21 Jan 2019
Business Acumen? Say what?!
Business Acumen means understanding business disciplines such as finance and accounting and knowing the specific details of all functional areas in an organization such as logistics or sales. It’s also about being able to handle the what, how and why of business. An HR department demonstrating effective Business Acumen understands its organization’s operations and functions, as well as the industry and competitive environment in which the organization operates and it also uses that information to effectively make business decisions.
Good business acumen shows the people in your organization that they can trust you.
Why is it key for HR to develop Business Acumen?
In “Business Acumen: Building a Better HR,” professor Peter Cappelli, director of The Wharton School's Center for Human Resources, acknowledges that “HR is often perceived by corporate leaders as being out of step with the rest of the business.” To help counteract that perception, he provides great advice for HR professionals about how to think and act more strategically and from a business perspective—to develop their business acumen.
Business acumen should be a key part of HR.
How come HR leaders are lacking Business Acumen?
One explanation could be that many HR leaders come up through the ranks from other roles in their organizations and therefore may lack specific education and training in HR or business. Or maybe they have gotten into HR because they "like working with people” :-)
Executives need HR to speak the language of business acumen!
Terms that drive strategy and economic outcomes such as debt-to-equity, discounted cash flows, turnover, DuPont Model, EBITDA, and a lot more need to be familiar to the Human Resource managers. When HR leaders understand the internal and external business, they're better able to align people programs with business needs. After all, HR is not just about personnel files, data entry and record keeping anymore.
Instead, today's HR leaders need to be able to implement programs that align with business strategy and speak in management language.
How can HR learn the complexities of Business Acumen?
One thing’s for sure: you can not learn this in a webinar, a book, or via Powerpoint because there simply are too many interdependencies that need to be practiced and that can not just be learned by rote.
Generic business acumen training is like training a commercial airline pilot how to fly by teaching them to fly a 2 seat Cessna prop plane. It’s fun, but not very applicable.
HR professionals will need to spend time and money on immersive Business Acumen training that is hands-on and not merely theory based: such training should focus on obtaining real world outcomes and results. Giving HR managers the ability to drive a real business in real time is invaluable. Topics such as finance, innovation, leadership, marketing, product development, strategy development, and employee management should all become familiar to HR managers. Participants of the training program should understand the impact one department’s decision has on another.
The results of hands-on, applicable, and focused business acumen training for HR managers is the ability to become fluent in the language of corporate strategy. This common business language will enhance a company’s ability to drive corporate change more quickly, resulting in HR playing a more critical role in a company’s overall success.
Here are some tips for business leaders:
- Include HR in critical business planning and strategy conversations, make time for strategic people conversations like succession planning and performance calibration
- Identify one or more mentors from the business who an HR leader can go to with questions
- Invite your HR leader to relevant industry conferences and events
- Review the HR roadmap and priorities and sign off on big initiatives, just like you would for finance, operations and other functions
- Involve senior leadership in your planning process — their input can keep your work relevant
- Know what business problem you're solving to avoid working in a vacuum
- Dedicate time to learning your industry and attend industry related events
- Measure the business impact of your work including cost savings, retention and engagement
Becoming Proficient as an HR professional
HR professionals will have to adopt a mindset of curiosity, eagerness to learn to find ways to demonstrate their competence and credibility.
- If you're just starting out as an HR generalist for a small company, you need to understand how your organization is structured and how its business and financial systems work but you also need to understand that information from the perspectives of your colleagues and leaders. So be sure to dig in and figure out if what you’ve read aligns with the actual culture and practices of your organization. They only way to find out is by interacting with those business partners.
- As you’re moving up the career ladder, it's critical to learn more about what to say and the right way to say it, at the right time, to the right people. So go seek out a mentor in your organization.
- At the highest levels of HR, a key part of your role is to use your business acumen to help drive HR strategy. Hone your skills by attending leadership conferences that focus on business strategy from a multidisciplinary perspective.
- Show how HR is strategically important to your organization's core business functions.
- Present information that makes the business case for HR.
- Use a variety of internal and external resources to learn more about your organization's business and operational functions.
- Use organizational metrics to make HR decisions that align with your organization's business goals and stakeholder expectations.
- Market HR internally and externally.
- Leverage technology to solve business and HR problems.
- Navigate corporate culture based on understanding how business in general, and your organization's specific business, works.
And if you’re a freelancer, we’ve got some great news: February 11th HRbuilders has invited Christel Dhoey who will learn us everything we need to know about Business Acumen. More info and registration via this link (Workshop open for HR freelancers - in Dutch)
This week’s blogpost is a mashup from some inspirational content about Business Acumen: