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The importance of business acumen training managers and employees

The message at Clos is becoming clearer and clearer. entrepreneurs want them to align learning opportunities with strategic objectives of the organization.

This is not an easy challenge. They must ensure that education and communication reinforce the objectives of the company. They must help employees understand the objectives and develop the skills and motivation to contribute.

And the most basic level of alignment, they must ensure that each employee understands how the company makes money. This includes understanding how the profitability is driven, how assets are used, how cash is generated and how the daily actions and decisions, including their own success impact

Development Business Acumen fundamental to business alignment. Consider Southwest Airlines, which was founded in 1971. With 33 consecutive years of profitability, the company became widely known for the culture of motivation it creates for employees and extraordinary dedication service customer.

Many industry has suffered during the years of growth in the South West, including many airlines have merged or declared bankruptcy. Southwest buys the same planes and jet fuel along with other airlines, and pays the salaries of its employees and competitive advantages. What is the difference?

Unlike some of its competitors, the management team of South-West involves employees in the company's financial results, explaining what the numbers mean and, more importantly, helping to link individual decisions and actions to the bottom line. The company has an open culture, one of inclusion at all levels, and employees understand their roles in providing great service and keeping costs in line.

Certainly, there are other factors that contribute to the success Southwest, but it is difficult to ignore the positive impact of an approach that develops the business sense of all employees and managers so they can contribute to the success of airline.

A Challenge for Education

Unlike those in the South-West, the contributors individual managers in many organizations today have not been educated about the big picture of their businesses. They a narrow vision of their own departments and job functions and are not able to make the link between their actions and their business success. Multiplied by hundreds or even thousands of employees, this lack of understanding – the lack of true business sense – means that too many decisions are made and actions taken are too many that are not aligned with business objectives.

How training can help bridge this gap? For many companies, such as south-west, the implementation of learning programs to develop a solid base of financial knowledge and business acumen has made the communication of financial results to employees easier and more efficient.

Business Acumen: definition

Very simply, the business sense is the understanding of what it takes for a company make money. This financial literacy, which is understanding the numbers on financial statements, as well as understanding strategies, decisions and actions the impact of these figures.

Someone financial information, for example, would be able "read" the state of company performance. This would be an employee or manager to understand the terminology (revenue, cost of goods sold, gross margin, profit, etc.) and what the numbers represent (ie, the gross margin is equal to the total sales / revenue less cost of goods sold).

With business acumen, the person would be able to "interpret" the income statement, taking into account how the strategies Business and initiatives have influenced the numbers during specific periods.

Consider a simple comparison: In football, it is necessary for players to know how the game is scored and how to play the game to change score. In business, literacy is to understand the "scores" (financial) and business acumen to understand how impact (strategic actions and decisions).

Asking the Right Questions

If the business acumen propagates through a organization, employees and managers are beginning to ask questions. These questions are not only the organization but also themselves and their Services – questions about the processes, products, systems, staff and others that may lead to innovative and necessary decisions and actions.

Business Sense allows everyone to understand it enough to ask: "How Do we cut costs? "Or say:" We need increase sales. "Digging Deeper, employees with high levels of business sense to ask questions that take into account the impact major decisions possible and show a greater ability to make the link between performance and results.

Issues that could go the root of the disappointing operating ratios:

• increased production costs? If yes, why?

• Do we changed the price? If yes, how has that affected our margins?

• Is there competition issues impact on our performance?

• There were changes in customer requirements?

• If our costs per unit of output have increased, we can better monitor the effectiveness of our production or service delivery?

• Is there a way to produce a higher volume of products at the same cost?

• Can we increase prices, always bring value to customers and remain competitive?

When questions to be more precise, Good decisions can be taken.

Business Acumen for Managers

Managers at all levels require a high level of business acumen to do their work. Each day they make decisions about employees, projects, processes, expenses, customers and decisions much more – that ultimately drive greater results in the organization. Managers who make these decisions while looking through a lens of the Department, with a limited understanding of how these decisions affect financial results or how they are linked to organizational goals and objectives, working in silos, which can ultimately damage the company.

