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Ask The Experts: Examining Financial Literacy in the Workplace

by John S Kiernan on March 24, 2014

Workplace Financial LiteracyThe issue of financial literacy, or a lack thereof, has rightfully earned a great deal of mainstream attention in the wake of the Great Recession.  It seems that while we refuse to learn our lesson about the dangers of habitual overleveraging, judging from the more than $73 billion in credit card debt that we’ve racked up in the past two years alone, we do want to help future generations avoid repeating our mistakes.

The question is how corporate America fits into the picture.  It’s clear that parents and teachers have an inherent responsibility to prepare young people for the financial realities of the “real world,” and most school systems are experimenting with different methods of incorporating personal finance and economics into the curriculum.  But do businesses, from small organizations with just a handful of employees to Fortune 500 companies, have any business coming anywhere close to the issue?

There’s a lot more riding on that question than you might think – billions of dollars actually.  There are probably more potential marriages between personal and corporate finance than you might think as well.

Financial Literacy, Stress & Employee Productivity

There is a clear and logical correlation between financial literacy, employee productivity, and a business’s bottom line.  Let’s work backward.

For a business to survive, it must produce a positive return on its biggest investments. Human capital obviously represents one of the most significant investments any company will make, both from a monetary and time perspective.  Given that employee acquisition and training accounts for much of that cost, the most efficient businesses are those that are able to maximizing the productivity and output of existing staff.

The thing is, it’s rather difficult to draw blood from a rock when the rock is always missing work due to stress.  Stress is kryptonite to productivity, keeping us up at night and robbing the economy of $60 billion a year in the process.  Not only that, but around a million people miss work because of stress every single day.  That’s another $300 billion in lost productivity right there.

What are the leading causes of stress?  Money, work, the economy, and family responsibilities are the most commonly reported sources, according to the American Psychological Association.  What do these things have in common?  They all concern our ability to put food on the table, pay the bills, and otherwise support our families.  They also reflect a perceived lack of control as well as anxiety about what the future may hold.

So, in summary, employees don’t feel like they’re in control of their financial lives and it is affecting their performance at work.  It does make a lot of sense, after all.

“Think about it,” says Mitchell D. Weiss, an adjunct professor at the University of Hartford, management consultant, and serial entrepreneur.  “If money’s a worry – you don’t have enough of it to go around, the bills are piling up, the collections companies have begun to call – how clearheaded would you be for the tasks at hand; particularly those that require creative thought?”

But by that same token, it’s fair to wonder how companies – especially small businesses – can address their workers’ financial concerns while dealing with monetary pressures of their own.  One of the things you have to consider in that regard is what a more financially pragmatic staff will get you.

Using Financial Literacy to Boost the Bottom Line

Just think:  When people are struggling to pay the bills, much of their frustration will inevitably be directed to the source of their perceived-to-be-inadequate salaries.  When people know what to do with their money and wind up with a bit of money to save each month instead of an ever-larger balance, the prism through which they view their compensation is decidedly more positive.

The potential therefore seems to exist for workplace financial literacy programs to mitigate resentment in the ranks as well as preclude the need for salary increases or peripheral benefits.  They can also be used to identify and correct workplace inefficiencies, says Barry A. Friedman, founder of the SUNY Oswego Center for Human Resource Management and a former longtime ExxonMobil executive.

“When at ExxonMobil, I taught machine operators how to read Profit & Loss statements and find line items they could impact,” Friedman told WalletHub.  “They did so and could easily quantify a favorable return on the training investment.  Employees loved the process as a form of empowerment and increased involvement”

Ask The Experts:  Tips for Starting a Workplace Financial Literacy Program

WalletHub asked university as well as industry experts in the fields of management, marketing, human resources, and finance for tips on how to establish a personal finance employee training program.  You can check out their insights on everything from program structure and content sourcing to potential corporate partners and employee engagement below.  If you have additional suggestions, feel free to share them in the comments section below!

