writing in business

Is there a straightforward way to improve? Yes, through the application of the pyramid principle.³ This simple approach, originally codified by consulting firm McKinsey & Company and taught to all its associates, has spread widely among business communicators because it is a logical, straightforward way to get your points across as convincingly as possible.

The first step is to identify four things:

• ✓ Situation: What is the issue (e.g., thinking and communicating clearly are essential to business success)?
• ✓ Complication: Why are you even addressing this issue? What’s wrong (e.g., many Y’s don’t do it particularly well)?
• ✓ Question: What are you trying to figure out (e.g., is there a straightforward way to improve?)?
• ✓ Answer: What is the solution (e.g., yes, through the application of the pyramid principle)?

This last point is a big deal: note that you provide your answer right up front! Not after a meandering buildup, not through the suspenseful parsing out of facts (as you might if you were writing a novel), but at the beginning.

To back up your answer—which may, in fact, be the conclusion of your analysis or the recommendation you are making—you should then list your supporting arguments in as crisp and clear a way as possible (e.g., the pyramid principle has been used effectively for many years in many business situations, and it is easy to learn).

Here’s another example. Let’s assume that you want to write a memo to your boss requesting funding to set up a home office and permission to work from home at certain times during the week. Write a crisp message, structured around these five points of logic.

• ✓ My work involves a significant amount of time spent conducting analyses and writing, both of which require uninterrupted stretches of concentration. (Situation)
• ✓ The office environment is filled with frequent, distracting conversations and meetings. (Complication)
• ✓ I have sought an option that makes good business sense and would allow me to be more productive. (Question you have addressed)
• ✓ I recommend that I work from home three days a week. (Answer)
• ✓ I would have more time for my key tasks of analysis and writing. I have calculated that I spend an average of three hours each day in meetings or in hallway conversations; by coming in two days a week, I would still have an adequate level of face-to-face interaction. (Supporting points)

Clearly when you actually write the memo itself, you won’t include the labels “situation” and the like, but do use the logic of that structure as you prepare a short, to-the-point message.

Lay out your thoughts in a logical and persuasive way. Give your ideas their best shot to be understood and accepted.

understand how your company makes money

You need to learn basic financial terms and observe how they are used within your firm. At a minimum, you should know the following things about your business:

• ✓ Revenue: How much money does the company get from selling products or services to customers? To whom does it sell goods and services? What are the major sources of the money your company takes in? Which sources are the most important? Which are the fastest growing? Why do customers buy your products or services? What is your company’s strategy for getting them to buy more? How does your job contribute to that strategy?
• ✓ Expense: What does it cost your company to produce its products or deliver its services? What are the other costs associated with operating the business, including administrative expenses, employee salaries, rents, and sales and marketing costs? Which costs are most significant? How do the expenses relate to your company’s strategy for getting customers to buy more of your products or services? How does your job contribute to managing the costs?
• ✓ Profit: What is left over after the expenses are subtracted from the revenue? There are a number of terms commonly used to track profit: operating income, EBIT (earnings before interest and tax), EBITDA (earnings before interest, taxes, depreciation, and amortization), and so on. Which term or terms does your company use, and what exactly does it mean? What is included in the calculation?

Find out which reports or other sources of information your company uses to share its financial results with employees. Are there regular reports that you may have access to? Are there teleconferences or town hall–type meetings with management? Be sure to access this information, and, if there are terms used that you don’t understand, don’t hesitate to ask a colleague to explain them to you. No one will think less of you for admitting you don’t know, and they will be pleased that you are interested in learning more.

understand the world that influences your business’s future

Become familiar with the key issues that could affect your business. Who are your key competitors, and how are they doing? Are there important government regulations or financial institutions that affect your business? Is a significant part of your company’s business conducted in other countries, and, if so, what current events are happening in those areas? Is your business affected by any particular metric, such as the consumer confidence index, the number of housing starts, or interest rates?

