• Author:Andreas Mueller
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Leadership Acumen – what the CHRO wants you to know

Some terms are often quoted and rarely commonly understood, business acumen is one of those. How often do I hear the term, mainly to describe what HR managers don’t know about the business, mainly quoted by non-HR managers.

But there is help for HR: only a decade ago, Ram Charan described in his best selling book “What the CEO Wants You to Know“, what he had learned from his Indian childhood, when he had helped out in his fathers shoe shop, and what turned out to be a universal law for him, for any kind of a business.

These are the 5 things which he likes us to focus on:

  1. Cash & Cash Flow
  2. Margin
  3. Velocity (e.g. turnover)
  4. Growth
  5. Customers

Charan coined the term ‘business acumen‘ for these core aspects, and gained praise until these days. So, this became a gold standard of business basics. The business world has changed since, as Steve Denning stated in his Forbes review of the Global Peter Drucker Forum 2014, “the discussion was not about a type of firm, young or old, big or small, in or outside software, but rather a set of leadership and managerial practices that are taking over all kinds of organizations.” This article might help to develop this new kind of leadership into the realm of modern HR and leadership.

So let us reframe Charam’s question: What does the CHRO want you to know, especially on your role as a leader within the organization?

1. What is it all about?

Charan is quite in line with most economists, when he assumes, that it’s all about money. This is definitely true in times of steep economic growth which we have seen in the past. Yet, when prosperity comes more into focus than financial growth, we should rethink it. Gallup had started 30 years ago with employee engagement surveys, which were only the start of a more people oriented perspective on the economy. The war of talent has shown, that cash alone is even not enough to attract the best talent, and that Generation Y has now an even higher demand of matching human values than ever before.

When it is not about cash as the main asset anymore, we should add people to the bill. Yet, what we want to maximize would not be simply the amount of people, but the value(s) they generate. General Electric has build this into their people management. After GE had invented “the 9-grid” to map performance vs. potential, the new grid is focussing on the ‘what’ (performance) and the ‘how’, which is a match with the company values.

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Source: Leadership Roundtable

So, let us add people values as what fuels the people business.

2. What makes the difference?

In cash terms, more is better, which does not hold true for people. Not more people is better, instead it is the kind of values that the organization is striving for. Whether we take Maslow’s hierarchy of needs (cf. Huitt’s recent review) or currently en vogue developmental stages (cf. Kegan) or any other, we have a natural understanding of higher vs. lower people values.

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Striving for Higher Values (source: http://www.culturalinspirations.com.au)

What makes the difference, is no more the bigger margin, but it is the level to which the organizations values reach out.

3. What can we do to intensify?

Business acumen looks for the velocity to achieve a higher margin over the same period as others. Effective processes, better equipment, more resources (also more human resources) can help to accelerate the business. When we look instead at people’s values, the higher intensity comes by personal interaction, by active communication as in personal development or leadership.

In his recent book “You Must Change Your Life“, German philosopher Peter Sloterdijk calls the human beings’ seek for the better a ‘vertical tension‘, and learning is the modern approach to constantly reduce this tension.

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The male torso that inspired Rilke to say “You must change your life”, marble (perhaps Parian), from the island of Miletos, “Severe” early classical style. c 480-470 BC. The Louvre, Paris. Photo © R.M.N./H. Lewandowski

The learning strategy makes a difference between organizations, and not all strategies include the 70:20:10 finding, that most learning happens outside of classroom or coaching sessions, but at the workplace. Neither do all learning strategies include a homogeneous leadership development nor leader development, which enables leaders to improve on their people leadership role instead of their business leadership role.

To generate velocity in the people domain, we should focus on the development of individuals within a framework of corporate values and on an organizational development to foster the organization’s culture.

4. What can others do to intensify?

To have a well working business is one, but how about the competition? Market growth is not only a demand of shareholders but it is also an external indicator for business success in practice. Putting this approach into the people domain leads to a communication of the organization about external values. Even well-positioned businesses can quickly fail if they do not keep pace with their environmental values. Since the Enron bankruptcy, we know about the importance of corporate ethics as a continuous discourse with society which helps to adjust the internal value set.

Since people values are not as stable as the way we work with figures, the criterion is how an organization displays and reflects its values. The more transparent it is, the more trust it builds, the more human value it produces.

5. Who is buying in?

As a final aspect, Charan focusses on the customer, who generates the business. We will extend this view, as there are two more groups who have to buy in, current employees in the same way as potential employees. As the human values form a core layer to top business results, it gets clear that above all, the employees should breath the corporate values, before candidates and customers will be fascinated and attracted. It is an enormous and constant effort to bring the organizational culture to a higher level, and even more so to make the environment feel it.

What the Chief Leadership Officer wants you to know

Finally, here is the list of our 5 core elements for leadership acumen based on Ram Charam’s approach:

  Leadership Acumen Business Acumen
What is it all about? Values Cash & Cash Flow
What makes the difference? Developmental Stages Margin
What can we do? Learning Strategy Velocity
What can others do? Ethics Growth
Who is buying in? Employer Attractiveness Customers

If both, business and leadership acumen, help to form our leaders of the future, I am optimistic that we will not only see more successful companies, but also more “irresistible” organizations in the near future. Additionally, the role of HR would be much stronger being an advocate and provider of Leadership Acumen instead of the often quoted lagger in Business Acumen.

 

NB.
Bersin/Deloitte published a study on the “irresistable organization” in 2014, in which Josh Bersin combines five strengths: meaningful work, great management, individual growth opportunities, an inclusive, flexible & fun environment, and inspirational leadership – which is not too far away from the idea above. One substantial difference stays: We would only add more of an external influence to it, which means, irresistable organizations should behave more ethical.