavior patterns, or you can let other people determine your path. Choose wisely.

Professor Lauren Morgan Roberts shared insights from her research on managing professional image in an interview with Mallory Stark. As with effective career development, Dr. Roberts points out that developing a desirable professional image is best undertaken strategically and proactively.

Dr. Roberts defines professional image as “the set of qualities and characteristics that represent perceptions of your competence and character as judged by your key constituents (i.e., clients, superiors, subordinates, colleagues).” She points out, “Research shows that the most favorably regarded traits are trustworthiness, caring, humility, and capability.”

Closely related to trustworthiness is reliability. Be a person that people can count on to deliver time and again, especially when the stakes are high and deadlines are tight.

Dr. Roberts gives insights related to closing the gap between your desired professional image and how others perceive you. Consider what you want people to say about you when you aren’t there, and compare this to the concerns you have regarding what people might think and say about you. Tune in to direct or indirect feedback about how others perceive your “competence, character, and commitment.”

According to Dr. Roberts, three factors can undermine your perceived professional image. First, making mistakes or having gaps in your skills and knowledge can create predicaments related to your professional image. Secondly, although not necessarily through any fault of your own, your identity with certain negatively stereotyped groups can create devaluation in how others perceive your professional image. Thirdly, if others perceive that you lack legitimacy, your professional image will be harmed.

To overcome these challenges, Dr. Roberts proposes these steps: “People manage impressions through their non-verbal behavior (appearance, demeanor), verbal cues (vocal pitch, tone, and rate of speech, grammar and diction, disclosures), and demonstrative acts (citizenship, job performance).”

However, when attempting to manage impressions, there is a risk of others perceiving your efforts as “deception, delusion, preoccupation, distraction, futility, and manipulation.”

This is where one of Dr. Roberts’ key insights comes in: “When you present yourself in a manner that is both true to self and valued and believed by others, impression management can yield a host of favorable outcomes for you, your team, and your organization.”

In other words, be authentic and credible. These attributes must be balanced since some people might need to downplay particular natural tendencies in order to meet professional expectations and be credible. At the same time, this should not be overdone at the expense of authenticity.

Dr. Roberts concludes with a list of action steps and provides this insight: “Be the author of your own identity. Take a strategic, proactive approach to managing your image.”

Poetry and Art for the CFO: Twelve Elements

Are you left or right brained? Analytical or emotional? A number cruncher or a poet?

Although it might run counter to our initial assumptions, CFOs are expected to go “beyond the numbers” and manage key aspects of the business as a whole. We have seen the importance of understanding technology and operations, among other factors not directly related to number crunching.

Very critical is the CFO’s role in dealing effectively with people and relationships. A CFO needs to be approachable. To become CFO material, a finance professional needs to develop habits of ambiguity tolerance, composure, empathy, energy, humility, and confidence.

On that note, the international accounting and finance firm Deloitte has published a poetic and artistic description of the CFO’s twelve elements, which encapsulates the expansive requirements and responsibilities of the CFO’s job:

“As CFOs grow in stature and importance, they keep coming back to the same issues that form their agenda. The elements of the CFO Agenda represent a powerful framework for one of the toughest jobs on earth. Year after year, quarter after quarter, they endure.”

Here are the twelve elements and my summation of the messages:

  • Truth – Be real. Know the true story and tell it.
  • Growth – Plant and water. Make choices and commitments to move plans forward.
  • Relationships – Work together. Manage relationships up and down, inside and out.
  • Decisions – Root your insights in numbers. Don’t manage solely based on your gut.
  • Capital – Manage business investments. Determine timing, amounts, and allocations.
  • Disruption – Be discerning as technologies, industries, and markets constantly change.
  • Crisis – Manage risks. Be ready to respond to various sorts of threats.
  • Infrastructure – Be an enabler. Invest in tech, talent, systems, and solutions.
  • Transactions – Research deals with the right criteria, calmly, thoroughly, and rationally.
  • Transitions – Change is constant. Build your skills and reputation in the midst of it.
  • The Street – Have give and take on forecasts. Be vigilant to represent the company well.
  • Me – Provide solutions. Navigate through complexity to make things happen.

Don’t take my word for it. Take a look at the presentation for yourself. Reflect on the messages. Do you agree or disagree with each of the elements and how they’re presented? How can you apply these insights in your work as you develop your career?