We have Ryan Hunt, a senior financial consultant here today to talk to us about how business acumen can benefit managers and leaders within an organization! Let's jump right in with Ryan.
Question:
Hi Ryan, let's jump right in. Why is it essential for managers and leaders to possess strong business acumen?
Great question. MIT did a study a few years back and found that although 97% of senior leaders said they had a clear understanding of their company’s priorities, 1/3 of those same leaders couldn’t even name 1 of their strategic objectives! And those objectives hadn’t changed for 2 years! 1/3 of them could name 3 out of 5! How do we make good, strategically aligned decisions that have the desired impact, when we don’t even know what that means?! Good business acumen means we know what strategy is, we know what our current initiatives are, and we’re making decisions that help meet those objectives. But as managers and leaders, it goes further. It means we can understand, interpret, and communicate our strategy, performance, and the why’s behind our decisions to get buy-in from our teams and colleagues. We have to be able to coach our teams.
Question:
Yikes! That is a scary study. How can managers leverage their business acumen to coach their teams?
Business acumen is simply knowing how we make money, and then making the appropriate impact in that money-making process. Managers with strong business acumen play a crucial role in coaching their teams, fostering innovation, and driving alignment with organizational goals. They shape and evaluate business ideas brought forth by their team members, assessing their value in terms of the company’s current initiatives whether that’s generating sales, enhancing operational efficiency, or making sound investment decisions.
Additionally, these good leaders empower their teams to understand the evolution of the strategic journey, to interpreting the company's performance, and then bridge any gaps or leverage any strengths they see. By teaching team members to listen for indicators of the company's direction and performance, leaders can more deeply engage their teams by having a deeper connection to their objectives and see how important each team member is in the company’s success.
How managers lead their teams plays a huge role, for good and for bad! Having business acumen helps managers equip their teams with the knowledge and skills needed to thrive and contribute effectively to the organization’s success. Good leaders develop business savvy individuals, the next level of impactful leaders.
Question:
How does having business acumen enable managers to serve as a linkage point between the company's strategic goals and day-to-day operations?
Typically, managers have a little more experience and more access to information than their team members. Managers with strong business acumen can bridge the gap between the company's strategic direction and the daily activities of their teams by sharing that broader perspective. By effectively translating strategic objectives into actionable tasks and demonstrating how these tasks contribute to the bigger picture, managers provide meaning to their team members' responsibilities, fostering a sense of purpose and alignment.
Also, a significant aspect of a manager’s role is educating and developing their employees. Managers play a crucial role in equipping these individuals with the tools necessary to thrive in the workforce and in their specific roles. It's their responsibility to ensure that every team member understands the vision of the business and how their individual role contributes to the bottom line.
Question:
Can you provide examples of how managers have successfully applied their business acumen to drive organizational success?
Certainly! I get to see these success stories a lot! Managers with robust business acumen have been able to identify market opportunities, streamline processes for greater efficiency, and align team efforts with the company's strategic priorities.
I’ll give you two examples of how seeing the bigger picture really makes a
difference.
We work with some mining companies. Front-line employees work with large machinery with limited visibility, caustic chemicals, and a lot of other hazards. If a team member doesn’t understand how important the safety initiatives are and doesn’t understand all the moving parts around him/her, it can not only cause a loss of productivity, but in a very real way, lacking that perspective can be a matter of life and death. A key priority in the mining business is safety, and everyone needs to see how that fits.
Now, not many of us face life and death situations when we go to work. But we all have an impact on the companies we work for, so let me share another example that might resonate better. Managers and leaders are often tasked with coming up with solutions to challenges in the business and then pitching those solutions to senior leaders or executives to make investment decisions. One of our workshops helps leaders work through the gap analysis all the way to analyzing their solution. One manager I worked with was prepared to pitch a solution, but as she worked through the analysis, it became clear that her current solution wasn’t a tight enough strategic fit and didn’t have the financial impact that they needed to see. It was a great opportunity for her to identify in the early stages that she needed a different solution. That to me, was a huge example of great business acumen. Making good decisions means we have to know when to say “No. Let’s make a change.” She saved tens of thousands of dollars and a lot of time by identifying that early on in the process.
Question:
Wow that’s amazing! If any executive heard this success story, they’d be sure to come crawling to Acumen Learning for all of their business acumen needs!!! Way to go Ryan. Last question, I want to touch on your experience and expertise of working hands-on with individuals. What are some key differences you're able to see between managers who possess and really practice their business acumen on a day to day basis, vs. those managers who maybe don't give very much time and attention to it?
This is a great question! I see a lot of differences, and they’re very prominent! Managers who possess and actively practice their business acumen on a day-to-day basis demonstrate several key differences compared to those who do not prioritize it. Firstly, like I briefly mentioned in a previous question, managers with strong business acumen tend to have a deeper understanding of their company's financial health, market dynamics, and strategic objectives. They are able to make informed decisions that align with the organization's goals and contribute to its success. On the other hand, managers who neglect business acumen may struggle to grasp the broader implications of their actions and decisions, leading to siloed decisions that have negative impacts downstream and missed opportunities.
Managers with strong business acumen are also much better equipped to anticipate and navigate challenges in the business environment. They can identify potential risks and opportunities early on, allowing them to proactively address issues and capitalize on emerging trends. While managers who lack business acumen may respond reactively to challenges. By this point, it’s too late in the game. This results in suboptimal outcomes and heightened stress and uncertainty.
Managers who prioritize business acumen often foster a culture of continuous learning and innovation within their teams. They inspire trust, encourage critical thinking, data-driven decision-making, and a results-oriented mindset, which fosters a high-performance culture. Managers who neglect their business acumen may struggle to inspire and motivate their teams, leading to disengagement and underperformance.
Overall, the difference between managers who actively practice business acumen and those who do not, lies in their ability to understand, adapt to, and effectively navigate the complexities of the business landscape. By investing time and attention into developing their business acumen, managers can position themselves and their teams for long-term success.
ACTIVITY:
Now that you've explored the concept of business acumen and its significance for managers and leaders, let's engage in a learning activity for your next team meeting:
Exercise: Building Business Acumen for Effective Leadership
Divide participants into small groups. Each group will be given a different hypothetical business scenario that requires making strategic decisions. Examples include launching a new product, entering a new market, or addressing a decline in sales.
Each group will discuss their scenario, focusing on the following points: -Identify the company's strategic objectives related to the scenario. -Analyze the potential impact of different decisions on the company's financial health, market position, and overall strategic goals. -Consider the role of various business functions (e.g., finance, marketing, operations) in addressing the scenario.
Then develop a detailed action plan that aligns with the company's strategic objectives. Make sure to include key steps and timelines, metrics for evaluating success, and potential risks and mitigation strategies.
Then have each group present. Encourage a discussion around the great strategies and potential risks.
By engaging in this exercise, managers and leaders can deepen their understanding of business acumen, enhance their ability to make strategic decisions, and effectively coach their teams to align with the organization's goals.
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