Finance skills for the non-financial manager

Medical Laboratory Observer, Sept, 1989 by Lucia M. Berte

When I was a new medical technologist several years ago, if someone had told me I needed business skills to supervise a laboratory, I would have laughed. Yes, I wanted to be a supervisor-but for people, not numbers. I considered the business of the lab to be someone else's concern. In fact, I didn't think much about it at all.

Many years and projects later, I have come to understand that basic financial management skills are essential to the healthy operation of every laboratory. Demanding tasks now require supervisors to seek additional training, rather than shrink from these obstacles.

Administrators keep asking us for volume and mix projections, budget cuts, break-even analyses, payback calculations, and other financial reports. They expect us to make important laboratory decisions based on this information. Since not every supervisor can acquire an M.B.A., we must pick up the necessary skills in other ways.

Many hospital administrators stress that supervisors must learn and practice the human side of management. Yet they neglect to provide training in basic finance. In today's health care environment, these skills are greatly needed.

*Bridging the education gap. The vice president of administration at our 450-bed hospital was unhappy with the quality of the capital request, labor, and equipment justifications he had been receiving from his division supervisors. He found they were having a hard time calculating break-even analyses and explaining why negative variances were occurring when actual expenditures exceeded budget.

We supervisors were unhappy about having to rework these requests several times and wade through the mass of computerized financial reports dumped in our mailboxes twice monthly.

One three-page memo on revenue-adjusted budgets was as clear to us as a Cyrillic dictionary . It was obvious there was a lack of understanding on both sides, and something needed to be done.

After I had discussed this problem at a lab supervisors' meeting, our administrative director contacted the hospital's education department and asked what options were available. Next, I found myself organizing a new pilot project: constructing a basic finance course for laboratory and other hospital supervisors . Our goal was to create a curriculum that would provide supervisors with the necessary background to understand the financial operations associated with their section's management.

*Designing the program. The first step was to analyze the performance problem. Applying the analysis of Mager and Pipe,' we asked: "Do supervisors really have a skills deficiency or are they simply resisting the idea of practicing financial management correctly?"

An informal verbal poll of the supervisors in the laboratory, pharmacy, surgery, respiratory, radiology, and data processing departments revealed that financial education had not been part of these technical programs' core curricula. Formal financial training was clearly needed. Once again, we asked the education department for help. Their department head offered the services of the organizational development manager, who assisted me in designing the training program. *Determining needs. Using the basic principles of instructional design, the vice president of ad ministration and I did an informal needs assessment to identify which topics deserved the most instructional time. We decided that the most important topics to cover included:

* cost accounting

* break-even analysis

* budgets

* equipment acquisition

* report interpretation

Suggestions for the program title ranged from the very straightforward to the pointed. We finally decided to combine both into "Basic Finance for Hospital Supervisors: Your Budget or Your Paycheck!"

A short and simple overview conveyed the importance of having technical specialists serve as financial managers in their respective sections. The overview emphasized that understanding and practicing sound financial management was an important objective for supervisors and should be so reflected in their personal performance standards.

The overview stated that the course would teach supervisors to calculate unit costs, prepare breakeven analyses, justify capital equipment expenditures, interpret financial reports, and make future plans by using the budget process. All these skills are important to master in meeting the financial challenges of efficient operation.

At this point, the vice president of administration and I asked the vice president of finance to join our planning discussions. After discussing their preferences and suggestions, we concluded with three overall objectives and a number of sub-objectives, listed in Figure 1.

We then constructed exercises to test participants' knowledge of the course's objectives. One sub-objective, for example, stated that participants would learn to define cost-accounting ten-ninology. For this purpose, we developed a matching exercise of various financial and cost-accounting ten-ns.