Business Acumen for New Managers is an Underdeveloped Core Competency
Year after year, line leaders want to improve business acumen for new managers so they can make better, faster and more informed decisions. Unfortunately, most new managers get a failing grade when it comes to basic business acumen.
Current Managers Get Failing Grades for Business Acumen
Harvard Business School decided to test the business acumen for new managers to see how much they knew about the business terms and financial workings of the companies that they worked for. We suspect that even Harvard was surprised at the low scores on the exam. The 300 managers tested received an average of only 38%.
How Would You Rate Your New Managers?
How well do you think you would do with your new manager training in terms of business acumen basics?
Three Business Acumen Basics for New Managers
Here are a few questions for new managers (and their bosses) to ponder:
1. Reading and Interpreting Basic Financial Statements
How well can you decipher the relevance and implications of the numbers on your company’s financial report? Can you define COGS? How does it affect the bottom line? Does it matter whether cash flow originates from operations or investments?
2. Leverage Points
What factors have the greatest impact on a company’s available cash: timeliness of invoice payment, rising profits, increasing retained earnings or higher accounts receivable? What are the financial metrics that are most aligned with your business strategy and the goals of your team? What warning signs should you and your team keep an eye on?
3. Cash Flow
Why do analysts and investors care so much about free cash flow and what does the term mean?
The Bottom Line
Are your new managers up on the business acumen basics? If not, it is high time to get some management training in business finance basics so you can follow and contribute to the conversations at the right level. Without knowledge of finance basics, you are unlikely to advance much further than your current level in the organization or know how to make the right decisions.
To learn more about improving the performance of your managers, download The Six Management Best Practices that Make the Difference Between Effective and Extraordinary
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