Regularly read relevant publications, such as the Wall Street Journal, the Economist, and other business publications.

express your ideas in the language of business

Be able to discuss whether the proposals or suggestions you are making are worth the investment of time and money that would be required. Never take a suggestion forward without considering whether or not it (the investment of time or money required) would be worth it (the benefit you anticipate would result). Few things will make you look inexperienced faster than recommending something that is ridiculously out of balance (far more expensive or time consuming than it’s worth in terms of any reasonable value that you might expect to receive).

The most difficult part of expressing your ideas this way is often simply determining what the investments and, particularly, what the returns might be in financial terms. Doing this much—developing a reasonable estimate of the associated costs and likely financial results—will dramatically strengthen your argument even if you don’t go on to the second step of calculating the actual returns.

Making a list of the required investments should not be too difficult, but be sure to consider time as well as specific monetary investments. In business, time is money. So, for example, the cost of installing a new piece of machinery might include the following:

• ✓ The cost of buying the machine itself.
• ✓ The cost of the labor required for installation.
• ✓ The cost of disposing of the old machine, perhaps, or otherwise preparing the site.
• ✓ The cost of downtime while people are not working as the machine is being installed (assuming it occurs during work hours). You need to come up with a reasonable way to translate this into costs, such as the average per hour wage cost or the lost revenue of products that would have been built during that time.

A more difficult challenge for most people is to compose a reasonable summary of the likely results of the investment. Often people stop at what business calls soft benefits: employees will be happier, the quality of the product will be greater, the delivery time will be shorter, the flexibility to produce customized products will be greater. These are all terrific results, but you need to push yourself to quantify them. So, for example, happier employees might mean that retention rates would be higher and the cost of recruiting and training new employees would be lower. Higher product quality might mean that sales would increase. You can estimate the financial value of these latter items.

You don’t need to have historic data to validate your assumptions (although if you do, that’s great). All you need are reasonable ifs. You can present your estimates as follows: “We expect that this investment will increase employee satisfaction. If we assume that higher satisfaction reduces turnover by 10 percent,” (choose the lowest if you can—make sure it seems very reasonable) “the cost savings in reduced recruiting and training expenses will be . . . ”

Learning to speak in business language in terms of investment costs and estimated returns doesn’t require an MBA or even a course in finance—only common sense and the discipline to keep going until you get to an end result that can be translated into financial terms.

investment costs and estimated returns: lay out the FACTS of your case

To develop the estimated costs and likely financial results associated with a project in a systematic way, lay out the FACTS (facts, assumptions, costs, timing, sensitivities). Identify the following:

• ✓ Facts: Information (data) on the current situation.
• ✓ Assumptions: Your estimate of how this investment would improve the current situation, translated into financial terms. Remember that you may need to go through several layers of logic to get to benefits that you can assign a financial value to: happier employees means higher retention, which means lower recruiting and training costs. Now you can assign a financial value.
• ✓ Costs: The amount of cash you will need to invest.
• ✓ Timing: How the costs and benefits will occur over time (how much each year).
• ✓ Sensitivities: Elements of your analysis that are uncertain and would significantly affect the outcome. You may want to redo your analysis several times, varying these assumptions, or at least be prepared to answer questions about why you think they are not likely to occur.

Now, try it for yourself; lay out the FACTS for purchasing new equipment from the information in “The FACTS for Purchasing New Equipment.”

Accompanying your ideas with even a simple assessment of the financial investments and returns shows that you have thought through the reason for your recommendations or suggestions and that you’ve mastered the basic business finance language and logic. So don’t be intimidated; use this approach to implement your recommendations and ideas in your organization.

TABLE 11-1

Example: The FACTS for purchasing new equipment
Fact	Cash flow from current sales are $1,300 per year.
Assumption	The new equipment would double capacity and last three years.
	We can sell as much product as we can produce, and therefore the extra capacity will translate into higher sales.
Costs	The new equipment would cost $3,000, including the cost of installation.
	Installation will occur at night and will not disrupt current production.
Timing
Sensitivities (and other anticipated questions)	The market might not be there for more product: what if the incremental cash flow were only $1,000 per year?
	The equipment might last longer than three years: what if its life expectancy were five years?