Training and leadership development have become crucial for filling employee skill gaps and talent needs in today's labor market. Harvard Business Review states that many large companies have failed to pay adequate attention to their leadership pipelines and succession processes, thus quantifying a total loss of a trillion dollars during CEO and C-suite transitions. To overcome talent obstacles and costs, organizations are increasing their internal talent development and succession planning. According to SHRM, succession planning is a focused process for keeping talent in the pipeline. There are a variety of skills and leadership competencies that are key in developing future leaders. However, two skills are strongly associated and stand out more than most: financial literacy and business acumen. The Bureau of Labor Statistics expects the demand for finance skills to rise 16 percent by 2028. Financial literacy is an understanding of financial resources, and business acumen is the depth and application of that understanding. Employees, managers, and leaders need to assess the competitive landscape accurately and connect day-to-day decisions and activities with critical financial, functional, and business performance metrics and goals. By implementing business acumen into an organization's leadership and succession planning process, leaders will quickly begin making effective and positive impacts on their organizations.
During our current times of change, decision-making skills have become more critical than ever. To remain competitive in today's market, workers and managers must quickly respond to shifting environments, operational changes, and new initiatives. Decision-making requires critical thinking and analytical skills. According to GCFGlobal, critical thinking is the act of deliberately analyzing information so that you can make better judgments and determinations. Future leaders need to examine their organization's data and understand what levers need to be pulled to make an effective impact.
When disagreements arise in personal relationships or businesses, it usually seems best to avoid conflict in order to save the relationship. However, there is an opportunity to turn disputes into productive negotiations while also preserving the relationship. Finding and demonstrating value is key to capitalizing on opportunities for negotiation. As a leader, if you can build a case and articulate what values a deal might add, a productive outcome is more likely. Identifying opportunities for negotiation is often overlooked, but it has become more imperative for leaders to have the skills to negotiate their careers/roles and negotiate deals within their business. Whether you are building a case to speak to your boss about a raise or needing other stakeholders to sign off on a project, you need to make sure the value is visible. Reminding your boss of your closed sales or how you have impacted the business is essential. To get other stakeholders' support, they need to understand the value being offered and the difference it will make. Business acumen creates a foundation for identifying, measuring, and sharing value.
The Project Management Institute states that strategy gives a shared vision for the organization, serving more like a North Star. It guides activities and decision-making based on a standard set of assumptions. Future leaders need to understand their business strategies, but more importantly, they need to know how to execute their goals. Understanding the big picture of how one's business works and how their organization makes money will allow leaders to have greater agility and understanding when implementing new strategies.
The ability to understand business strategies and key financial metrics is crucial to have powerful conversations. According to the Council of Advancement and Support of Education (CASE), strong business acumen in leaders provides the ability to have a sophisticated discussion with a client, board member, or other business leaders. Future leaders must know their industry's markets and understand the impacts and how it affects the business. Communicating with a common financial language both internally and externally creates greater clarity and more productivity across an organization. Leaders that lack financial literacy and business acumen skills are unable to have powerful, challenging conversations. If one does not understand the business, how can one improve the business's success?
Ready to arm your future leaders with business acumen? Check out our eGuide: 5 tips every leader needs.