You can spend your training dollars on everything from communication skills to time management and end up with
great leaders that don't understand whether their efforts are good, bad or indifferent when it comes to your profitability.
Business Acumen Articles, Information, and Opinions
Business Acumen Definition
Business acumen is financial literacy and then some.
Business acumen is a concept pertaining to a person’s knowledge and ability to make profitable business decisions.
The dictionary defines acumen as Quickness, accuracy, and keenness of judgment or insight. It comes from the latin word acuere which means to sharpen. Acuere is also the root of the word acute.
We find that business acumen is often a missing link in leadership and management training today. While many aspects of business are taught in business schools (i.e. accounting, legal, marketing, advertising), these skills are specialized and segmented. This practice produces an excellent understanding of the profession, or skills, but creates distance from the whole of running or impacting a business.
We believe that every employee needs to understand how his or her role fits into the big picture and how he or she impacts the business.
Business Acumen & The Five Business Drivers
Business Acumen is all about managing the connections between Five Business Drivers that are essential to every business:
Cash
Profits
Assets
Growth
People
Business acumen combines financial literacy with professional competence to achieve this single goal: sustainable and profitable growth. It’s an overall strategy to help employees learn more about how your company makes money and how they can play a key role in the process. It’s very hard to run a successful business without a strong emphasis on Business Acumen. After all, if your employees are not making you money - then what are they doing?
Ram Charan teaches that business acumen requires an understanding of the building blocks of money making. Think back to how you learned physics or chemistry. First you had to understand the parts of an atom: electrons, protons, and neutrons. Once you understood the parts and how they interact, you were ready to develop your knowledge. It’s the same with business.
Businessmen and businesswomen who understand the The Five Business Drivers individually as well as the relationship between them are able to assess the total financial health of the business, articulate their findings, and advocate strategies that grow the company profitably.
The Five Business Drivers can all be measured and interpreted if you know how to read financial statements. But people with business acumen have gone beyond financial literacy. They understand the real meaning of the numbers and can visualize the decisions and strategies that the numbers are a result of. They instinctively sense the relationship between cash, profits, assets, growth, and people (employees & customers), and are able to create a mental picture of the total business.
Business Acumen: The Universal Language of Business
The Five Business Drivers also make up the universal language of business. Smart executives recognize that employees will be able to contribute more if they know what really goes on in the business. Making business acumen part of the corporate vocabulary breaks down organizational silos and bridges the communication gaps between employees.
Whether it’s getting your new workforce to work with your seasoned vets, or getting a culturally diverse workforce talking about the same things - business acumen invites everyone to participate and understand the business’s money making priorities. In short, business acumen helps employees become more valuable to the company.
Take the new Gen-Y college grad and the business savvy Baby Boomer. They may not have much in common and might find it hard to talk with one another, but if they both have business acumen they are threaded to a common understanding of how a business makes money. While one approaches business problems with a text message and the other likes to sit down and talk it out - the communication barrier doesn’t exist when talking about the financial health of the company.
A product manger in one country and an engineer in another may not understand the uniqueness of one another’s culture, but if they both strive to practice and perfect their business acumen they can come together to address the unique challenges and opportunities that the company faces.
Executives that recognize that business acumen plays a key role outside of the boardroom will be able to face the challenges of a rapidly changing and increasingly diverse workforce. From increasing business dialogue to breaking down department silos, speaking the language of business acumen will provide clarity that will help employees figure out the right priorities.
Business Acumen Solutions
A successful Business Acumen strategy involves many different areas of your company, starting with the executives, of course. But really all employees from customer-facing areas, like sales, marketing, and customer service to departments like HR, IT, and engineering benefit from a personal sense of Business Acumen. Acumen Learning offers training solutions for all those areas… and more.
Business Acumen for Managers ›
Business managers use their business acumen to make financially sound decisions for your business. From recognizing the cost benefits of implementing strategies that improve efficiencies to helping employees recognize how their day-to-day activities effect the financial strength of the company.
