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July 28, 2009

Power to Your People, Right On

By Raymond Green

Asking the Right Questions

When business acumen spreads through an organization, employees and managers begin to ask core questions beyond the numbers on the financial statements. These questions are directed not only at the organization, but also at themselves and their departments—questions about processes, products, systems, staffing, and more that can lead to necessary and innovative decisions and actions.

Business acumen helps everyone understand that it’s not enough to say, “How do we cut costs?” or “We need to increase sales.” Digging deeper, employees with higher levels of business acumen will ask questions that take into consideration the far-reaching effect of potential decisions and demonstrate a greater ability to make the connections between performance and results.

Some questions that can get to the root of operating ratios include these:

• Have power plant costs gone up? If so, why?
• How has the current credit crunch impacted revenue?
• Have we changed prices? How has that affected our margins?
• Are there any competitive issues affecting our performance?
• If our costs have gone up, can we better control the efficiency of our production or service delivery?
• How do environmental concerns affect the business?

When questions become more specific, right decisions are more likely.

Business Acumen for Managers

Managers at all levels need a high level of business acumen to do their jobs. Every day, they make decisions about employees, projects, processes, expenditures, customers, and much more—decisions that ultimately roll up into larger organizational results. Managers who make these decisions while looking through a departmental lens only, with a limited understanding of how these decisions affect overall financial results or how they are tied to the organization’s goals and objectives, are working in silos—disconnected pipes—that can ultimately damage the company.

Managers are often promoted to positions of responsibility because of their “technical” expertise. They were successful customer service representatives, electrical engineers, researchers, or IT professionals. They are now entrusted with decision-making, budgets, projects, and people. They often do not have financial literacy, nor have they developed a higher-level perspective about the business. Over time, especially if they move up the managerial ladder, they may develop these. They may not.

Organizations need managers who operate as part of the management team, taking accountability for their own results as well as the results of the entire company. Therefore, more and more organizations have built financial literacy and business acumen into managerial competency requirements and have integrated business acumen training into management curriculums.