Structured Approach to Financial Conversations

 Read time: 5 mins

Welcome to this week’s edition of Financial Fluency. Today, we’re going to explore the Pyramid Principle by Barbara Minto and how non-finance leaders can use it to better frame financial conversations across their department, division, or team.

Understanding the Pyramid Principle

The Pyramid Principle is a communication technique that allows you to present your thinking clearly, logically, and succinctly. It’s based on the idea that ideas at any level in the pyramid must always be summaries of the ideas grouped below them. This principle encourages starting with your most important point (the top of the pyramid), followed by supporting arguments and details (the base of the pyramid).

Why It Matters to You

As a non-finance leader, you’re often involved in discussions that require clear and effective communication of financial information. The Pyramid Principle can help you structure your thoughts and present complex financial data in a way that’s easy to understand.

Applying the Pyramid Principle in Financial Conversations

Let’s consider an example where you’re a department head presenting a budget proposal to your team. Here’s how you could structure your presentation using the Pyramid Principle:

• Start with the Answer: “Our goal is to reduce our department’s expenses by 10% while maintaining the same level of productivity.”
• Group and Summarize: Break down the budget into major categories like personnel, operations, and technology. For each category, provide a summary of the proposed changes.
• Logically Order Your Points: Discuss the changes in order of their impact on the budget, starting with the most significant.
• Keep it Simple: Use clear, simple language to explain the changes and their expected impact.

Like the diagram above suggests, each argument should be supported with data insight, conversely, no data insights should be made available if it does not support a key argument.

Now, let’s consider the opposite scenario where the Pyramid Principle is not used

• Unclear Answer: “We have some changes to our budget. I’ll go over them now.”
• Ungrouped and Unsummarized Points: You start discussing random changes in various categories like personnel, operations, and technology without providing a summary or grouping related points.
• No Logical Order: The changes are discussed in no particular order, making it hard for your team to follow along.
• Complicated Language: You use financial jargon and complex language, making it difficult for your team to understand the changes and their impact.

Key Takeaways for Non-Finance Leaders

1. Effective Communication: The Pyramid Principle can help you communicate financial information more effectively. By structuring your thoughts clearly, you can ensure your message is understood and retained.
2. Improved Decision Making: Clear communication leads to better understanding, which in turn leads to better decision making. When financial information is presented clearly, non-finance leaders can make informed decisions.
3. Enhanced Collaboration: The Pyramid Principle can enhance collaboration between finance and non-finance leaders. Clear and effective communication can bridge the gap between these two groups, leading to more productive discussions and better outcomes.

Remember, enhancing your financial acumen and communication skills is a journey. Don’t hesitate to ask questions and seek further understanding. Stay tuned for our next newsletter where we’ll continue to break down financial concepts in an easy-to-understand manner.