At Insight Experience our goal in business acumen leadership development programs is to increase participants’ fluency in financial terminology and decision-making, rather than turning them into finance or accounting professionals. We use business simulations to highlight key leadership decisions and trade-offs, trace the impact of our participants’ everyday decisions through their own company financial statements, and challenge them to find opportunities for improvement. Their stories during and after the programs inspire us every day. It’s hard to pick favorites, but here today we share a few such success stories from the field.
Improving Manufacturing Working Capital
We worked with the CFO of a diversified manufacturing firm to create a business acumen course for division and general managers. Key sections of the course were linked to the new CEO’s ambitious five-year operating plan. One prominent goal was better working capital management, but progress was slow. The CEO and CFO were frustrated with the pace of change, and our participants were frustrated with the amount of pressure being placed on them in inventory and accounts receivable management.
As part of the curriculum, we asked our participants to calculate the value to the corporation of collecting invoices and turning inventory just one day sooner. Participants were inspired; in a flash, we saw the light bulbs go off. As a group they created a list of best practices and potential improvements. At the end of the session, they met with the CFO and told him how they planned to prioritize working capital management. The corporation used examples and exercises from our course to better communicate the importance of working capital management throughout the organization. They exceeded their working capital goals within 15 months.
Shortening the Billing Cycle
Many of our clients have a sufficient understanding of how they influence the Income Statement, but often it is unclear to them how they influence the Cash Flow Statement, particularly around billing. In most organizations, providing customers with timely, accurate bills can substantially reduce payment times. We have worked closely with two long-time customers, one a major equipment manufacturer and one a large service provider, to help their senior managers understand how they influence the Unbilled Accounts Receivable — and why it matters.
For each clientm we created a custom business simulation with real-world leadership trade-offs, including those that impact billing times in their markets. A business simulation allows us to compress time to show the cumulative effect of small changes. After the simulation debrief, the participants worked in small groups to create action items for their businesses. The steps they proposed ranged from changing standard contract terms so that single line-item issues do not delay the total invoice; to sending draft invoices to the client before major milestones; to having the service technician create an invoice for the billing team within 24 hours of the ticket being finalized; to highlighting the importance of accurate timesheets. As a result, both clients have reduced their Unbilled Receivables to well below industry averages and have successfully maintained that position over time.
How Leadership Behaviors Drive Financial Performance
One of the biggest “aha!” moments for participants in our classes is understanding the link between leadership skills and financial performance. In nearly every class, we thoroughly review the client’s business to demonstrate how a high-performing team drives higher revenues, lower costs, and improved cash flow. Our business acumen simulations present real-life leadership scenarios with difficult trade-offs. We identify for our participants the financial consequences of strong communications, prioritization, the development of teams, and the establishment of long-term trust with customers. One senior leader recently said:
“I have always prided myself on how many high priorities I set for my team. I now realize that taking things off their plates and helping them prioritize is even more powerful.”
Senior participants have had similar epiphanies when it comes to the notion of building their teams. Most of them are dedicated to their employees and see their primary role as managing the trade-off between employee development and driving results. While that can occasionally be the case, our simulations allow them to examine the long-term costs of employee turnover, training, productivity losses, burnout, and reduced customer satisfaction. Although much of our class time is dedicated to improving financial understanding, over half of the final commitments from our participants include mention of increased communication or the development of their teams.
Another “aha!” moment often cited in our classes is understanding the power of small steps. We present participants an exercise that demonstrates how an exceedingly small increase in revenue can impact profits — whether through a change in scope, a price increase, the early completion of work, or the expansion of a sale. We apply the company’s own financials to track the effects of slight changes in revenue or cost and then lead a discussion on various ways to capture them. Because of the positive impact this has had on participants, we now equip them with a teaching kit, one they can share with their own organizations.
Applying financial concepts to a fictitious business and practicing difficult trade-offs in a business simulation creates a remarkably safe space to learn. Leaders can experiment with numerous strategies and techniques to see which business outcomes they drive. Whether those strategies succeed or fail in the simulation, the participants learn valuable lessons they can take back to the job. Empowering non-financial employees and leaders to learn, understand, and apply business and financial acumen concepts creates a more informed, capable, and high-performing organization. Click here to learn more about an Insight Experience Improving Business Acumen leadership development program.
