Business Acumen TTM Associates Ltd 09/04/2012 Business Acumen for New Age Leaders 1 P a g e
EXECUTIVE SUMMARY WHITE PAPER BUSINESS ACUMEN FOR NEW AGE LEADERS Dr Christiaan W Mostert, TTM Associates (Middle East) The current world economic situation warrants a fresh approach to linking business strategy to the execution thereof one of the key problems businesses face is that there is often a disconnect between the current business imperatives and how workers perform their everyday activities (which are often based on past ways of doing things). Successful organisations have managed to enhance the business acumen skills of their managers over a wide front with result that they are now better aligned to contribute to organisational objectives in a meaningful and actionable way. Business Acumen training can greatly assist organisations to sensitise managers to this important outcome. Keywords: Business acumen, leadership, skills, organisational performance, business simulation, experiential learning 1. Introduction The challenges faced today by commercial and even government organisations are profound. This is especially true in light of the current world economic situation, unstable markets and downturn in consumer demand for products and services. Various comments by business leaders have highlighted the importance of having special skills to survive and even to thrive in these demanding economic situations (Dean, 2009). At the same time the lack of managerial skills is highlighted as one of the key contributors to the failure of businesses all over the world (Pretorius and Venter, 2007). Business issues are also becoming so complex that problems cannot be resolved by knowledge only. Competition has also consequently become more knowledge based, but the ultimate success of an organisation is directly linked to how effectively it acquires, transforms and utilises this knowledge to develop capabilities faster than their rivals. Organisations require not only insight, but sound management practices and processes to support the transformation of knowledge into solutions and solutions into operational tactics and actions. A high level of business acumen is required for functional managers and other leaders alike to effectively pursue organisational objectives in these times. There are many definitions of "business acumen" the traditional definition is "a keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome" (Wikipedia, 2012). However, although this is in essence true, the world that we are operating in today requires an expansion of this basic viewpoint. As will be discussed in the next sections, business acumen is now moving towards a broader concept that includes a profound understanding of the core of the business and a specific understanding of what it will take to achieve the desired outcomes (financial and otherwise) of the organisation. This will then not only include a deep understanding of the functional processes of the business and their inter-relationships, but also include certain inter-personal and leadership skills to achieve these outcomes. Business Acumen for New Age Leaders 2 P a g e
BUSINESS ACUMEN FOR MANAGERS For most of the time, staff is employed for their technical expertise in whatever field they are working in (i.e. an engineer, accountant, sales executive or HR professional) and as time goes by, they move up into positions where managerial and leadership skills are becoming increasingly important. Many of these organisations have however relied on these newly promoted managers to move forward the organisation's strategy in a fast changing market environment without having acquired any specific business acumen skills to deal with this. It is then therefore often up to a few "highly talented" individuals to understand the "bigger picture" and to set the strategic and operational guidance to achieve the changing objectives. As far back as 1997 in an article on "The war on talent" by McKinsey Quarterly (1997) highlighted that the number and availability of "highly talented" managers are seriously under pressure and for many organisations this means that they will not be able to attract this required talent in sufficient numbers. This very issue was then highlighted in a global executive survey by McKinsey Quarterly (2007) where executives mentioned that finding talented people will become a top five challenge over the next five years. How right they were! To effectively deal with this situation, a key solution will be to find ways to allow a greater number of your own, existing staff, to take up these functions. The Perth Leadership Institute (2007) found for instance that it is possible to move beyond simple "business literacy" programs into high level "business acumen" programmes where participants are shown how their decisions and behaviours (individually and in a team context) influence the overall success in business strategy execution and resultant overall financial success. This then is the big challenge? Modern business acumen programmes must not only transfer operational business skills, but also be able to relate this situational knowledge into personal leadership and development. Business Acumen has in many ways become the Next Leadership Frontier! We are therefore observing an interesting shift in the skills sets of leaders: For many years big- picture skills have resided with only a few leaders, but the complexity and required involvement by modern leaders is such that business acumen skills have to become widely adopted in the organisation rather than just residing with a few senior managers. The consequence of this is profound acquiring business skills across your whole management pool have become a key learning requirement for leading organisations. As leaders, all managers must be able to break down organisational silos, bridge communication gaps, and engage the employees they manage, so that the entire workforce can understand how the company operates and how each person can contribute to the company s success (Rezak, 2011). At TTM Associates we view business acumen as concept not only to be much broader than traditionally, but also much deeper and specialised. Although there will always be room for basic business acumen skills at lower levels, our focus is to equip middle and senior level managers with a skills set that will sensitise them with "big picture" issues and how to actively contribute to achieving the strategic objectives of the organisations in a practical and tangible manner. This will then invariably also lead to the self-realisation of the importance of leadership skills to achieve these objectives. Business Acumen for New Age Leaders 3 P a g e
