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  • Writer's pictureAcumen Learning

How to Measure Business Acumen: Q&A with Ryan Hunt, Senior Financial Consultant at Acumen Learning

Today we have Ryan Hunt, senior financial consultant here to give us some great insights on how to measure business acumen! Thanks for joining us Ryan!


Question:

We’re going to start strong. How can a finance professional effectively demonstrate their impact on a company's growth and profitability? Essentially…how does one measure their own business acumen?


Finance professionals typically have the numbers or know how to get them. In

fact, just the other day, I had one executive tell me that sometimes we look at too

many numbers. To demonstrate good business acumen as a finance

professional, we have to go beyond the numbers. The best way is to be a partner

to the business. Understand what the organization is trying to do, down to the

individual roles of those you partner with. Don’t just bring numbers and

percentages, but bring possible solutions that could add value to the business.

Lastly, communicate in a way that is meaningful to the business – not just

specific percentages, metrics, or other numbers – but here’s how WE can move

the business forward. The measure of your business acumen as a finance

professional is how often people come to you, not for reports and analyses, but

how often they include you in finding solutions.



Question:

In the realm of business acumen, how does financial decision-making play a crucial role in driving a company's success?


There’s no doubt that the numbers are critical. We use numbers to measure

the impact of our decisions, and whether we like it or not, in business, we make

decisions based on what the numbers are telling us. Using leading and lagging

indicators we make decisions that influence strategic choices that impact growth,

market share, and overall profitability. Having good business acumen helps you

to understand what consequences will happen when you make certain decisions.

Sometimes tweaking tiny operational procedures can make huge impacts…for

good or for bad! Finance professionals play a pivotal role in shaping a company's

economic story by helping manage resources and identify and analyze

investment opportunities.


Question:

Now we’re going to get a bit granular. Can you help us understand how we can contribute to innovation within a company, and how this innovation can impact financial outcomes?


I’ll often joke that finance first says, “No!” and then asks questions. The fact of

the matter is innovation is critical for a company and everyone can play a pivotal

role in innovating.

 

Picture a manufacturing company aiming to enhance its production efficiency.

Employees from the production line, with insights into daily operations,

collaborate with colleagues from the finance department. Together, they analyze

the operational and financial feasibility of implementing automation technology.

Employees contribute by providing on-the-ground insights into the current

production challenges, while finance professionals assess the potential costs and

benefits of implementing the new technology. The finance professionals don’t

know exactly what is needed in the production line, like the floor workers. And the

floor workers may not always understand the financial implications that the

finance team does. This collaborative effort ensures that the innovation aligns

with the company’s financial goals and operational needs.

 

In essence, employees at all levels have the power to drive innovation by offering

unique perspectives and actively participating in cross-functional collaborations.

The resulting innovations, when aligned with strategic goals, operating realities,

and financial objectives, can lead to improved efficiency, cost savings, and

ultimately, positive impacts on the company’s financial performance. And who

doesn’t want that???


Question:

That is awesome! These are great tips and scenarios we can take to try and implement in our own companies. I have found that it is hard to show leaders in non-financial roles why they would need financial knowledge and business acumen. What role does financial acumen play in addressing challenges like regulatory concerns, quality control, and speed to market, especially for professionals in non-finance roles?


Financial acumen is essential in non-finance roles when tackling challenges,

and in many cases…even more essential! Go back to our collaborative

innovation example. If the ops team depends solely on finance to bring the

financial assumptions, they may be missing an opportunity to stress test or even

modify assumptions that may not make sense in this case. If this is another

iteration of a project that we’ve done 3 or 4 times now, are the cost assumptions

still valid? Or are we now more efficient as a project team and can lower the cost

assumptions, thereby increasing the ROI of the project?

 

That’s just one example in operations, but as you look across the other areas you

noted, financial acumen is critical in those areas too. In quality control, we have

to balance the cost of waste vs. speed and efficiency of production. Going slower

may increase quality, but what if the incremental quality improvements go beyond

spec and now we can’t fulfill orders on time. While waste and warranty

costs may go down, so will revenue, so we need to find the balance.

