In the wake of several crises — from the coronavirus pandemic to subsequent supply chain interruptions, the war in Ukraine and more — organizations around the world face the double threat of recession on top of rising inflation.
Businesses create strategies to address these types of threats, but many leaders lack the business acumen to fully understand and successfully execute critical strategies. Several studies show that a majority of leaders can’t identify their organizations’ strategies or define the economic goal of nearly any strategy. Therefore, strategies often fail — particularly in high-stakes pursuits or in complex situations like combatting recession, inflation or both.
One cause of leaders’ strategic shortcomings is a huge pendulum swing in how organizations prioritize leader development. For years, it focused primarily on building business acumen so leaders could solve complex business problems and drive growth, according to Brandon Hall Group’s annual leadership development benchmarking studies. In 2017, for example, 84% of research respondents listed strategic thinking and business acumen as critical competencies, compared to 28% who listed inclusion and inspiration as critical.
Over the past few years, however — and particularly during the pandemic — the emphasis swung in the opposite direction, with organizations focused on helping leaders be more empathetic, authentic and inclusive. In Brandon Hall Group’s 2022 leadership benchmarking study, 66% of research respondents said business acumen was critical for improving leader development, compared to 88% citing emotional intelligence.
BTS, a global professional services firm that partners with clients to enable strategy execution, has been steadfast in the belief that great leadership balances strategic intent, people and culture.
Dan Parisi, an executive vice president and Global Head of Strategy Execution & Business Acumen at BTS, believes successful strategy implementation starts with leaders – whether it is around dynamic challenges like recession and inflation or specific functions like improving product or service offerings. Parisi points to four traits that will make leaders better decision-makers and accelerate their strategies.
- Financial literacy is the foundation that drives business strategy. It is simply how a company keeps score and measures progress. All managers and leaders must have a foundation of financial literacy, Parisi says. This includes understanding profit and loss statements, a balance sheet, cash flow, and key performance indicators (KPIs).
- Functional business savvy is what gives leaders in the various functions of an organization the necessary perspective on how their function works with other parts of the business to produce business growth. Parisi says having functional business savvy means leaders learn to see beyond their silos and think “end-to-end” across the enterprise.
- GM (General Manager) Thinking occurs when leaders extend their understanding to how all functions work together to produce value for clients, beat the competition and produce financial results. This is traditionally the function of a general manager. But in high-performing organizations, Parisi says, leaders have this ability to sense market trends, set strategies and make decisions to navigate the business through ambiguity and uncertainty.
- Enterprise Value Mindset takes strategic thinking to the highest level and focuses on driving sustainable business growth across an entire enterprise. Parisi says CEOs everywhere are demanding that their leadership teams adopt more of an enterprise value mindset — to think strategically beyond their function to have a deeper impact on the organization.
There are signs that employers are now seeing the need for balancing leadership priorities. In the Brandon Hall Group study, How We Can Improve Leader Training, inclusive leadership still rated high as a quality that leaders need. But the top two answers when we asked about improvements needed in leader training were:
- More focus on practical skills needed for future roles
- Strategic planning and critical thinking
Businesses will be operating in a VUCA environment for the foreseeable future, juggling the evolution of the work environment with the impact of inflation and a possible recession. Leaders must develop and demonstrate a strategic mindset in tandem with a focus on inclusion and collaboration to steer their organizations to success.
-Claude Werder, Senior VP and Principal HCM Analyst, Brandon Hall Group