Competencies 3 - Business Acumen, Consultation, Analytical Aptitude

Question 1

Value (definition, in business terms)

Answer 1

Generally, an organization’s success in meeting its strategic goals

Organizations aim to protect and enhance value of their assets, and to add new value where possible

Question 2

Value chain

Answer 2

Process by which an organization creates a product or service and sells or delivers it

Each internal or external participant adds value; total value should be more than the sum of its parts

Question 3

Value chain - HR contribution

Answer 3

HR adds value by:
- ensuring quality and availability of “pivotal talent pools” (employees with critical skills)
- managing labor supply to support optimal productivity
- providing leader and performance development training

Question 4

Service Level Agreement (definition)

Answer 4

Defines the services HR (or another function) will provide to other functions

Question 5

3-Stage Organization Life Cycle

Answer 5

3 Stages:

Introduction - low revenue due to little market awareness; business is developing their value proposition and creating an identity with customers

Growth - revenue increases; focus is increasing efficiency without stifling creativity

Maturity - high demand but revenue slows due to saturated market; only growth is through new products/customer groups, or acquisitions; efficiency is very important

At this point, organization will either decline, go through a period of now growth, or find a way to renew itself

Question 6

PESTLE Analysis

Answer 6

Environmental scan, including 6 factors:
- Political
- Economic
- Social
- Technological
- Legal
- Environmental

Question 7

Strategic plan (definition)

Answer 7

Plan that defines an organization’s purpose and direction

Typically includes
- Vision and mission statements
- Core values
- Goals and objectives (short and long-term)
- SWOT analysis
- Action plans

Question 8

Financial projections (definition)

Answer 8

Estimate of an organization’s future financial performance; serve as a valuable tool for translating goals into targets and for spotting deviation from the plan

Usually address specific 12-month period and are broken up by month and by function

Question 9

Revenue (definition)

Answer 9

Money generated through sale of goods and services; gross income

Question 10

Net income (definition)

Answer 10

Revenue minus costs

Question 11

Enterprise resource planning (ERP) system

Answer 11

Integrated software solution for storing data from various parts of a business
- Human resource management (HRM/HRIS)
- Customer relationship management (CRM)
- Manufacturing resource planning (MRP)
- Finance resource management (FRM)
- Supply chain management (SCM)

Question 12

Balanced scorecard

Answer 12

Tool for tracking performance of a business’s strategic goals/activities

Question 13

Budgeting methods - incremental

Answer 13

Traditional line-item budgeting; last year’s budget serves as the basis for the next budget

Efficient, but doesn’t account for changes in business circumstances or practices that could affect spending

Question 14

Budgeting methods - zero-based

Answer 14

Each unit or goal is ranked in order, and available funds are distributed in that order; every expenditure must be justified for each new budget period (everyone’s budget starts at $0)

Time-intensive (esp. at first), but can eliminate wasteful spending that sneaks through with other budgeting methods

Question 15

Budgeting methods - activity based

Answer 15

Focuses on how much it costs to perform different strategic activities; funding is allocated based on strategic significance of activities

Ex: Organization asks each function what it will need in order to produce certain outputs; if needed, resources are transferred from lower-priority activities

Question 16

Budgeting methods - formula based

Answer 16

Different units or operations receive varying percentages of the budget

Ex: A government agency has a 2% budget decrease, and spreads the effect among each department

Question 17

Business case (definition)

Answer 17

Presentation to management that a problem exists and that the proposed solution is the best one

Question 18

Business case - tips for success

Answer 18

• Align your proposal with organizational strategy
• Get early buy-in from key decision makers
• Focus on facts, not emotion
• Include specific metrics to evaluate the solution

Question 19

Balance Sheet

Answer 19

Snapshot of a company’s finances; shows assets, liabilities, and equity

(Whatever value is left from “Assets - Liabilities” is usually considered to be shareholder equity)

Question 20

Assets (definition)

Answer 20

What an organization owns - cash, property, finished product, and intangibles such as copyrights or proprietary knowledge

