P&L experience in terms of leadership is not the ability to create and construct the income statement spreadsheet – it is the ability to understand an income statement, develop and tune strategy, and execute business decisions that minimize risk while increasing profit. Further, P&L experience is the ability to combine the P&L with other business information, economic indicators, market/industry and organizational information and produce desirable outcomes. In discussions, ensure common understanding between “assembling the numbers,” and “leadership ability to take action based on the numbers.”
Many people, and especially anyone with a business degree, or who has earned an MBA, have intensely studied income statements (also called profit and loss statements (P&L), revenue statements, statement of financial performance, earnings statement, operating statement or statement of operations by Erich A. Helfert in “Financial Analysis Tools and Techniques: A Guide for Managers.”)
Recently I was coaching a colleague of mine who shared a discussion with me that she had with a prospective employer. She was being considered for an executive position over a global services organization by the Senior Vice President of Human Resources. She had done her homework, studied the company, and prepared for the kinds of questions she anticipated.
The Human Resources screen read from the script and asked the candidate for examples of her P&L experience. My friend continued to outline examples of difficult leadership decisions she had made that involved P&L analysis. She carefully described the situation, the insight that the P&L statement had on the situation, the various options that the P&L analysis presented, and the final decision and action that was taken. She concluded her answer by describing the outcome resulting from her P&L experience in this example. She said to me that she absolutely hit a home run with her answer.
As it turned out, the interview was a complete failure – based solely on that one question. How could that be? This was an experienced executive, had made many difficult decisions resulting in positive outcomes, and she knew how to use income statements to drive business decisions.
What happened? Why was my colleague passed over for the job? She called later to follow-up, and found the Hiring Manager had received comments from the screener indicating that “she did not have P&L experience.” Further exploration revealed that the screener made this decision because my colleague did not answer the question by “discussing how she produced the P&L statement spreadsheet an accounting function, not a leadership and decision-making function.”
Moral of the story here is to ask questions, as a candidate, clarify specifically what the screener wants to know. They may not have the same level of understanding of the business decision making concepts for the role that you do. Second moral of the story, employers must make sure that screeners have deeper understanding of screen questions and the acumen to understand the role (spreadsheet creation vs. leadership decision-making). This was nothing less than embarrassing for the company, and the story could damage the company’s reputation among other future executive leadership candidates.
Has a situation like this ever happened to you?
I am currently looking to be employed within restaurant management. An Employer has contacted me from Atlantic Food Group and asked me a few general questions of my knowledge of the business. When asked what my “P&L experience” was I questioned what P&L stood for? He said unfortunately I’m not qualified because I don’t know what it is and training for it is a long process. So I did my homework and couldn’t understand why I didn’t know what it “P&L” was within my 7 year management experience! Turns out I have already been in charge of Profit and Loss operations but didn’t know the title. It’s unfortunate that this company didn’t want to invest some time in training me in such area to fit their establishment. It seems accounting skills are more important than actually managing staff, decision making and making sure such an establishment is running efficient and profitable. I can’t find courses for P&L online. Once again, isn’t this an accounting area?