Managers are often promoted into their positions because of their "technical" expertise. They have been successful service representatives customer, large vendors, innovative researchers and well respected IT professionals. They are now responsible for decision making, budgets, projects and people. They often lack financial literacy, and have not developed a high level perspective on the business. Over time, especially if they move up the ranks of management, they can develop these. Or they can not.

Organizations need managers who operate as part of the management team, taking responsibility for their own results and results throughout the company. Therefore, organizations have increasingly integrated financial literacy and business acumen and management skills and have integrated the business acumen training programs in management studies.

Business sense for employees

Although there is little debate about the need for managers to develop business acumen, organizations sometimes question the need This understanding among the employees. But the primary contributors, those who are most directly concerned with a production facility or customer, for example, taking measurements every day that impact on business results.

Consider the seller delivered goods, or his representative dealing with an unhappy customer, or caretaker who finds a problem. The actions each of them could erode the margin beneficiary, to lose a good customer or to allow questions to increase security. Without an understanding of how their actions affect the results of the company, they would not consider the context of alternatives.

Many organizations have determined that education financial and business acumen are not only more managers. They decided to develop a society of people who know the business, who know what the return on assets and return on average investment, who know how rates of inventory turnover may influence the outcome and importance of flows positive cash who see the link between financial success of the company and their own health benefits, 401 (k) plans and more. In other words, we need people who understand the "business" of the company.

In his book Good to Great, Jim Collins said: "We found no evidence that the" good to great companies had more or better information that companies comparison. None. Both sets of firms virtually identical access to good information. The key, then, lies not in better information, but to transform information into information that can not be ignored. "

With an increased level of acumen business managers and employees can better interpret the information, linking their actions and business results.

Another reality of today's business

results of operations of a company open are well known at the end of each quarter. Analysts, investors, media, employees, everyone has access to the financial performance of company. With a focus sharply on accounting irregularities in recent years, management has become very conscious of the need provide accurate and timely financial information. And employees have become much more likely to question these figures. "My company be honest? The numbers tell the whole story? "

Without a basic understanding of financial results and capacity to interpret, employees may be suspicious and eventually cleared. workers emerged, in turn, impact negatively on productivity and profits.

CEOs of public companies, must ensure that managers and employees are able to understand numbers and have confidence. This means that an effective education in business acumen as well as ongoing and open communication from the top.

Former GE Chairman Jack Welch said in his book Gut right, "Getting used to the mind of every game is a big part of what the job CEO is all about … There is nothing more important. "

The Big Picture

As we became a nation of specialists, armed with new information technologies and operating systems across the enterprise, it has become easier for managers and employees to become immersed in their own myopic job. This immersion can have the effect of obscuring their view of the big picture. They can not consider the cumulative effect of wasting assets. They may have little regard for the objectives and responsibilities of team members, departments or divisions. They may lack motivation to invest in personal energy project's critical work.

Organizations that undertake in the development of his business acumen to provide a clearer vision and a general context in which employees can work, while creating an environment that is more likely to break down internal barriers. There is less waste and less ambivalence. There is increased innovation. Employees are committed, they understand their role and its impact on business results, and they are more likely to believe that their efforts really count. They are more likely to think like a business owner.

Thinking Like an Owner

For Effective business owners must be able to helicopter over issues from day to day and see the big picture. They must understand how the pieces fit as well as corporate profitability and cash flow impact, and they must be able to assess potential risks and benefits of decisions. Business owners consider the best figures, to ask tough questions, analyze their mistakes and take decisive action.

To truly understand the business, owners have to understand how this company makes money – In other words, how they produce sales, profits and cash. Organizationally, they know it's about people, processes and productivity. On the front of the customer, it is satisfaction, loyalty and Share market. Ultimately, all actions and all decisions taken in these areas impact on sales, earnings or cash.

When managers and employees begin to think like owners, too, look at the big picture, to understand how all the pieces fit together, and assess the risks and rewards. They include, as an owner, how the company earns money, how it remains in business and how they contribute to its success.

The advantages for an organization to engage managers and employees in this type of property thought are obvious. So, how companies can develop the business acumen of its people?

Development Business Acumen: Two stories

Entrepreneurs are usually forced to develop his business acumen of their own. They are practical with their businesses and to make all decisions as and, good or bad. Either they learn from their mistakes or fail.

Very different for managers and employees in an organization.