Human capital is an important asset but isn’t counted by finance

Question 21

Accounts receivable

Answer 21

Money owed to an organization by its customers or other stakeholders

Question 22

Liabilities

Answer 22

What an organization owes - rent, loans, wages/benefits earned but not yet paid, accounts payable

Question 23

Accounts payable

Answer 23

Money an organization owes to its vendors/suppliers

Question 24

Income statement

Answer 24

Compares revenue, expenses, and profits over a specified period of time (usually a year or a quarter)

The “bottom line”:
Net income = Revenue - Expenses

Question 25

EBIT (in finance)

Answer 25

Earnings Before Interest and Taxes

Question 26

EBITDA (in finance)

Answer 26

Earnings Before Interest, Taxes, Depreciation, and Amortization

Question 27

Cash flow statement

Answer 27

Shows how money is flowing into and out of an organization over a defined period of time

Data comes from the income statement and balance sheet

Question 28

Profit margin (formula)

Answer 28

Total sales - Total costs
_________________________
Total sales

Question 29

Return on investment (formula)

Answer 29

Gain from investment - Cost of inv.
____________________________________
Cost of investment

Question 30

Sales pipeline

Answer 30

A visual representation of an organization’s sales process - usually includes identifying leads, gathering information, creating proposal, negotiating, closing sale, monitoring

Question 31

Decision-making tools - SWOT analysis

Answer 31

Brainstorm organization’s strengths and weaknesses, and external opportunities and threats; sometimes includes assigning a value or ranking for each

Question 32

Decision-making tools - SOAR analysis

Answer 32

Similar to SWOT, but focuses on strengths, opportunities, aspirations, and results

Combines fact-finding with the organization’s goals

Question 33

Decision-making tools - Multi-criteria decision analysis

Answer 33

Team selects important characteristics of a successful decision (such as ability to meet project requirements, likelihood of success, least chance of causing secondary risks), and uses a matrix to score and compare their options

Question 34

Decision-making tools - Cost-benefit analysis

Answer 34

Exactly what it sounds like - usually uses group discussion to identify all possible costs and benefits of a decision

Question 35

Decision-making tools - Force-field analysis

Answer 35

Tool designed to analyze the forces favoring and opposing a particular change; group members identify and weight factors that could influence outcome (+ or -), and compares scores for different opportunities

Helps teams identify opportunities that are favorable for change, and avoid initiatives that face very strong resistance

Question 36

J Curve (how change affects productivity)

Answer 36

When implementing a change, expect to see productivity decline temporarily as employees adjust to the change, then gradually rise past the starting point

Question 37

Handling groups who are
- resistant to a change
- neutral
- welcoming

Answer 37

Resistant - provide empathy, communication, and support; goal is to shift out of resistance

Neutral - sell the benefits, provide opportunities for involvement; goal is to shift out of neutral

Welcoming - provide recognition, delegate responsibility, provide support for their leadership role; goal is to maintain course

Question 38

Change models - Lewin

Answer 38

1. Unfreezing - get people to accept that a change will occur, and reduce factors that would work against the change
2. Moving - move toward the new state, work toward general acceptance
3. Refreezing - focus on making the new idea a regular part of the organization

Question 39

Change models - Kotter

Answer 39

8 contributors to successful change implementation:
1. Create sense of urgency
2. Assemble a strong guiding team
3. Provide a clear vision
4. Over-communicate
5. Empower action
6. Ensure short-term successes
7. Sustain progress and build on achievements
8. Institutionalize

Question 40

Change models - McKinsey 7-S Framework

Answer 40

7 elements that need to be aligned for an organization to perform well:
- Style (culture and informal rules)
- Skills (institutional and individual)
- Systems (processes, including HR systems)
- Structure (decision-making and relationships between authority levels)
- Staff
- Strategy (how the organization gains competitive advantage)
- Shared values (what the organization is trying to achieve)

Question 41

3 approaches to change - cascade, progressive, organic

Answer 41

Cascade - relies on top-down sequence, where change at one level eventually transforms the level below it

Progressive - change originates at the top and is broadcast to the entire organization