Business Acumen for Sales ›
Too often sales professionals don’t have an audience with CXO level decision makers, and when they do they can become intimidated. More often than not, it’s not a lack of confidence or sales savvy - it’s a lack of business acumen. Sales professionals with business acumen understand how their client’s make money and how their product or service will help bolster the process.
Business Acumen for HR ›
Too often Human Resources is viewed as a cost center, but HR professionals with business acumen are able to help others see Human Resources from an inside-out point of view; helping employees and other department heads see how HR impacts the company’s bottom-line.
Business Acumen for Finance ›
Just because your accountants understand the books doesn’t mean they have business acumen. Accountants, auditors, investor relations and other professionals that report up through the CFO sometimes need business acumen training more than anyone else. While they understand the books, they struggle communicating the relationship between financial numbers and corporate strategy.
Business Acumen for Technical Professionals ›
Business acumen can help engineers understand how their projects affect the business. For example, an engineer with business acumen would be able to analyze the cost advantages and disadvantages of using one material over another. IT professionals use their business acumen to better understand the needs of their internal customers and how their service impacts efficiency, and how efficiency impacts the numbers.
Business Acumen
What the CEO Wants You to Know
About Ram Charan
Ram Charan is a highly sought after business advisor and speaker famous among senior executives for his uncanny ability to solve their toughest business problems. For more than thirty–five years, Dr. Charan has worked behind the scenes with top executives at some of the world’s most successful companies, teaching the importance of business and financial acumen.
Since 2002 Acumen Learning has been the official and only company with an agreement to use concepts in Ram Charan’s bestselling book, “What the CEO Wants You to Know”
Ram Charan’s Thoughts On Business Acumen
From the book: What The CEO Wants You To Know
Business acumen requires understanding the building blocks of money making. Think back to how you learned physics or chemistry. First you had to understand the parts of an atom: electrons, protons, and neutrons. Once you understood the parts and how they interact, you were ready to develop your knowledge. It’s the same in business.
When two businesspeople talk, whether or not they talk openly, they always try to gauge: Is her business making money? How is her business making money? How is the money making likely to change? Businessmen and businesswomen have an insatiable desire to cut through the complexity to the fundamental building blocks of money making - that’s business acumen.
Money making in business has three basic parts: cash generation, return on assets (a combination of margin and velocity), an growth. True businesspeople understand them individually as well as the relationship between them. Add consumers to these three parts of money making - cash generation, return on assets, growth - and you have the core, or nucleus, of any business.
Cash generation, margin, velocity, return on assets, growth, and customers: Everything else about a business emanates from this nucleus. Does the business generate cash and earn a good return on assets? Are we retaining customers? Is the business growing? If so, common sense tells you that the business is doing well. A large, complex company will eventually falter if this core is not right.
Don’t let your formal education or the size of your company obscure the simplicity of your business. Think like the street vendor. Cut through to the nucleus of the business. If your business shows deterioration in one or more of the basic components of money making, use common sense to fix it. If you do, you are on your way to thinking and acting like a true businessperson and a successful CEO!
Ram’s Business Acumen Quotes
Maybe you can persuade your bosses that the universal language of business does not belong in the executive suite alone. Remind them that employees can contribute more when they know what really goes on in the business and can apply their business acumen.
Let’s now look at the real world of companies, small, medium, or large, many of which are publicly traded and punished heavily by the stock market for missing a commitment by as little as a penny per share of stock. What the CEOs of these companies know that most of us don’t - is how to use the same common sense that street vendors use to perceive what’s really changing in the outside world and to cut through the complexity of the business. They use their business acumen to determine clear, specific priorities, or action items, that make money in the real world and create wealth for stockholders or owners.
The best CEOs use their business acumen to reduce complexity, whether internal or external to the company, to the basics of money making. They relish the mental challenge. Doing so helps them discover any flaws in their logic and gives them confidence that they are on the right path. It helps them make the right tradeoffs and makes them more decisive.