They are not involved in all aspects of the business, and they take decisions primarily within their own areas of responsibility. After seeing the connections is not easy, they need to learn another way.

Books and lectures can help. But his business sense is better developed experience. Learners should be able analyze situations, ask questions, discuss with other learners, examine options, make mistakes and see the results.

Well there are a variety of ways to achieve this type of experiential learning, many companies have found that the simulations, reflects the reality and allow learners to experiment in a safe environment is one of the best ways. Here is the story of two companies that have chosen to educate their students with simulated cases.

Comcast Cable Communications

The North Central Division Comcast – One of the greatest spectacles in the country, information and communications companies, specializing in television cable, high speed Internet and telephone services – set out to ensure that managers and employees of the organization's sense of funding necessary to make the right decisions. A survey of the entire company has clearly demonstrated this need – especially for managers of employees who had direct contact with customers.

For example, if a customer calls with a service problem, the front-line employees and their Supervisors can issue credits on the customer's account in an effort to solve the problem. Although this is exactly what is needed for the situation, Comcast realized that employees take these decisions do not necessarily understand that a credit of $ 10 may eventually need more than 100 $ In revenue for the company to break even. Similarly, visiting a service technician to a customer's home could cost $ 50 directly, but the company might have to sell an additional $ 500 in services to cover the cost.

"The lack of financial skills between supervisors and employees has been largely understandable, "said Mark Fortin, vice president of finance for Comcast's North Central Division. "Nearly 75 percent of company employees are at the forefront in such roles as the staff of call center technicians on the ground or. They are trained to be good at what they do, but their origins in general do not understand the emphasis on financial literacy. "

Comcast executives determined that a human resources approach fundamental to the development of his business acumen is required. But This approach would also need to be fast, commitment and relevant employment. Building on its already strong management program Comcast University leaders have chosen to integrate a high energy, tailored learning experience that provides the "basics" and at the same time, deal specifically with Comcast terminology, concepts and strategic imperatives.

As they participated, the students made decisions about products, processes, pricing and more, and they saw how these decisions affected the financial success. Ultimately, it is become easier for them to make choices clearer day by day.

"The only thing that comes to leaders of frontline field technicians, and supervisors and call center managers who are present, is the high cost of sales of our company, "explains Sophia Alexander, Director programs and settings for the division. "It's like a bell rang in my head when they realize what it costs for us to win this we need to win to lead the organization. "

Attend training session is not mandatory for supervisors and managers. However, there is an unwritten expectation that they will participate in the training business acumen as well as other programs Comcast basic universities, according to Jan Underhill, Senior Director of Leadership Development of the North Central Division. This expectation, coupled with the fact that manager compensation recently became tied to meeting specific financial goals, kept spectators.

Senior management support was also an important factor in creating interest and awareness about financial literacy. "Getting people to sign is much easier When executives like Mark Fortin are strong advocates of the program, "said Underhill.

The reviews have been resoundingly positive. On average, for example, a level comments about the discovery based learning sessions, business acumen was 4.5 on a scale 5 points. This means that the program has exceeded expectations. Better than that, "said Sophie Alexander, Director of Programs and settings for the north central division, is the empirical evidence that new ideas and knowledge have made a difference. For example:

• Participant self-assessments indicate that literacy Financial has increased by at least 25 per cent following training business acumen.

• After training, there was an increase 20 per cent in the participants' ability to use the basic terms and financial concepts on the job.

• Nearly 45 percent of participants surveillance report that they use their knowledge of business acumen in daily communications with staff and peers.

"Some people, especially in large companies, feel like there is a checkbook. They think that … I do not own the company. This is not my problem. Someone will pay the bills. But in the current context, with some very large companies in trouble, everyone must be part of the solution. education purposes business acumen for managers and employees using the company as a whole, but it also helps employees. It is self-preservation to some extent. "Comments Fortin.

Southwest Airlines

Southwest Airlines is one of the companies quite profitable makes "business knowledge" an essential element of its training programs for employees. Each employee has a solid understanding what a new customer and new revenue, the means of the company. Employees also know how the loss of a client may have an impact company.

