There are many industries where times are very tough right now. Core markets have slowed down and demand has been cut by up to 20% year over year in too many industries that drive the global economy. Some places like central Europe and Eastern Europe have been hit even harder because of the ongoing Russian war and the impact it is having on energy prices and other goods. Even industries like high tech which have been fairly recession proof are also feeling the effect as consumer confidence and demand continue to erode. The impact of these tough times transcends the organization and has an impact on every employee.

In 2023 and beyond, the capability of Strategic Thinking will be more important to business leaders than ever before. Everything in business has changed and without foundational strategic thinking skills, leaders, decision-makers, and decision implementors have no direction. Without strategic direction, business failure is almost guaranteed sooner rather than later.

It is my pleasure to share with our readers fresh content and ideas about the 6 levels of strategic thinking. We use this framework and approach in our core business acumen content that supports our business simulation-centric approach to learning and the insight shared here is the same that I discussed with senior leaders during a high-level program delivered for a global 1,000 company’s high potential leaders.

Learning from McDonald’s and Bed, Bath, & Beyond

Two iconic companies have been in the news over the past few days, and there are some great business acumen learning lessons from both. As Advantexe teaches in our core business acumen programs, everything in business starts with the strategy and the value proposition a company chooses to offer to its customers. Once the value proposition has been locked in, the company must execute that value proposition through operational decisions. The stories of Mcdonald's and Bed, Bath, & Beyond provide some interesting contrasts and insights into strategy and execution.

One of the most frequently asked questions in Advantexe’s business simulation-centricworkshops is, “Can you explain the impact of giving or not giving dividends?”

To help participants in our Business Acumen programs I wrote this blog that I am pleased to share with our blog and business community. I start the blog with a definition of what a dividend is and then share insights about the impact of the dividend on a company and its shareholders.

What is a Dividend?

A dividend is a way to share a portion of a company's profits with its shareholders. Shareholders have trusted a company with their capital (cash) and if a company does well, there is an obligation to share the success with the shareholders who gave the company the cash to do business.

The distribution of dividends is typically a big deal and is approved by the Board of Directors. Dividends are often paid quarterly, and sometimes instead of cash, dividends are given in additional stock.

One of the most important metrics of success when it comes to a dividend is something called the “dividend yield.” The dividend yield is calculated by dividing the actual dividend by the current stock price. For example, if the annual dividend is $10 ($2.50 per quarter) and the stock price is $200 per share, the dividend yield is $10 divided by $200 which equals 5%. That, of course, is over and beyond the increase (or decrease in the value of the stock). A blog for another day is the concept of Total Shareholder Return (TSR) which looks at the increase/decrease of the value of the stock plus the added value of the dividends.

For investors, dividends can provide a steady stream of income and can also be a sign of a company's financial health. For example, retirees who have invested in a portfolio of stocks that give regular dividends may actually live off of their quarterly dividend disbursements without having to tap into other savings or selling off the actual stocks.

A high-potential leader participating in the Business Acumen program was very upset. She just couldn’t reconcile her understanding of why the Cost of Goods Sold (COGS) didn’t go down despite the fact her business simulationteam “increased their Production Team budget by 1.5%” (which in the context of the simulation was really not that much). I carefully explained that the COGS is also a function of 3 other dynamic variables including raw materials, R&D, and labor costs. She responded by saying, “I just don’t understand…how can all of these things be happening at the same time? How would I know what is more important if nobody is telling me the answer?”

I explained that just like in the real world of business, there is always going to be a certain level of ambiguity and many times in business things are never going to be black and white, that there are many areas of gray such as understanding how the COGS of a product is derived. At that point, you could physically see the hopelessness on her face as she receded to the background not knowing what to do next.