The better your business know-how, the more value you'll bring to the job.
Business acumen is the ability to link keen insights about and a thorough assessment of the business landscape with an awareness of how money is made and then executing a strategy that delivers results.
Sounds complicated, right? Well, it is. But you can break it down into simpler terms.
At its core, having business acumen means understanding how your business operates, competes against other organizations, and makes money. Do you know how your company makes a profit and delivers value to shareholders and customers? Do you understand the direct connections between what you do each day as a talent development executive and the impact those actions and decisions have on your organization's success?
To build your business acumen, you first need to think of yourself as a member of the business team. You need to be familiar with various business models, financials, strategy, sales and marketing, R&D, profit and loss, EBITDA, and other key concepts. Clearly, this isn't a single skill but a broad set of competencies that require understanding across multiple facets of the organization.
Let's take a closer look at how you can heighten your skills in three key areas of business acumen.
Even talent development leaders need to have deep insight into the marketplace in which their organizations operate. "This means knowing who customers are and what they want, who the competitors are and what they have to offer, and the trends shaping and redefining the marketplace," explains Ned Wasniewski in a blog post. Wasniewski is a partner at Insight Experience, a Boston-based firm delivering business simulations and learning experiences to integrate leadership, business acumen, and strategy execution.
It also requires a deep understanding of the company's competitive positioning, its value proposition to the customer, and how leadership plans to support it. Mike Figliuolo, founder and managing director of thoughtLEADERS, facilitates a business acumen course for Lynda.com. To gain a clearer understanding of these elements, he suggests leaders pursue a deep exploration of the following questions:
- What business are you in?
- What's your market and who is your competition?
- What problem does your business solve?
- How are your products and services created?
- What are your pricing and growth strategies?
- How do you measure performance?
No doubt you will need to cultivate relationships with people inside other departments to answer those questions. Your purpose in creating these relationships is to learn more about what they do and how talent development can work with their department to serve the business better. This should be easy, though, because you're already building relationships as you implement talent development solutions.
"Knowing how decisions impact bottom-line financial results is essential," says Wasniewski. He explains that all C-level leaders must have a good grasp of basic financial reports and metrics to be able to monitor performance and make corrections to plans. They also must understand how decisions affect profitability, the utilization of assets, and cash flow.
In an article for the American Management Association, learning and development expert Marina Theodotou advises leaders to start building their financial acumen by strengthening core financial literacy concepts and metrics, and streamlining their own processes such as budgeting, forecasting, and reporting. She also says that you need to "sharpen your ability to keep your house in order and work efficiently by managing costs and resources and focusing
on process quality, standards, tools, and metrics."
However, in a blog post, the Employee Training Institute's Erin Hall warns against mistaking financial literacy for financial acumen, explaining that financial literacy is the ability to understand financial concepts and financial acumen is the ability to applying that knowledge to make better business decisions. In other words, financial literacy is just one piece of broader financial acumen. In addition to literacy, financial acumen requires interpreting, applying, and communicating financial data.
"The underlying common thread in all these functions is a keen understanding of the numbers in your line of business. Mastering the numbers enables you to make sound and quick decisions," Theodotou explains.
As leaders gain additional responsibility, they must become increasingly aware of how their decisions affect others. They must take into account not only their own functional requirements, but the broader needs of the business. That requires a system thinking approach, a method of critical thinking by which you analyze the relationships between the system's parts to understand a situation for better decision making.
"It's about seeing the big picture and the interdependency of decisions and how they combine to achieve competitive advantage and financial results," says Wasniewski.
How can you start to see the big picture? In a post on the Nimble Blog, Laura Patterson says leaders should read everything they can from inside and outside of their organizations about their market, customers, products, competitors, and industry. This will help you to see the full system within which you are working and give you context for your decisions.
"People perceived to have business acumen are people who perform thoughtful analysis, which often entails making connections between and among various data sets," says Patterson. "This type of information helps you begin to see potential patterns and how the future might unfold. Armed with this information you are in a better position to anticipate and make strategic recommendation."
Make the time
For talent development leaders to be recognized, valued, and respected members of the teams they support, they must develop strong business acumen. When you cultivate your knowledge and understanding of how businesses and organizations run at every level, you improve your ability to make good decisions about how to develop the talent your organization needs.
"Developing and honing your business acumen isn't something you do when you have a few extra minutes," reminds Patterson. "You have to make a conscious decision to dedicate time to develop this skill."
Business Acumen Quiz
How much business acumen do you have? This 11-queston quiz based on content from the LinkedIn Learning course taught by leadership expert Mike Figliuolo can help you determine how much business acumen you have.
Read more from CTDO magazine: Essential talent development content for C-suite leaders.