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A Journey of Business Acumen
We believe Business Acumen are skills to be learned and used, not a one-time event of hearing the metrics and moving on. Without practicing the skills, you'll never fully grasp the concepts. Kenny Snarr gives great insights on how to further your business acumen. Read the transcript here:
"I actually think business acumen is a lot more of a process than it is an event. You know, the learning initiatives are great events, but this skill is a process. If you don't practice it regularly, if you don't do it as part of your career at some sort of a regular cadence, you'll lose everything you learned either in a session or what you learned in college. In building your business acumen, a couple of things that I would recommend that you do on a regular basis around a regular cadence.
Earnings Calls
If your company is public, I would listen to your executives in their earnings call. At a very minimum the prepared remarks. I prefer the prepared remarks because that's the messaging that the executives prepared to give to the market that outlines their strategic focus, their goals, and objectives, and as a leader in the organization. I think it's paramount that you understand that.
The analyst questions are interesting too. The analysts are trying to find gaps in that communication in order to build their understanding and be able to forecast what they think the organization will be able to do in the future, but at a minimum that prepared remarks I think is important for you to understand. What are the metrics that they're managing the business around? And if you don't know what those metrics are, research them. They might be things like earnings per share, and earnings per share growth. It might be a return metric like return on invested capital or something like that. It'll be a cash metric, like free cash flow. Some profit metrics, certainly revenue growth, and some margin. But understand the metrics that are important for your company's organization. You have to know what they are. If you listen for a few minutes to the prepared remarks there may be 15 or 20 minutes on a quarterly basis from the CEO and the CFO. Listen to what she's saying. Identify what's important. And then research and understand the metrics that are important.
Free Earnings Call Resource:
Download a free earnings call workbook to help guide you through the calls.
Align Your Goals with the Executives
Then second to that, I think it would be important for you to recognize as a leader inside of your organization, how you impact those metrics. How does your team, your role, your projects, your programs, your function impact the specific metrics that are important to your executives? I would do this every quarter. And if you ever bump into her in the hallway and she introduces herself and you introduce yourself, and she says what do you do for us in the organization? You could then articulate that you and your team and your project and programs are connected to the things she's trying to accomplish. I would do that every quarter.
Analyze the Financial Statements
If you have more time, I would look at the financial statements. We call it Navigating the Financials, but I would look at the key metrics and their trends. It's not every line item on a financial statement, there are a couple of basic ones. You're looking at the revenue growth, you're looking at the profitability growth, either operating income, net income, or some other important profit metric to your organization, and the growth rate of that. Maybe earnings per share growth, very common metric for executives. And I would just look at it and see how it's trending period over period. On the balance sheet, you might look at cash and cash equivalents, the amount of cash your organization has to invest. And the equity or the total shareholder equity. How much financial strength does the organization have? On the statement of cash flows, the most important number is the net cash provided from operating activities. That's the cash flow that the organization generates over a period of time. And I would look at the trend - is that cash flow growing period over period? If you look at those handful of line items on the financial statements, that will help you be able to tell the story that the financial statement tell about your company's business is doing. And if you look at it on a quarterly basis, you will be able to see the trend in that story or how that story is changing over time.
Quickly Navigate the Financials:
Build Your Business Acumen Quarterly (AT LEAST)
Those are some fundamental things I would do on a quarterly basis. They’re relatively simple, they don't take a significant amount of time, you don't need an MBA in finance to be able to do that, and then you'll be better able to leverage your business acumen skill. You will build it over time and you might be able to help build it in the teams that you lead inside of the organization. And I think organizations need more leaders that have this, and that are willing to go and wrap their minds around it. I think it is a skill and like all skills it requires practice.
Business Acumen Tools
One of the great things about Acumen Learning and the way we teach that is we not only do we build their skills but give them a framework for how they think about their businesses. We also give them tools that they can use in their career that will help them apply what they learn. The Navigating the Financials worksheet is phenomenal for navigating the financials. The executive alignment might be the best tool of application I can think of the five drivers and of business acumen. Understanding what driver your executives are focused on, what goals and objectives the organization is trying to accomplish, and how an individual as a leader inside the organization impacts those goals and strategies out. It's not just understanding something at a point in time, it's being able to apply to affect your decisions, your choices, and your behaviors on a regular basis with an understanding of the implications to your organization. And then helping your organization in particular, the people that you lead learn it for themselves. So I think it's an important skill to build but it requires some work on the learner's part to continue that development for them, and then to pay it forward, and to help build that capability in their teams. And great things happen. We've seen great things happen inside of organizations when teams, and leaders in the organization are able to connect to some of the abstract concepts their companies are trying to accomplish."
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