EXPERIENTIAL LEARNING AND USING BUSINESS SIMULATIONS FOR BUSINESS ACUMEN TRAINING Further to the discussion and in an effort to increase the effectiveness of management practices and processes in supporting increased business acumen across the board, organisations need training tools that can effectively facilitate all departments/ unit's ability to leverage this knowledge for increasing competitive advantage. Training will support the transfer of fundamental business skills that span the whole organisation (i.e. operations, marketing and sales, people management and business finance), but that can also assist in equipping managers with the necessary bigger picture skills and further development of their personal leadership and behaviours. Experiential learning or learning by doing has become a powerful means of enabling participants to, not only absorb essential knowledge and concepts, but also transfer them directly to their workplace in the form of changed behaviours. This experiential learning process, with the use of robust business simulations, is not only much more efficient than traditional learning methodology, but has the highest direct retention of all forms of learning due to learners hands-on experience and their positively altered behaviours.. If utilised effectively, this ultimately then increases the return on learning investment (ROI) for organisations directly. Figure 1. Shows the general progression of learning impact note that business simulations not only yield the highest learning impact but also the highest level of involvement. Fig.1 Business Simulations as learning Methodology An empirical study by the University of Pretoria Pretorius and Venter (2007) have concluded that business simulations are ideally suited to transfer business acumen skills in such a way that it instils those as practical skills in participants. 1. Planning Business Simulation Training Sessions Inherently to experiential learning, but in particular simulations, is the risk that the simulation programme will be experienced as a "pleasant experience" but nothing changes afterwards, i.e. little or no back-to-workplace Business Acumen for New Age Leaders 4 P a g e
application. The design of business simulations training sessions therefore have to be well-planned with respect to the desired learning outcomes, the realism of the simulation environment as well as the instructional design. Pretorius and Venter (2007) have also highlighted the importance of using credible facilitators in experiential learning as a key success factor and that training managers should select service providers very carefully in this regard. Another key practical aspect of the business simulation planning process is to create a realistic market environment. This process can be depicted in Figure 2: Fig.2: ComSim Business Simulation: Key Drivers Experience has shown that it is not important to create a duplicate or an exact replica of the participants' working environment the reason for this that focus is then shifted to the perceived accuracy of the simulation rather than the learning points. It is then best to rather create a related market environment where real-life issues, constraints and general market environment conditions that the participants normally deal with, are relatively accurately established. This increases the credibility of the simulation whilst at the same time create an operating environment that is sufficiently close to be associated with. Business simulations must include a realistic set of drivers that define the environment of the simulation and that are real for the challenges that all organisations face today. The environment should however be dealt with in such way that it is non-threatening and positioned in such a way that participants realise the importance of the economic and social environment where we all have to perform and be successful. This operating environment must cover all five the key functional business areas: (1) business strategy, (2) operations, (3) revenue generation (including marketing and sales), (4) people management and (5) business finance. The level of realism and the inter-dependence between these five business areas are crucial components to successful business acumen programmes. Fig3: Business Simulation Planning: A Whole Business Approach Figure 3 depicts the interaction between the five key functional areas in the TTM ComSIM Business Simulation. It also includes reference to the inter-personal and leadership skills set that must accompany the functional business skills. One must remember that key to the successful presentation to Business Acumen is that the learning outcomes stretch beyond the transfer of fundamental business skills such as finances or sales. ComSIM has fully scalable complexity modes that will allow the programme director to Business Acumen for New Age Leaders 5 P a g e
