By Anne Evenson
If you are hoping to be an effective leader, making sure you have these vital skills is more important than ever!
“Leadership and learning are indispensable to each other.”
John F. Kennedy, 35th President of the United States
Shrewd leaders and savvy business owners wear many hats and must be proficient in different areas that frequently overlap. Whether you’re preparing to step into a leadership position or launch your first startup, it’s worth your time and energy to develop the foundational skills you need to help your company thrive.
Increase Your Financial Management Proficiency
Financial management skills are an essential element of any business professional’s toolkit. The key component to strong financial leadership is knowing how business processes and administrative decisions affect an organization’s financial status.
Understanding how to generate and measure value leads to smarter decision-making. Leaders who have access to accurate financial data can provide insights and analysis which improve communication and trust among stakeholders. Savvy entrepreneurs who appreciate every aspect of finance, from accounting and bookkeeping to cash-flow projections to securing loans, are more likely to succeed. Whatever the industry, if your role requires more fiduciary responsibility, it’s important to learn the principles of financial management.
Cash Flow – According to CB Insights, 29% of startup founders indicated that running out of cash was one of the primary reasons for the failure of their company. Cash flow is the amount of money coming in and going out of a business. Cash flow projection is a financial statement that anticipates the expected cash flow for an upcoming period. This projection gives the business leader or entrepreneur a better sense of their organization’s current financial health, which allows them to make adjustments like hiring employees or cutting costs.
Bookkeeping and Accounting – Keeping accurate financial records is the foundation of all financial management. Bookkeeping is the daily process of recording all financial transactions in a general ledger, including debits and credits, invoices, and payroll. Accounting involves interpreting, classifying, summarizing, analyzing and reporting this data compiled by the bookkeeper to produce financial models for the business owner.
Supply Chains – A supply chain is a network of entities, people, activities, information and resources involved in moving a product or service from a supplier to a consumer. The success of any business is intrinsically linked to the performance of its supply chain. Experienced leaders understand that a reliable supply chain strategy doesn’t evolve organically but is the result of a rigorous design process.
Financial Tracking and Reporting – Skilled leaders can steer their organization in the right direction over time by tracking the financial performance of the business. Understanding how to read financial reports helps ensure that a company remains financially viable and capable of meeting its operational objectives instead of running out of cash, defaulting on loans, or becoming over-leveraged. Tracking and reporting the financial performance of the business includes discovering and analyzing trends, evaluating market sectors, monitoring accounting discrepancies and making strategic choices. Financial reports help leaders make decisions that will ultimately guide their organization’s growth or decline. These are just a few of the financial management skills that every leader and business owner needs to learn. The UT Center for Professional Education offers an Introduction to Financial Management course that is the perfect place to begin building a better financial future for your business.
Understand the Fundamentals of Human Resources
The Small Business Association (SBA) defines human resources (HR) as “the people who work for a company or organization,” and human resources management (HRM) as “the department of a company that is responsible for managing those resources.”
For leaders and business owners, basic knowledge of HRM competencies is critical to the health of the organization. Often it is the small business owner who must function as their HR person, so they must be well-versed in recruitment and hiring processes, employee training and development, and compensation and benefits. Business leaders must navigate the performance management process and be familiar with employment law and compliance and liability issues. Whichever way you look at HR, caring for one of your primary assets is just as important as understanding your finances.
Recruitment and Hiring – Businesses invest a significant amount of money in finding, training and developing their employees, so hiring the best person and retaining them is critical. High employee turnover is expensive, so whoever is performing the HR function in an organization should carefully search for a candidate who has the skills and experience for their position and who will integrate harmoniously with the organization’s work culture.
Training and Development – Leaders who create and maintain a training and development program for their personnel are more likely to achieve the strategic goals of the organization. Employees prefer to work for companies that invest in their skills so they can stay competitive among their peers. Employers who provide creative development for employees are rewarded with more engagement and commitment and can better adapt to changing business structures.
Compensation and benefits – This term refers to both the monetary and non-monetary benefits offered by an organization to its employees. These include salaries, health insurance, employee discounts and other perks that are a vital aspect of HRM because they help motivate the workforce. The four main types of direct compensation are hourly, salary, commission and bonuses. One of the best ways to attract top talent to an organization is by offering competitive compensation and generous benefits. These incentives inspire loyalty and encourage higher productivity, which results in higher employee retention.
Performance Management – This is the formal practice of ongoing communications between a supervisor and an employee, which fulfill the strategic goals of the organization. Regular employee performance reviews set clear and specific expectations for employees while providing supervisors with a way to monitor and measure their activity. These analytics can support decisions associated with advancement, compensation, and training and development. Performance reviews also offer opportunities for periodic formal and informal feedback and coaching.
Employment Law – Federal labor and employment laws change regularly, and business leaders and employers must stay on top of this continually evolving legal landscape to provide a safe, healthy and productive environment for their employees. Entrepreneurs need to be familiar with labor laws and workplace rules and regulations to ensure the business is compliant and protected from liability. Maintaining a regularly updated employee handbook and the current employee documentation is a must for anyone performing HR duties.
So, whether you would like to fulfill the human resources role yourself, or you plan to delegate that responsibility to someone else, remember that an investment in HRM skills and competencies is an investment in your organization’s strength and stability. You can learn about real-world human resource issues and topics in SHRM Essentials of Human Resources offered by the UT Center for Professional Education.
Financial management basics and human resources fundamentals are just two of the essential skill sets needed for leaders and business owners to be successful.
Making time for continued learning is another strategy for success, so stay tuned for part two of our series featuring more Essential Skills for Emerging Leaders and Entrepreneurs.
Anne Evenson is a marketing specialist and copy editor working in Austin, Texas. She holds a BFA in Fibers and Printmaking from the Kansas City Art Institute.
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