Developing Business-Savvy Leaders

By Catherine J. Rezak, Chairman and Co-founder, Paradigm Learning

Three Stories About Managers

Tim manages an operations department. A long-timer, he makes sure his people do what must get done. He doesn’t always agree with company decisions and insulates his staff from “turmoil.”

Barbara runs a sales team. She diligently focuses on customer relationships as “the key to success.” She can’t stand to lose to competitors, so she does whatever it takes to get business.

Gene oversees IT. The company’s best technical expert, he keeps up with advances in software and hardware. He wins industry awards and gets accolades around the company.

Successful managers, right? Look at it another way.

Tim has processes in place, says the company is just fine, and doesn’t care what the competition is doing. Barbara goes for revenue every time—even discounting products or giving services away to keep business, driving profitability down while insisting her relationships will pay off in the long run. Gene is ahead of the competition in expertise and equipment but doesn’t consider the financial implications of upgrades and enhancements.

All three are focused on their own jobs to the exclusion of the bigger picture of the company. They don’t see how their work aligns with strategies and initiatives. Are they bad managers? It depends. One thing is certain: They could be bettermanagers with increased business acumen.

What Is Business Acumen?

“Business acumen” is more than a buzzword. It’s a comprehensive understanding of what it takes for an organization to make money—combining financial literacy (understanding numbers on a financial statement) with business strategy (recognizing how behaviors, actions, and decisions drive profit and growth).

Consider this example: In team sports, players need to know how the game is scored. To affect the score, they need to know how to play the game. In business, financial literacy is understanding the score, and business acumen is knowing how to affect it.

Who Needs Business Acumen Training?

Managers with a solid understanding of industry, market, and financial information have a clear view of the company’s current realities and potential opportunities. They can analyze and apply diverse financial data to strategy development. They can make decisions that lead to increased profit or cash flow because they know how their actions affect the numbers. They understand business drivers and key financial levers, and the relationships between them, and can assess the financial health of the business. They can break down organizational silos and help employees understand how the company operates and what they can do to be successful within the company’s vision, goals, and strategies.

In today’s increasingly complex and turbulent business environment, it is a bad time for any manager to lack business acumen. Fortunately, business acumen can be learned. And as more organizations identify it as a core leadership competency, business acumen training quickly is becoming one of the most sought-after and strategically important learning initiatives.

While fundamental finance courses focused on terminology and financial statements have become more available, they aren’t enough. Getting real results means going beyond financial literacy. Business acumen training puts all of the organization’s other development efforts into the context of overall strategy. It not only helps managers make faster and better decisions, it aligns everyone around a common language, provides clarity of purpose, and shows them how to leverage all their skills to strengthen the company’s financial position. It also gives them tools to engage their teams in ways that build loyalty, increase their “ownership” in the process of building the company, and aid with employee retention.

Every manager at every level can benefit:

• Senior leaders who have excelled in their specialized disciplines and have assumed expanded management responsibilities may need to take a holistic look at the business. Business acumen training can be an eye-opener—or a refresher.Middle and lower manager levels might have academic credentials or demonstrate some level of financial literacy but might not be making the right connections between their own decisions and organizational success. And they might struggle to explain strategies to employees clearly.
• High-potential leaders are ideal candidates for business acumen training. It can equip them with critical business knowledge and skills that might otherwise take years to develop.
• Financial professionals, such as accountants and auditors,understand the numbers but might not be as clear about how they relate to corporate strategy.
• Sales personnel who meet with C-level decision-makers can get a competitive edge when they understand how their clients make money and can show how their products or services help.
• Technical specialists, such as IT and HR associates,can perform better if they can analyze costs, understand how service affects efficiency, and make connections between their efforts and overall strategy.
• Team leaders can ensure better alignment of their projects or process initiatives with company goals by using a financial “lens” to evaluate them.

What Kind of Business Acumen Training Is Most Effective?

As with any workforce development initiative, it is important to customize business acumen training to meet the needs of learners and the organization. One size doesn’t fit all, but there are benefits to using a consistent, “foundational” program and customizing or expanding it for different audiences. Deciding on such a program depends to some degree on the education, experience, and competency of participants and the business realities facing the organization. But the basic rules of effective adult learning delivery still apply.

1. Business acumen training has to be engaging and energizingenough to overcome the “oh, no” factor typically associated with financial training. Make it palatable to reluctant learners and maximize participant engagement.
2. It can’t overwhelm learnersby going beyond the needs of the audience. Multiple days of training might not be necessary for non-financial managers, for example.
3. Since business acumen training is at a higher level than most skills-based development, relevance is essential.It’s not just about learning specific skills, but about driving insight.
4. It must be memorable.There’s a huge gap between knowledge retained from traditional classroom training and knowledge gained from interactive learning experiences. Some estimates say people retain only 5 percent of a lecture, compared to about 75 percent when they are actively involved in their learning experience.

Accordingly, “discovery learning” rapidly is gaining popularity for teaching business acumen—especially to manager-level audiences. Simulations based on real business dynamics and learning experiences that use games, stories, and team problem-solving provide multiple opportunities for these learners to practice and improve decision-making. By allowing participants to act out and affect real outcomes—without real-life risks—they provide the context and consequences managers need to clearly visualize the impact of their actions on the organization as a whole. This “learning by doing” enables them to not only absorb essential concepts but also transfer their knowledge directly to the workplace as changed behaviors. And that’s what it takes to impact the bottom line.

Far too many organizations are filled with managers who don’t understand how the game of business is played. In today’s highly competitive and volatile business environment, it’s time to give them a playbook. Develop their business acumen and reap the rewards.

Catherine J. Rezak is chairman and co-founder of Paradigm learning, a training and communications organization specializing in the design of business games, simulations, and Discovery Maps. From 2003-2006, she served as president of ISA – The Association of Learning Providers. Paradigm’s flagship business acumen training program, Zodiak: The Game of Business Finance and Strategy, has been conducted with close to 1 million managers and employees worldwide. For more information, contact info@paradigmlearning.com, visit www.ParadigmLearning.com,or call 727.471-3170.