According to Elizabeth Bryant, director of leadership training at Southwest Airlines, "Our training focuses on how financial ratios such as return on assets and various margins are determined. Knowing that the team leaders, supervisors and employees have this knowledge leadership allows the company to submit detailed financial reports and explain to teams where the margins should be. Management can talk more in depth to all employees and employees understand the objectives. "

Bryant added: "Because we do not waste the little things, because we follow every penny and every activity, we have all learned about the importance of every penny. With the sub in hand, we spotlight the idea of compound interest, for example, how we help small economies at the end of the year and how including small quantities of waste can add up opposite hurt us. "

Consider the importance of key measure of operation for the airline industry – operating cost per seat-mile. Thus the cost of a company Air to fly one seat one mile. All operating costs are divided by the total number of seat miles (total mileage of all seats that were made during a given period, if a passenger was in place or not). Much of the industry has had a cost per seat results mile or more to 10 cents. Southwest Airlines' cost per seat mile is about 6.5 cents. The lowest cost per seat mile in the industry nearly 25 years was a little over 5 cents.

How do they do? Certainly there are a number of factors that lead to success. However, one major influence in south-west is a training in business acumen. This training allows employees to know:

• How it is difficult to ensure profitability under way to make a profit can never be taken for granted

• The importance of exploiting the advantages of good years to prepare for the difficult years

• The impact of individual actions and decisions to the bottom line

In other words, Southwest invests in training to help employees think like owners. This, in turn, produces results concrete, as its cost per seat mile consistently low. When the south-west of the learning team decided to implement a simulation business acumen several years ago, there were some initial concerns about how it would be received.

Bryant said: "Some people especially those who have no financial training, have been nervous about it. We as a people-oriented company that we wanted not make people think that now we're just a financially oriented and everyone will be judged solely on financial performance. But we have placed the need for training to master business as another way to prove that we did a lot of care for each employee. We explained that if you understand the significance of numbers, you can better understand how your work contributes integral to the company. "

Southwest Airlines, according to Bryant, has never had a layoff – a rarity in the airline industry. The more employees understand the challenges the company, the more they appreciate the importance of making intelligent decisions every day.

Bryant concluded that the discovery techniques learning in a simulation work and strong business culture in South-West because of the team orientation. "All participants learn that they can not individually make this possible, "said Bryant. "They learn that they have themselves to look beyond act and think like an owner, and realize that our efforts and financial results are not here only for a career, but for a cause. This is This philosophy of cause and delivering a low cost, high quality service that allows people the opportunity to travel. Our success in obtaining results positive results in individual possibilities to work, grow and continually think of innovative ways to improve our and serve our customers. "

The advantage in class

Both companies have chosen to develop business acumen of managers and employees using a simulation in the classroom, led by trainers on the company sites. Although the online options were available and were used in some cases, complete training sessions with an instructor, they decided there were significant benefits to raise this issue in a "live" session where they could take advantage of the power:

• SHARING KNOWLEDGE AND EXPERIENCE: students bring their own perspectives and issues of the session.

• Teamwork Learners work together, make decisions together and depend on each other as they learn.

• COMPETITION FUN: small teams "play" against each other and enjoy a competitive environment.

• Intra-company Discussions: The learners in the common interest and strategic financial issues of their company allows a more thorough analysis and depth of discussions and a real "connection" between simulation and reality of organizational learning.

• The motivation to learn and comfort: Learners who may not be comfortable with the issue of funding find themselves playing a game in the comfort of a team environment.

Although there are a number of instructional approaches available to organizations in the field of business acumen, training classroom that brings together teams of learners can help ensure that learning occurs and connections to the company are taken to achieve rapid return to work action.

The Bottom Line

More than ever, successful companies will focus on developing the business acumen of managers and employees. These companies will realize that when their people to understand numbers, when they understand how their services contribute to corporate goals and when they see how their own decisions and actions make a difference, they begin to function as part of a team rather than in a silo or departmental staff. And a vital piece alignment of the puzzle is solved.

With his business acumen widespread, companies may have a powerful asset – employees trained, informed and motivated. And with that asset, they are companies best placed to succeed.

About the Author

Raymond (Ray) Green is cofounder and CEO of Paradigm Learning. Paradigm Learning is a corporate training and communications company specializing in the design of business games, business simulations and Discovery Maps®.

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