setup simulation scenarios for various types of participants as well as to accommodate specific requirements or needs that individual businesses may have. The ability to focus the simulation on the specific or individual needs of a variety of businesses and participants is of particular interest as this will not require any special system reprogramming (it can be derived through parameter setup and program execution control by the facilitator). 2. Business Acumen as strategic leverage Well designed and properly setup business simulations create highly realistic business environments and business processes and therefore create a live and dynamic case study. Participants then have to actively strategize, create action plans, implement and track the progress through various performance measurement tools such as financial statements, management reports, performance scorecards and feedback from facilitators. The instructional design of the TTM ComSIM Business Simulation follows a structured and proven flow of decisionmaking cycles with resultant reports and debriefing. These feedback loops provide insight into decisions taking and the debriefing or discussion of possible actions to improve or enhance the desired outcome. The University of Pretoria (2007) study have found that traditional learning often takes place in pockets of learning. However through the use of a well-designed business simulation, much higher levels of integration becomes visible. The reported behavioural chances by participants or the intentions to do so are significant from an educational perspective. This study proved that intervention through simulation and specifically the TTM ComSIM program benefited the knowledge and skills of participants. The impact achieved with a four day simulation suggests to management educators the value of simulation in a safe environment and promotes the development and simulation models for training of specific managerial skills." To enhance successful organisational performance, the importance of high level business acumen skills cannot be over-emphasised. As part of an internal transformation process to deal with the current market environment, business acumen have to become an enabling skills set which will then increasingly help differentiating the organisation from ones that do not have it. TTM ComSIM has fully scalable complexity modes that will allow the programme director to setup simulation scenarios for various types of participants as well as to accommodate specific requirements or needs that individual businesses may have. The ability to focus the simulation on the specific or individual needs of a variety of businesses and participants is of particular interest as this will not require any special software reprogramming as it can be derived through parameter setup and program execution control by the facilitator. This will therefore be a highly cost effective approach to customised programme delivery. 3. Conclusion The current world economic situation warrants a fresh approach to linking business strategy to the execution thereof during "easy times" it is normally expected of managers to display motivational skills whilst in "relatively tough "economic times, the focus shift towards business acumen as the desired skills set to pull through. One of the key problems businesses then face is that there is often a disconnect between the current business imperatives and how workers perform their everyday duties (which are often based on the past of ways of doing things). Business Acumen for New Age Leaders 6 P a g e
There are four key issues relevant to the successful implementation of business acumen programmes in organisations: 1. The executive management as well as HR Departments, have to acknowledge that Business Acumen has become a key skills set that will enable managers to effectively deal with the current world economic situation and the resultant business imperatives 2. High levels of business acumen must not reside only with a few senior managers, but should be widely fostered in the organisation. Business Acumen training should therefore involve various levels of managers (with appropriate content), ranging from Senior Management all the way to Team Leader/Supervisory levels. 3. Business Acumen should not only include the transfer of fundamental business skills (i.e. business finance), but should include aspects relating to inter-personal skills and even behavioural aspects as the final back-tothe-workplace application will require behavioural and leadership changes to ensure the desired business outcomes are achieved. 4. Training Managers should pay special attention to service providers of business acumen skills programmes. These providers should have a high level of cross functional knowledge and experience, but above all they have to use highly credible facilitators in their programmes to ensure that the value of the experiential learning is derived as expected. Successful organisations have managed to enhance the business acumen skills of their managers over a wide front with result that they are now better aligned to contribute to organisational objectives in a meaningful and actionable way. For them business acumen does not reside with a few talented people, but has been incorporated into most, if not all of their management staff and is reflected in sound management practice and process. Modern business acumen programmes must not only transfer and enhance operational business skills, but have to cultivate individual leadership and development, if they are to prove to be a key variable in the increase of an organisation s overall performance and success. 4. Reference List Dean, D (2009). A CEO s guide to reenergizing the senior team. McKinsey Quarterly. September 2009 McKinsey Quarterly (1997) The War for Talent. McKinsey Quarterly (2007). Global Survey (December 2007) Mostert CW (2009). Seeking talent an elusive effort? "Shadowmatch The Full Story". DBA Perth Leadership Institute (2007). The role of business acumen in leadership development. White Paper. Pretorius M and Venter C, University of Pretoria (2007). The use of simulations in transferring business management skills: an empirical study. Commercium 2007 Volume 7 Number 1. Rezak, CJ (2011). Developing business-savvy leaders: Raising the business acumen of managers for bottom-line impact. White paper. Paradigm learning Inc. Wikipedia. Business Acumen (2012). http://en.wikipedia.org/wiki/business_acumen Business Acumen for New Age Leaders 7 P a g e
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