Business Acumen is one of the key competencies every leader in every organization at every level needs to be viewed as a true business partner. As I was reviewing various definitions for Business Acumen I came across the one on Wikipedia. It reads as follows:
“Business acumen is keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome. The term “business acumen” can be broken down literally as a composite of its two component words: Business literacy is defined in SHRM’s Business Terms Glossary as “the knowledge and understanding of the financial, accounting, marketing and operational functions of an organization.” The Oxford English Dictionary defines acumen as “the ability to make good judgments and quick decisions”. Given these textbook definitions, a strictly literal definition would be “keenness and quickness in understanding and dealing with a business situation.”
Additionally, business acumen has emerged as a vehicle for improving financial performance and leadership development.”
We often think that business acumen is only about positively impacting an organization’s financial performance. Wikipedia’s definition acknowledges that business acumen is more than that. Understanding and assessing the current business realities of your Company, aligning the department strategy with Company strategy and contributing to profitable growth are all critical to “…dealing with a business situation in a manner likely to lead to a good outcome”. It is also a key skill needed for overall leadership development.
“Human Resources leaders should view themselves as Business Partners first with a specialty in Human Resources, an expertise in Aligning People Performance with Business Results and the ability to deliver Profitable Growth.”
I often wonder why this skill has not been given higher priority and developed in the early stages of a leader’s career, particularly with leaders in Human Resources. Here are some tips for developing your Business Acumen:
Know Your Company Financial Statements:
It may not be all about the numbers but knowing your Company’s financials is high on the importance list. Financial metrics are the numbers senior leadership uses to gauge business performance and the basis for many decisions. They are the universal language of business and to be a true business partner you need to be financially intelligent. Ensure your understanding of the “big three”: The Profit and Loss Statement, The Balance Sheet and The Cash Flow Statement.
Calculate Return on Investment (ROI):
Understand and make ROI part of your regular means of evaluating your Human Resources decisions. Include these calculations when building your business case for new initiatives.
Understand Your Business’ Product or Service:
If you are new to your Company, spend time during your training on the front lines of your operations. Get to know not just the product and service first hand but what it takes for your team members to deliver the quality your Company expects. Build in regular opportunities for you and the members of your department to refresh your understanding and stay in touch with those in operations.
Stay Current with your Industry and your Expertise:
Understanding the industry environment your Company operates in helps you know what skills your leadership needs to remain competitive. Staying up to date on your functional expertise helps you deliver that need more effectively.
Develop Cross Functional Relationships:
Get to know your peers in other departments. Develop your understanding of how other functions impact the success of your Company and the challenges they face. Seek out ways to partner on Company initiatives. Start with your CFO and schedule a time to review the Company financial statements.
Align with your Company’s Strategy:
Make sure you and your team know the overall strategy of your Company. Ensure you understand the business results that are expected. Develop strategies and tactics with your department that align and will support the Company’s success.
Develop the Business Acumen of your Team:
Many say the best way to learn is to teach others. Ensure the members of your team understand the Company financials, teach them to calculate ROI, allow for time in their schedule to stay in touch with operations, create cross-functional teams for initiatives and ensure they understand the Company strategy and their role in delivering results.
Continue to develop your Business Acumen and become a true Business Partner in your organization.