How Business Acumen can help organisations navigate challenging times
Business acumen is a critical capability that organisations need to be developing in their people. But what is business acumen and how do you develop it?
Fiona Hancock, Director of Added Insight, has noticed an increase in organisations looking for people with business acumen. “This doesn’t surprise us,”’ she says. ‘’These are testing times for organisations and industry sectors. Yet despite the challenges, many of our customers are doing really well. What makes them thrive while others in the same sector struggle? Like our customers, we think the difference is business acumen.”
What is business acumen?
“In simple terms, business acumen is the ability to position the organisation to make money and return value to stakeholders,” says Cynthia Johnson, a senior leadership development consultant who partnered with Added Insight to develop the Business Mindset tool.
Johnson started researching business acumen after the Global Financial Crisis in 2008.
“Business acumen is appreciated in tough times when the focus is on the fundamentals of business survival” she says.
Organisations that maintain a business acumen mindset, and develop and practice the skills through good times and bad times, are those that can position themselves to make money or add value, no matter what the global economic conditions.
What makes a good business leader?
“I believe great leaders need strong functional expertise,” says Johnson. “For example, you need to be a good engineer to lead an engineering function. Then you add leadership skills, personal resilience and business acumen, which are separate from your functional capability. You could be a really good engineer, but lack business acumen.”
Business Acumen is a critical differentiator at senior and mid-level management according to Johnson.
“I used to be an Air Force psychologist and some new recruits were natural pilots. They picked things up really quickly. At the other end of the spectrum were people who were clearly never going to be able to learn to fly a military aircraft in the time available to teach them. Then you had the group in the middle with the ability to learn through focus and practice. It's the same with business acumen. Some people have just got it. Some of us have got to learn it and some people will never get it in the time the organisation has available to teach them, largely because they aren’t especially interested.”
Identifying business acumen through our Business Mindset tool
Business Mindset is a tool developed by Johnson in partnership with Added Insight to assess business acumen. It is based on research with over 400 hundred people and has a strong statistical basis supporting it. Business Mindset assesses business acumen based on three factors:
Quest to Understand Business
Energised by Business
Quest to Understand Business
Leaders who score highly on this factor have a drive to understand costs and where and how the organisation adds value for customers. People who score highly in this trait are driven to get into the details and understand the numbers. They’ll be able to tell you for example, yesterday’s production numbers, the cost of supplies, competitor costs, and market share. They’re also highly curious about how business works in general. They’re well informed, not only about what’s happening in their own organisation but also in the broader sector, and international trends.
People with business acumen build mutually beneficial relationships. They’re concerned with developing win-win, fair, sustainable, and long-term relationships with their suppliers and customers. They think beyond the transactional and distinguish themselves by developing a deep understanding of supplier or customer businesses appreciating that this will lead to bigger opportunities and long-term business opportunities. ‘Everyone needs to make money’, ‘leave something on the table for the other party’, and ‘there’s plenty of cake to go around’ are phrases you may hear them say.
They also engage in developing capability in their teams so that they have what it takes to meet their customers' needs. Their team will experience ‘development heat,’ which they will enjoy, especially the commercial focus of that heat. People with strong business acumen have even been known to develop capability in suppliers and customers employees knowing that this is good for all parties.
Leaders with business acumen typically have high energy levels. They bring passion to their work, thrive under pressure, find business exciting, and are generally optimistic. They’re energised by doing business deals and making connections and they enjoy the challenge and the game of business. People with business acumen tend to treat business as a game, an infinite game as Simon Sinek puts it in his book.
“It's not a sprint,” says Fiona Hancock Director of Added Insight and an experienced Organisational Psychologist. “It's not about beating your competitor to the finish line because where's the finish line? Business Acumen is about a long-term, sustainable commitment to doing things better than your competitors. There’s no end point.”
Where to start?
“The first thing an organisation needs to do is agree what business acumen looks like in their business,” says Cynthia Johnson. “For some organisations it is really financial acumen, which may be appropriate for them, but our research shows it to be much broader than the numbers or the P&L.”
“Once you’ve defined business acumen it needs to be a key pillar in your talent identification criteria. There’s a shortage of leaders with business acumen so it’s vital that you identify the people in your organisation who already have it or have the potential to develop it. That's where the Business Mindset tool comes in.”
The Business Mindset tool provides clarity for organisations about who has business acumen and who could more easily develop it. It is also a useful development tool for team members. According to Fiona Hancock, “Once you have an insight into your strengths, weaknesses and opportunities you can make a plan on how to develop business acumen in yourself and your team.”
Many leadership factors and capabilities that were important pre-Covid, are now even more critical. Think resilience, adaptability, and collaboration. Organisations need executives and leaders who can prepare for a future they may be unable to predict, with the mindset, skills and behaviours to cope with complexity and ambiguity. They need business acumen.
Even before Covid-19, companies were concerned about their ability to retain and replace key staff. Since the start of the pandemic, there has been huge demand for skilled workers in many industry sectors and a shortage of suitably qualified candidates.
Chorus was coming to the end of the broadband fibre network roll out across the country and there was a critical need for the organisation to think differently about how they identify talent. This led Chorus to partner with Added Insight and Divergent & Co to assess the leadership capability in the organisation.
Explore our latest Talent Potential Report and explore the findings behind the Talent Potential solution and how organisations are using the A.I.M model to give a more rigorous view of potential and reduce the unconscious bias.