My first HR job was with a food manufacturing company that had survived for over a hundred years without a dedicated HR person. I had never worked in the food industry before and I started out focusing on setting up the human resources department. Revamping policies, writing job descriptions, and establishing procedures to standardize HR practices across the organization did not require a deep knowledge of food manufacturing. But when I started getting involved in culture change and human capital strategy, I realized I needed to know more about the business. Beyond understanding the food industry, I needed to understand business in general.

Added Value

If HR is going to be taken seriously, we have to be able to add value to the bottom line. We have to know what the bottom line represents, and how individual roles, including our own, impact profitability and growth. We’ve talked for years about the challenge HR professionals have getting “a seat at the table.” Much of the problem is centered on our lack of understanding when it comes to financial and operational literacy.

We excel at being employee advocates, and work hard to find middle ground when it comes to balancing the needs of the organization with the needs of employees. We make some strong arguments, but often lose ground because we can’t articulate the business imperative for our platform.

Strategic Management professor at the University of Albany (New Zealand), Ken Moore, identifies 5 benefits to acquiring business acumen.1

  1. It directly helps move disciplines such as HR from a tactical function to a strategy contributor.
  2. Understanding how other stakeholders evaluate your company’s financial and non-financial performance.
  3. Forming a productive relationship with the finance department.
  4. The ability to use numbers and financial tools to make and analyze business decisions.
  5. Strengthening and balancing decision making throughout the company.

1 Moore K. Acquiring business acumen and financial literacy: A key component of leadership competence. Human Resources Magazine [serial online]. April 2013;18(1):18-19. Available from: Business Source Complete, Ipswich, MA. Accessed May 4, 2016.

What is Business Acumen?

Business acumen has two main components: financial literacy and industry literacy. SHRM defines business literacy as, “the knowledge and understanding of the financial, accounting, marketing and operational functions of an organization.” Acumen has to do with our ability to apply our understanding of a topic quickly and effectively. I like the term “business savvy” – it speaks to the “shrewdness and practical knowledge” that shows we know what we’re talking about.

Industry literacy builds on general business savvy to gain an understanding of the history, trends, and competitive landscape within a defined segment of the marketplace.

In 2001 Ram Charan, a noted expert on business strategy, execution, and performance, wrote What the CEO Wants You to Know. It provides some great insights into what business acumen is and how it will help you gain credibility within your organization. In a more recent book, The Leadership Pipeline, Charan suggests some questions to aspiring leaders that reflect what business and industry acumen are all about:

  • What is this business trying to accomplish?
  • How does it want to position itself in the market?
  • Has the strategy changed recently or is it likely to change soon?
  • Does my function contribute to our competitive advantage?
  • What must each function contribute to that strategy?
  • How does my function’s effort impact the strategy?
  • How does my function impact the other functions’ ability to contribute?
  • How is the money made in this business?

Becoming a Savvy HR Professional

If you have the time and money to acquire a degree in business, that’s the most thorough way to acquire business acumen. However, here are some self-study resources that will help you improve your understanding of business finance and operations:

YouTube Videos:

·      ‪Why Business Acumen Training is the Best First Step toward Strategic HR

·      Finance for Non-Finance Executives

Open Courseware:

Books:

Another recommendation that not only builds your business/industry acumen but also builds your network and relationships inside the organization is to ask your savvy colleagues to teach you.

There is no shortage of resources. Set some goals for yourself to leverage the tools – videos, books, and online courses – and develop your business savvy. It’s good for your career – and it’s good for business.