Business acumen helps a CEO choose the three or four business priorities (no more than five) that will retain customers and achieve all the important money-making goals at the same time - all in the context of the real world.
Use your business acumen and think about the business challenge as a brain teaser. There are internal things and external things to consider, all of which can vary. Look at the big picture and see how the variables might come together.
Even if you’re not a CEO, business acumen can help you cut through the complexity to make the right decision every day.
Chances are you will face more complexity and volatility as you take on more responsibility in your job. Practice business acumen along the way so you will have the courage to face complexity. Many business leaders falter because they become overwhelmed or indecisive. Some do not set clear priorities, or they lose focus, especially if their judgements come into question. If the leader fails to set priorities, keeps changing his mind, or communicates them poorly, the whole organization loses energy.
The best CEOs use their business acumen to cut through the complexity of their business, their industry, and the broader business environment. They continually improve the fundamentals of money making, and by doing so consistently and relentlessly over time, they create a track record.
The opportunities exist for all employees to use their business acumen. Remember, shareholders aren’t the only ones who benefit from such wealth creation. Employees, too, stand to benefit from the opportunities to earn more, grow more, and at the extreme, avoid the uncertainty of changes imposed from outside because the company has underperformed.
Each of us can practice what CEOs with superb business acumen do instinctively: cut through all the clutter using the universal laws of business, and select the right business priorities.
You can give your department, business unit, or company an edge in execution by developing your business acumen and your judgement of people. The combination is irrefutably successful in the real world of business.
Business acumen provides the roadmap and clarity. But unless you want to be a one-man or one-woman shop, you must learn how to link business priorities and people.
Kevin Cope is the founder and President of Acumen Learning, the leader in business acumen training. For over 25 years, Kevin has promoted the idea that the brightest minds in business understand the essence of how a company makes money, and that they use this knowledge to impact the bottom-line. These people have been described as having business acumen, and Kevin has successfully promoted the idea that business acumen is an essential characteristic of a business leader.
Kevin Cope’s Thoughts On Business Acumen
Become Valuable
As you become better known for your insightful Business Acumen, you will become more visible as a contributor and a more valued member of your company team. Wherever you go in your future professional career, your ability to understand and implement the 5 Business Drivers and to exercise the Acumen associated with them will lead to sustained profitable success.
The Daily Business Dilemma
Ever found yourself in any of these kinds of situations?
You’re talking with a company executive and wish you could say something really insightful to show your practical knowledge of the business. But your brain goes numb and nothing meaningful comes out.
You’re attending a meeting with managers or other financial types—and get a little lost when they start reviewing financial statements. You hope no one notices that the smile on your face hides the gap in your grasp.
Your CEO has encouraged everyone to work harder to meet the company’s overall financial objectives. You’re struggling to see how improving how well you do your job impacts your company’s stock price.
You have a really good idea to contribute to your boss and work team about how to improve your department’s productivity. You know what you’re talking about, but others greet your idea with yawns, puzzled looks, arguments, or blank stares.
One of your team members asks you questions about the company’s recent improved financial performance and why Wall Street is not impressed. You fumble through an answer you know is disjointed and incomplete.
In meetings where senior executives start talking about corporate target metrics and financial goals, your eyes glaze over—and you tune out rather than focus in.
Importance of Business Acumen
Most employees wish they could better understand the overall performance of their company. But discussion of financial topics often results in boredom accented with confusion.
Business Acumen is the missing ingredient to unlock the door to better understanding the business of your business:
Understanding the “big picture” means seeing how the key drivers, or basic elements, of your business relate to each other and work together to produce sustainable, profitable growth. And how they relate to the role you play each day in your job.
You need to understand what managers and senior executives are really concerned about: how the company can consistently grow and make money. Comments, analysis, and proposals from employees should be linked to the issues most important to management. By the nature of their questions, ideas, and performance, employees who exhibit Business Acumen are seen as more valuable contributors. They can better communicate with executives to demonstrate their own worth to the company.
