Business Acumen is a combination of knowledge and skill informed by experience: knowledge about key business issues, the skill to apply that knowledge, and the confidence to take action informed by past experiences. Our business acumen definition is:
The ability to take a ‘big picture’ view of a situation, to weigh it up quickly, make a logical, sound decision confidently, and influence others to agree with you in order to have a positive impact towards achieving the objectives of the organisation.
Our business acumen definition was created as a starting point for debate with our clients. It expresses the capabilities of people with a certain mix of skills.
- Financial literacy – The ability to understand how an organisation uses its resources to achieve its desired outcome. In a commercial context, this is often measured in terms of profit or revenue, in other organisations the key measure of success might be improved capacity or measurable social benefits.
- Organisational knowledge – Knowledge about the organisation in which the individual works. What are the relevant procedures and processes? How can they get things done?
- Ability to deal with ambiguity – In many cases, it is impossible to know everything relevant to a situation. Each individual must decide when the information available is sufficient to move forward.
- Ability to link cause and effect – Both in a financial sense (e.g. 10% discount means we will not make a profit) and in a personal sense (e.g. if we don’t complete this forecast accurately, our boss will not secure the resources we need next year.
- Self Awareness – How will an individual’s actions and decisions impact on the organisation and the other people in it?
- Stakeholder Awareness – What are the stakeholder’s interests and needs, and how do decisions made within the organisation impact upon them?
- Contextual Knowledge – The ability to relate what happens outside an individual’s immediate environment to situations in the workplace. For senior managers, this will involve looking at the wider external landscape. For supervisors, it means knowing about the changes happening within their own organisation.
Our article Business Acumen: What is it? Who needs it? How do you acquire it? expands on our business acumen definition and how we reached it. It highlights some of the benefits that can be derived from increased business acumen at an individual and organisational level. In answer to the question ‘is it only relevant for senior management’ our response is no. Organisations in all sectors, public, private and the third are under increasing pressure.
- The increasingly extreme and unpredictable nature of changes in the external and internal environment.
- Decisions being made at lower levels in the company.
- Organisational structures becoming increasingly complex, with outsourcing, elongated supplier chains etc.
- The speed at which decisions need to be made, often with limited and incomplete information.
- Success at an individual level relying not just on technical skills, but on the ability to understand the wider organisational context.
In this context developing business acumen at senior management and within the supporting layers is clearly and succinctly made by Ram Charan:
No single aspect of managerial skill is more important. If the management’s assessment of the external landscape — how patterns of converging and diverging trends fit together — is inaccurate, the company’s strategic positioning will likely be wrong.
Decision makers will be tempted to develop the wrong capabilities, hire the wrong people, or enter the wrong markets.
We also provide our answer to the question ‘ Is business acumen a natural aptitude or can it be acquired through experience?’ In a nutshell, we believe business acumen is a learned skill. It isn’t innate but there are people who, because of their early experiences or their own personal disposition, will find it an easier skill to acquire. If you naturally look at the world around you with curiosity then you are already part way there – you want to understand how different factors impact on each other.
Read the full article and try our self-assessment questions, even better try them on your team or colleagues. If your organisation has its own business acumen definition what knowledge and skills for people require? Use these to create your wons self-assessment questionnaire.
We believe this is an area where the use of business simulation games can really help. They allow for experiential learning: the cycle of experience, observation, conceptualisation and experimentation identified by Kolb. Individuals have the opportunity to consider a situation, take action, examine the consequences of their action and consider their next steps. Through this process, they offer an ideal way for participants to gain the experiences they need to underpin the knowledge and skills which together are required to acquire business acumen.
Business simulation games open up a debate in which the individuals can discuss the ramifications of business acumen, reflect on their own level of understanding and consider where additional skill would be beneficial. Here at Elgood Effective Learning, we have many years of experience in designing and delivering bespoke business simulation games to a wide variety of businesses, educational establishments and not for profit organisations.
Sharpening your Business Acumen by Ram Charan.
Ram Charan has taught at the Harvard Business School, the Kellogg School of Management and Boston University. He was elected a Fellow of the National Academy of Human Resources in 2000 and named a Distinguished Fellow in 2005. In 2010 the American Society for Training & Development (ASTD) presented him with its Champion of Workplace Learning and Performance