Organic - points of origin can be at any level; change radiates out unevenly from origin, but accelerates with support from top leadership

Question 42

Steps in Evidence-Based Decision Making (EBDM)

Answer 42

• Ask - start with a question that can be answered through information gathering
• Acquire - gather info from various sources
• Appraise - determine whether evidence gathered is relevant, valid, complete, unbiased
• Aggregate - combine and organize data to prepare for analysis
• Apply - look for logical connections within the data; use data to draw conclusions; develop possible solutions, gain support, and take action
• Assess - monitor the solution and measure impact on objectives

Question 43

Focus group tools - mind mapping and affinity diagramming

Answer 43

Mind mapping - begins the discussion with core ideas; group members add related ideas and indicate logical connections

Affinity diagramming - a way of sorting a large amount of data/ideas that has already been collected; group sorts data into categories and subcategories until relationships are clearly drawn

Question 44

Focus group tools - Nominal group technique (NGT)

Answer 44

Proceeds through rounds where participants suggest ideas; rounds continue until no further ideas are proposed

In next stage, the group eliminates redundant items or irrelevant ideas, and sorts the rest in order of importance

Question 45

Focus group tools - Delphi technique

Answer 45

Starts with a pre-selected issue, and respondents are anonymous; first respondent proposes information, second respondent adds something different, and so on, until a list can be compiled

In next stage, the researcher circulates the list and asks each respondent to refine previous ideas, comment on strengths/weaknesses, and identify new ideas

*Aims to gather information from a group without the “group think” problem

Question 46

Reliability vs. Validity

Answer 46

Reliability - a data-gathering tool’s ability to provide consistent results

Validity - a data-gathering tool’s ability to measure what it is intending to measure

Question 47

Types of bias in statistical analysis

Answer 47

• sampling bias - sample might not represent the general population
• selection bias - when participants are not randomly assigned to control vs. experimental group
• response bias - researchers invite a representative sample to participate, but the group that responds is not representative
• performance bias - participants behave differently because they are being studied
• measurement bias - observers measure incorrectly due to their own bias or simple error

Question 48

Mean, Median, Mode

Answer 48

Mean - average
Median - middle value
Mode - most frequently occurring value

Question 49

Weighted mean

Answer 49

Calculates the average, but takes into account that some values have more weight than others

Commonly used for analyzing salary data, where some salaries are more common in the company than others; also useful in evaluating job candidates where certain qualifications are more important than others

Question 50

Frequency Distribution

Answer 50

Shows how often each value is represented in a data set

Question 51

Quartiles and Percentiles

Answer 51

Quartiles divide data set into quarters; percentiles divide data set into hundredths

Question 52

Standard deviation

Answer 52

Way of interpreting data using a “normal” bell curve; 68% of data will lie within 1 SD of midpoint, 95% within 2 SDs, and 99% within 3 SDs

If SD is smaller than “normal”, bell curve is taller than normal distribution; larger SD results in more spread-out bell curve

Question 53

Data analysis approaches:
- variance analysis
- ratio analysis
- trend analysis
- regression analysis
- root cause analysis
- scenario analysis

Answer 53

Variance - identifies degree of difference between planned and actual performance (usually uses schedule or budget as baseline)

Ratio - compares relative size of 2 variables; answer is a percentage (ex: net profit margin, turnover rate)

Trend - takes variance analysis a step further to see if it’s an isolated event or part of a longer trend; can be used to forecast future conditions

Regression - uses statistics to determine whether a relationship exists between 2 variables, and strength of relationship

Root-cause (or “5-why”) - starts with result and works backward to identify the cause; usually proceeds through several rounds

Scenario - used to test possible results of varying details of a situation; works best with software help, such as Monte Carlo analyses

Question 54

Histogram

Answer 54

Chart that shows sorting of data into groups; usually looks like a bar chart

Question 55

Pareto principle

Answer 55

80% of effects come from 20% of causes

Question 56

Pareto chart

Answer 56

Applies Pareto principle (80%/20% idea) in the form of a histogram, to illustrate which causes need to be addressed to change 80% (or other designated percentage) of effects