 

Compliance functions have a very real financial and people impact because they

protect us from the cost of non-compliance which could range anywhere from

fines, to work stoppages, and in some real cases even injury or death!

Compliance has to understand the risk involved, the probability of negative

events, and the magnitude of those events. Then they have to find ways to

monitor and control the processes in cost-effective ways that balance the risk

with the cost.

 

Both of these examples directly impact the company's bottom line, not to mention

the possible impact to customers and employees. This showcases how financial

acumen in non-financial roles can lead to both functional effectiveness and

financial success!



Question:

How can finance professionals effectively communicate their contributions to non-financial stakeholders, emphasizing the economic and financial benefits of their decisions?


Communication is a huge part of business acumen. It allows every employee

to see the implications of executive decisions and the way they’re trickling

through the business. We love to say – if you think you’ve communicated it

enough, communicate it again and it probably still won’t be enough.

Finance professionals should translate complex financial concepts into clear,

accessible language that relates to the business (segment, function, department,

and even role). People connect to stories, not numbers. The better you get at

telling the story of the business and how decisions impact the people you

support, the better you will partner with the business to be a success rather than

just being a gatekeeper of financial resources.


Question:

In the context of business acumen, what advice do you have for professionals looking to quantify and showcase their impact on a company's bottom line during job interviews?


When discussing impact during job interviews or promotional interviews,

professionals should focus on specific examples tied to revenue growth, cost

savings, or operational efficiencies. Quantifying your impact is huge! If you’re in

marketing, I want you to tell me the direct traffic percentage growth we had when

implementing a new marketing campaign. Tell me about the improvement of

conversion rates and incremental sales. If you’re in sales, I want you to tell me

how you were able to improve your close rate or how you protected the value of

your brand by eliminating discounting. If you’re in HR, I want to know what your

employee retention is, what you did to save on turnover, and what you did to

keep top talent. Quantifying these impacts with measurable outcomes, such as

percentage improvements or dollar amounts, helps demonstrate a clear

understanding of the financial implications of your decisions.

 

Hopefully, that’s helpful! I really believe business acumen can be beneficial to any

employee, at any company, at any level. I’ve named several ways people could

use business acumen, and I could name 100 more!



ACTIVITY:

Now that we've delved into various aspects of measuring business acumen and its significance across different roles within a company, let's engage in a learning activity that reinforces the principles discussed and encourages practical application:


Exercise: Financial Impact Analysis
  1. Start by presenting a hypothetical business scenario relevant to your company's industry or recent challenges it has faced. For example, consider a situation where the company is contemplating a new product launch, a cost-saving initiative, or an expansion into a new market.

  2. Provide the team with key financial data pertinent to the scenario, including projected costs, potential revenue streams, anticipated market trends, and relevant performance metrics.

  3. Divide the team into smaller groups and assign each group a specific aspect of the scenario to analyze. For instance, one group could focus on assessing the potential return on investment (ROI), another group could examine the projected cash flow implications, while a third group could explore the potential risks and uncertainties associated with the proposed initiative.

  4. Give the teams a set amount of time to analyze their assigned aspect of the scenario and develop a comprehensive analysis with recommendations.

  5. After the allotted time, reconvene the groups and have each one present their findings to the rest of the team. Encourage discussions around the different perspectives and insights offered by each group, as well as any areas of agreement or disagreement. Encourage participants to consider the broader implications for the company's growth, profitability, and strategic objectives.


This activity provides team members with an opportunity to apply their understanding of business acumen in a practical context, fostering critical thinking, collaboration, and the ability to communicate financial insights effectively. By engaging in a structured analysis of a real-world scenario, participants gain valuable experience in evaluating business decisions from a financial perspective and understanding their impact on organizational success.


 
Continue your learning…



Measuring

Business Acumen

 





Further Your

Business Acumen




 
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