Coaching on Business Acumen Is Critical

With record numbers of layoffs, leaders’ interpersonal skills are being put to the test as they guide the workforce through the economic downturn. In many cases, coaching programs focused on navigating personal conflicts and building team morale have prepared them for the challenge.

But a recent white paper from the Perth Leadership Institute argues that the downturn demands that the development of business acumen, not interpersonal skills, should be the top priority for coaching programs. E. Ted Prince, founder and CEO of Perth Leadership Institute, said coaching programs should be customized to the business cycle and, in the current downturn, focus on developing leaders’ ability to help companies survive financially and create capital.

“When times are good and money is plentiful, coaching needs to focus on interpersonal skills because the priority is not profitability,” Prince said. “When times are bad, the focus needs to move to business acumen because company survival is often at stake, and so is the career of an individual, where profitability concerns now become more important than just interpersonal skills. Lack of business acumen may be a career derailer in a down cycle.”

Prince defined business acumen as an individual’s ability to create capital and deliver positive financial and business outcomes to the organization. To be more effective, learning professionals should shift coaching resources to develop leaders’ abilities in these areas.

“Traditional coaching focuses on interpersonal skills and vocational capabilities,” Prince said. “It has rarely focused on business acumen and financial outcomes directly.”

Adding further complexity to the issue, the financial crisis on Wall Street illustrated that financial literacy often has no correlation to business outcomes or making money. In fact, Prince said, there may be an inverse correlation between IQ and academic skills and wealth creation and business acumen.

“This means that CLOs need to re-examine their beliefs about what they need to focus on in recruitment, talent management and talent development,” Prince said. “It is quite possible that they aren’t focusing on the right things, particularly at a time of financial crisis.”