Business Acumen for New Managers — The Basics to Master

Business Acumen for New Managers — The Basics to Master
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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 and faster decisions. To make effective decisions, managers must know how and when the company makes money.  They must also be able to identify the key short- and long-term leverage points that impact growth, profitability, and risk.

Unfortunately, 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%.

No wonder many teams struggle to collaborate and collectively move strategic initiatives forward that cross functional boundaries.

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
Based upon data from our people manager assessment center, we know that high performing leaders excel at thinking through solutions based upon their understanding of the way the entire business is conducted.  For new managers, here are a few business acumen questions to ponder:

  1. Reading and Interpreting Basic Financial Statements
    How well can you decipher the relevance and implications of your company’s financial report? Can you define COGS? How do different areas 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 for the success of your business?

Make Your Business Acumen Visible
Once you understand financial statements, business model leverage points, and cash flow take advantage of opportunities to showcase your business acumen.  Whenever possible, focus on highlighting business implications, making more informed decisions, and putting new ideas into action that demonstrate your overall understanding of the business.  Then help others on your team to gain the same knowledge so that you can thrive together.

The Bottom Line
Are your new managers up on the business acumen basics? If not, it is high time to get some basic business finance training 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 6 Management Best Practices that Make the Difference Between Effective and Extraordinary

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