Robert: Trying Hard, But Missing Out
Robert was an excellent member of the controller’s staff…or so he thought. He was dedicated to saving the company money and to conserving cash. He was always fighting with Sales to accelerate payments from large customers, and he continually wrestled with Manufacturing to delay payments to suppliers. He constantly argued with Human Resources over the need to add new employees; he vigorously advocated reducing employee benefits. He was fanatical about doing his job well.
Robert didn’t realize that his narrow focus on cost-control, cash conservation, and “doing his job well” ignored the big picture of how his company makes money. And what was required to do the CEO’s job well.
He was not connecting the dots concerning the impact on client relations—and future sales revenue—from his insistence upon early payments from customers. Or the huge turn-off and compromised quality when suppliers were promised payments they didn’t receive. He failed to consider the impact on employee performance, efficiency, morale, and product innovation when benefits were cut in the name of “improving our bottom line.”
Ultimately, Robert was viewed by senior management as a “narrow-minded bean counter.” While he wasn’t let go, he was never seriously considered for advancement into management ranks. The general leadership opinion was that “Robert never gets it…” when it came to understanding the overall needs of the business.
Robert tried to do his job well but missed out on seeing the big picture of his main job: to contribute to building a company experiencing long-term, sustainable, profitable growth.
Many employees, to a degree, are like Robert. They work hard to do their own job well but don’t completely understand how their role fits into the overall picture of helping their company to make money, achieve its strategic objectives, and boost its stock price (if a public company). Let me illustrate what I mean.
Our “Big Picture Quick Quiz”
Do your best to answer the following 10 “Big Picture Quick Quiz” questions. They were not picked at random. They result from surveys and interviews with hundreds of executives and CEOs from dozens of different industries. These questions reflect the areas of corporate performance—for virtually any company—that senior officers have on their minds and want employees to have on theirs.
OK…are you ready? Test your knowledge of your company’s operations during your most recent Fiscal Year. See how many of these 10 questions you can answer quickly—and without looking up the answers!
How much cash was on hand at year-end?
How much cash was generated from operations?
What was the net income (net profit)?
What was the net profit margin percentage?
What was the total revenue (or total sales)?
What was the inventory turnover (for retail firms)?
What was your return on assets (ROA)?
What percentage did total revenue (sales) grow or decline over the previous year?
What percentage did net income (earnings, or profit) grow or decline over the previous year?
If you’re a public company, by what percent did earnings per share (EPS) grow or decline over the previous year?
So What?
We’ve administered this little Big Picture Quick Quiz to over 40,000 employees from hundreds of organizations, including 11 of the Fortune 50 largest U.S. public companies. On average, employees know the answer to less than two of these questions.
So, how well did you do? More importantly, what difference does it make? Why would it be important for anyone other than the “C” or “Chief” suite executives—the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, and their executive teams—to understand these numbers?
These questions focus on your overall business, not the operations of a single department or division. Your CEO and the senior management team want the entire business to be profitable, not just a single unit. They want all employees to understand and better contribute to how their entire company makes money.
What if employees really understood the primary success measures of their company and how their individual performance contributed to—or hindered—its long-term profitability? What if they truly understood how their department, and their specific job, fit into the overall corporate strategy? Is it possible that the entire company could become more successful?
The Business Acumen Gap
We often find a gap between what executives believe their people know and what employees actually understand and act upon. Many executives think that employees at least know the meaning and importance of the answers to the Quick Quiz questions, if not the actual numbers.
This is evident in the many employee meetings conducted and memos written by executives who cite these kinds of performance measures. They don’t realize how few of their employees actually grasp the basic meaning of their communications.
Business Acumen: Influencing the Whole
If you want to be more visible and valued, then demonstrate that you understand how your department or unit fits into the big picture of the overall business.
