Although a fairly new term, financial intelligence has its roots in organizational development research,[1] mostly in the field of employee participation.
Factors such as the economy, the competitive environment, regulations and changing customer needs and expectations as well as new technologies all affect how the numbers are interpreted.
In the corporate world, managers can display financial intelligence by speaking the language, that is, asking questions about the numbers when something doesn't make sense, reviewing financial reports and using the information to understand the company's strengths and weaknesses, using ROI analysis, working capital management, and ratio analysis to make decisions, and identifying where the art of finance has been applied.
The concept of financial intelligence in organizations comes from the research of several well-known organizational development academics, including Dennis Denison, Edward Lawler and Jeffrey Pfeffer.
For example, the research of Lawler, Mohrman and Ledford [4] found that the indices that have the most impact on both direct performance outcomes in organizations (productivity, customer satisfaction, quality and speed) and on profitability and competitiveness were sharing information and developing knowledge.
The results of the study found that certain financial performance measures improved and that employee turnover decreased.
Several universities, including Harvard Business School, Wharton and Stanford have programs targeted at the corporate world, mostly at the leadership level, to increase the financial intelligence in organizations.