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Eileen Beiter

Professor of Accounting, Nazareth College

There are programs in existence that employees may be able to take advantage of through their college institution. For example, Nazareth College of Rochester has teamed up with SALT, which is a financial literacy platform created by (ASA) American Student Assistance, a nonprofit organization.

The platform is very robust, offering a multitude money and debt management tools and assistance tailored to the individual user needs. While this is a program for students and alumni, the idea is the same as an employer sponsored program and is indicative of the trend toward valuing these types of resources.
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Dave Ulrich

Professor of Management, University of Michigan; Partner, RBL Group

Economic literacy can be taught in online or in-person courses where faculty present business basics. One innovation from Root Learning is to bring the economics of the business into a board game that employees can ‘play’ to learn.

The most relevant economic literacy is not a training course, but an ongoing transparency of financial, marketing, and performance information shared with employees so they know how their personal choices impact business results.
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Wayne F. Cascio

Robert H. Reynolds Chair in Global Leadership, University of Colorado; Senior Editor, Journal of World Business

It could be offered as a ‘lunch-and-learn’ program, or even a breakfast program. It could be one hour a week for a certain number of weeks, offered in an interactive, Q&A format.
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Joseph L. Murray

Director, College Student Personnel Program, Bucknell University

There could be a role for colleges and universities to play in promoting financial literacy. Educational programming and consultation with members of the financial aid staff, focused on financial literacy, would be a nice addition to the types of student services that collegiate institutions typically provide in order to prepare students for other aspects of their transition into adult life.

The primary obstacle to a more active role for financial aid personnel in promoting financial literacy is the demand on staff time that is associated with administration of financial aid programs.
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Dean Obenauer

Assistant Director of Financial Aid for Financial Literacy, Creighton University

At Creighton University, a professional staff position was created in the Financial Aid Office. The primary focus is to help students build money management skills and behaviors so that they can be better prepared to handle their money while in school and after graduation.

Most of my time is spent conducting seminars for student organizations and groups on basic money management such as budgeting, saving, responsible credit card use, building a good credit history/credit score, protecting personal information, and responsible student loan borrowing. In addition, I do one-on-one financial counseling sessions with students and am also available to meet with staff.
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Mitchell D. Weiss

Adjunct Professor of Management, University of Hartford; Management Consultant

If the talent for this doesn’t reside internally, then I’d look to the company’s bankers. After all, they’re the ones who are most familiar with these matters and the odds are they have curricula and collateral material in place.
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Ryan L. Klinger

Professor of Management, Old Dominion University

The optimal program is really going to depend on the organization. Larger organizations - with larger pools of resources and greater numbers of employees in need of training - may find it beneficial to design their own financial literacy programs in-house. These programs could be customized to meet the specific needs of the employees.

Smaller organizations might look to outsource financial literacy training. For instance, several MOOCs (massive open online courses) offer courses in financial literacy that are either free or affordable enough to be subsidized by the organization. Enrollment in such courses can be rolled into new employment orientation sessions or current employees could be offered incentives for completing online courses.
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Megan W. Gerhardt

Director, Buck Rodgers Business Leadership Program , Miami University; Associate Editor, Journal of Leadership and Organizational Studies

I would recommend considering how the ‘effectiveness’ of such programs will be defined. How would we determine whether such programs are successful - when employees begin to enjoy greater financial success/freedom, or when we can simply say we have provided and delivered such training to all employees?

How would we measure the impact of such programs? Do we expect an organizational benefit from such training? Defining how we will determine success would be important in terms of then deciding how to balance that with cost/investment.
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Julian K. Saint Clair

Professor of Marketing, Loyola Marymount University

This is simple. There's an entire financial services industry that is always looking for new clients. I'd bet good money that they would give seminars and provide educational materials free of cost in hopes of earning new business.

John Kiernan is Senior Writer & Editor at Evolution Finance. He graduated from the University of Maryland with a BA in Journalism, a minor in Sport Commerce & Culture,…
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