If you want to influence the thinking and decisions of your supervisor or manager, address the topics that senior officers, including your boss, are concerned about. Communicate your ideas and proposals in language that he or she understands. The language of business is finance, and I’ll help you to learn how to become more fluent in “basic business-speak.”
If you want to be seen as a major contributor, show that you understand the relationship among the basic components of your overall business—not just how your department works.
If you want to be a more effective leader, better able to engage your team, link your team’s actions with the overall needs and strategic goals of the company identified by senior management.
Now, please recognize that even your supervising manager might not be as knowledgeable in some of these areas as you think. But I encourage you to ask questions of this type, and be willing to work diligently in acting positively on the answers. You’ll become recognized as one who demonstrates business acumen through both your savvy questions and your effective contributions.
Where’s the Puck Headed?
The Great One, Wayne Gretzky, named by Total Hockey: The Official Encyclopedia of the NHL, "the greatest player of all time." was once asked in an interview, “Wayne, you’re not the largest, fastest, strongest or hardest checking player in the National Hockey League. You’re just the best. Why?”
Wayne responded,:"Most players skate to where the puck is. I skate to where I think the puck is going to be."
An important application of Business Acumen is to forecast accurately the essential needs of your particular business and how to meet them. This includes how to anticipate the economic and consumer trends that will influence your future profitability. Where’s the business puck headed? How can you predict it?
Business Acumen - An Element of Trust
Character & Competence
About Stephen Covey
Stephen M. R. Covey is a sought-after and compelling keynote speaker and advisor on trust, leadership, ethics, and high performance. Stephen is the author of The SPEED of Trust, a groundbreaking and paradigm-shifting book that challenges our age-old assumption that trust is merely a soft, social virtue.
Stephen is co-founder of Acumen Learning and the CEO of CoveyLink Worldwide. He also currently serves on the board/advisory board of several entities, including the Human Performance Institute —the leader in energy management technology— where he serves as Advisory Board Chairman.
Stephen’s Thoughts On Trust & Business Acumen
The first job of any leader is to inspire trust. Trust is confidence born of two dimensions: character and competence. Character includes your integrity, motive, and intent with people. Competence includes your capabilities, skills, results, and track record. Both dimensions are vital.
With the increasing focus on ethics in our society, the character side of trust is fast becoming the price of entry in the new global economy. However, the differentiating and often ignored side of trust — competence — is equally essential. You might think a person is sincere, even honest, but you won’t trust that person fully if he or she doesn’t get results. And the opposite is true. A person might have great skills and talents and a good track record, but if he or she is not honest, you’re not going to trust that person either.
The best leaders begin by framing trust in economic terms for their companies. When an organization recognizes that it has low trust, huge economic consequences can be expected. Everything will take longer and everything will cost more because of the steps organizations will need to take to compensate for their lack of trust. These costs can be quantified and, when they are, suddenly leaders recognize how low trust is not merely a social issue, but that it is an economic matter. The dividends of high trust can be similarly quantified, enabling leaders to make a compelling business case for trust.
The best leaders then focus on making the creation of trust an explicit objective. It must become like any other goal that is focused on, measured, and improved. It must be communicated that trust matters to management and leadership. It must be expressed that it is the right thing to do and it is the economic thing to do. One of the best ways to do this is to make an initial baseline measurement of organizational trust and then to track improvements over time.
The true transformation starts with building credibility at the personal level. The foundation of trust is your own credibility, and it can be a real differentiator for any leader. A person’s reputation is a direct reflection of their credibility, and it precedes them in any interactions or negotiations they might have. When a leader’s credibility and reputation are high, it enables them to establish trust fast — speed goes up, cost goes down.
Business acumen training plays an important role in establishing trust within an organization. First, business acumen builds business competency, and second; it teaches business leaders how to tie the financial impact of trust to the financial statements. The combination of character and business acumen builds trust between co-workers, partners, and customers… resulting in faster and more profitable business decisions.
Business Acumen Solutions Business acumen benefits every industry and enterprise. Learn more about business acumen training solutions for your industry.