3 ways PR pros can build their business acumen

After I got my first job in corporate communications, my boss suggested that I start attending professional development meetings. I remember hearing a recurring theme, framed as a question, at many of these: Why didn’t PR and communications practitioners have a seat at the table? Like the late comedian, Rodney Dangerfield, famous for his line, “I don’t get no respect,” the communications profession seemed to be labeled as unworthy of equal footing with the organization’s top leaders.

We’ve made a lot of headway since then, and clearly some workplaces have put enormous value in the function and in the counsel we provide. But for those who still lament the lack of respect, I think we need to ask ourselves a tough question: Do we tune out when the numbers hit the table—when terms like P&L, P/E ratio, profitability metrics and positive cash flow are discussed?

If so, I’ll bet that others in your organization notice. Maybe you’re not included in strategy sessions or left out of meetings because you’re not viewed as business-savvy or interested in “the financials.”

“Communicators are trusted and admired when we can demonstrate a meaningful understanding of business and finance in addition to our communications craft,” notes Cary Hatch, CEO of MDB, an integrated creative agency founded more than 30 years ago. “Our ability to contribute to the larger playing field of business enterprise strategy and economic impact can help to secure a seat in the boardroom with the ecosystem of disciplines that drive future organizational success.”

So, how can you get started in building your business/finance IQ? Here are three steps you can take right now:

1. Make a commitment to learn everything you can about your business.

This means understanding the business model for your organization, whether it’s a for-profit or nonprofit. How does it make (or raise) money? Who are its competitors (for revenues, for donor dollars, etc.)? Do you know its vision, mission, goals and objectives—and the difference between each? Have you reviewed your firm’s strategic and operating plans?

These are great sources of information for you, as both an employee and a communicator. They’re also a fertile ground for generating questions and learning even more.

According to Erin Dick, who was a communications SVP at infrastructure consulting firm AECOM before becoming acting director of public affairs at the U.S. Space Command, “One of the best ways to learn is to voluntarily take on business challenges which are outside your scope as a professional communicator. I asked to sit through one of my business unit’s quarter end closings and learned a ton. It has made me realize I much I still had to learn.”

“If you don’t understand something as it relates to the business of the business, relentlessly ask questions until you do,” she adds. “This requires willingness to be vulnerable—but my experience is that if you show a true interest in learning, your business finance partners will be more than happy to teach and share.”

2. Think like an investor.

Public companies are widely followed by investors, banks, press, non-public companies and others—making them essential knowledge for communicators, even if you don’t work for an organization whose stock is  traded on the exchanges. Plus, many people who don’t think they’re investors in the stock market are, even if they’re not aware of it. For example, if you participate in your organization’s retirement plan, you probably have some investments in stock through mutual or index funds. Plus, investors are increasingly demanding more transparency in Environmental, Social and Governance (ESG) reporting: another growing opportunity for communication.

If you want to delve deeper, choose a public company; it could be your own firm or competitor. If you work for an agency, it could be a client. If you work in the public sector or for a non-profit, it could be a company you’re interested in, because you buy its products or services. Then, you should:

• Read its Form 10-K. Public companies are required to file these financial reports annually with the U.S. Securities and Exchange Commission (SEC). If you’ve never reviewed a Form 10-K, the SEC has some useful “how to read” As you look at more 10-Ks (comparing some within and outside a given sector), some noteworthy items will likely jump out (e.g. executive compensation details or a particular footnote).
• Compare the Form 10-K to the annual report. Companies aren’t required to produce annual reports, but most do. Some produce print versions (PDFs), while others offer print, interactive and video options.
• Then, take a look at companies chosen for best financial reporting in IR Magazine’s yearly awards Go to these companies’ IR websites and look at their annual reports.

Steve Cody, who founded and leads the strategic communication agency Peppercomm, asserts that you’ll fail without knowing how to read an annual report, 10-K or other basic accounting documents. “CEOs expect their top communications people (and their agencies) to understand the financial impact of a half-penny rise or fall in the company’s stock price,” he adds.

3. Understand the basics of the three financial statements.

These are used for all types of organizations, from public corporation to private firm to nonprofit:

• Income statement (also known as the P&L, for profit and loss). This report details three key categories of information: sales, expenses and “the bottom line”—the net profit that resulted in a given period, such as the quarter or year. Comparing the ratio of profit to sales for each period (and to other comparable companies) is an extremely useful key performance indicator.
• Balance sheet. It includes assets (what you own), liabilities (what you owe), and equity (which is what you’re worth). A balance sheet always balances, meaning that assets always equal the sum of liabilities and net worth. Stable assets and a steady climb in liabilities can spell trouble.
• Statement of cash flow. This statement relates to the timing of cash receipts and payments. An income statement, for instance, may show profitability for a given period, but a cash flow statement can reveal potential problems. A growing accounts receivable balance can indicate that it’s taking longer to get paid by clients, making it difficult for the business to cover its expenses.

Although these three financial statements measure different things, in combination they provide a powerful assessment of the health of an entity and help reveal potential challenges.

The addition of financial and business skills to your repertoire will help you understand the key drivers of your organization and what leaders care about. It will make you even more effective in tying communication/PR plans and results directly to business priorities.

In short, business acumen strengthens your ability to be both a “do-er” and a strategic counselor.

Karen Vahouny, a former presenter for Ragan Communication’s Business Fluency Boot Camp, is an independent communications consultant who has worked in both the corporate and agency world. She is an adjunct professor at George Washington University.