Business acumen

Source: Wikipedia, the free encyclopedia.

Business acumen, also known as business savviness, business sense and business understanding, is a combination of knowledge, skills, and experience that enables individuals to understand business situations, make sound decisions, and drive successful outcomes for an organization.[citation needed] It is also defined as "keenness and quickness in understanding and dealing with a business situation (risks and opportunities) in a manner that is likely to lead to a good outcome."[1] It involves having a "big picture" view of the business, financial literacy, strategic thinking, problem-solving, and effective communication.[citation needed]

Additionally, business acumen is viewed as having emerged as a vehicle for improving financial performance and leadership development.[2] Consequently, several types of strategies have developed around improving business acumen.

Characteristics

Executive level thinking

In his 2012 book

stock price reflect how well each of those moving parts is doing its job.[3]
Cope proposes that an individual who has the following five abilities could be described as someone having a strong sense of business acumen:

  1. Seeing the “big picture” of the organization—how the key drivers of the business relate to each other, work together to produce profitable growth, and relate to the job
  2. Understand important company communications and data, including financial statements
  3. Use knowledge to make good decisions
  4. Understand how actions and decisions impact key company measures and leadership objectives
  5. Effectively communicate ideas to other employees, managers, executives, and the public[4]

Distinguishing traits

Raymond R. Reilly of the Ross School of Business at the University of Michigan and Gregory P. Reilly of the University of Connecticut document traits that individuals with business acumen possess:

  • An acute perception of the dimensions of business issues
  • Ability to make sense out of complexity and an uncertain future
  • Cognizance of the implications of a choice for all the affected parties
  • Decisive
  • Flexibility for further change if warranted in the future

Thus, developing stronger business acumen means a more thoughtful analysis, clearer logic underlying business decisions, closer attention to key dimensions of implementation and operation, and more disciplined performance management.[1]

Financial literacy

SHRM article entitled, "Business Acumen Involves More Than Numbers"[5] Chris Berger, a member of human resources at CTPartners,[6]
explains that business acumen starts with the ability to understand how a company makes decisions, and that leaders must be financially literate and be able to understand numbers on company financial statements. It entails the ability to take the knowledge of business fundamentals and use it to think strategically and then take appropriate action.

According to

MBAs, and many have also had experience in the business sides of their professional roles. The need for these managers is to understand how their actions and their behavior impact their financial decision-making, and how this in turn affects financial outcomes at the unit and the corporate level." It's evident that an individual with business acumen has some level of financial understanding and knowledge — but someone who is financially literate doesn't necessarily possess strong business acumen.[7]

Business management and leadership

Bob Selden, a faculty member of Mobilizing People, a leadership development program based in Switzerland, observes a complementary relationship between business acumen and leadership.[8] Selden states the importance of nurturing both the development of strategic skills and that of good leadership and management skills in order for business leaders to achieve effectiveness.

A study published in Human Resource Management International Digest titled, Business acumen: a critical concern of modern leadership development: Global trends accelerate the move away from traditional approaches,

Perth Leadership Outcome Model, which links financial outcomes
to individual leadership traits.

In a study that interviewed 55 global business leaders, business acumen was cited as the most critical competency area for global leaders.[10]

In their 2011 book, The Leadership Pipeline,

group manager, and suggest that the process and criteria are similar for selecting a CEO. According to them an obvious criterion for selecting a leader is well-developed business acumen.[11]

An organization full of high business acumen individuals can expect to see leaders with a heightened perspective that translates into an ability to inspire and excite the organization to achieve its potential.[1]

Development

Programs designed to improve an individual or group's business acumen have supported the recognition of the concept as a significant topic in the corporate world. Executive Development Associates' 2009/2010 survey of Chief Learning Officers, Senior Vice Presidents of Human Resources, and Heads of Executive and Leadership Development listed business acumen as the second most significant trend in executive development.[12] A 2011 report explores the impact of business acumen training on an organization in terms of intangibles and more tangible expressions of value.[13] The findings support the notion that business acumen is a learned skill — developed on the job by learning the required skills from knowledge mentors while working in different employment positions. They also suggest that the learning process ranges widely, from structured internal company training programs, to an individual's self-chosen moves from one position to another.[1]

The combination of these reports and surveys indicate that business acumen is a learned skill of increasing importance within the corporate world. There are different types of business acumen development programs available:

Business simulations

A business simulation is another corporate development tool used to increase business acumen. Several companies offer business simulations as a way to educate mid-level managers and non-financial leaders within their organization on cash flow and financial-decision-making processes. Their forms can vary from computer simulations to boardgame-style simulations.

Psychological assessments

The advent of personal assessments for business acumen is based in the emerging theories of

behavioral finance and attempts to correlate innate personality traits with positive financial outcomes.[14] This method approaches business acumen not as entirely based in either knowledge or experience, but on the combination of these and other factors which comprise an individual's financial personality or "signature".[15]

References

  1. ^ a b c d Reilly, Dr. Raymond R and Reilly, Dr. Gregory P. "Building Business Acumen", HR West, December 2009.
  2. ^ Summerfield, Brian. "A Crisis in Leadership" Archived June 23, 2009, at the Wayback Machine, Chief Learning Officer Magazine, April 2008.
  3. ISBN 978-1-60832-246-6
    .
  4. ISBN 978-1-60832-246-6
    .
  5. ^ Hastings, Rebecca R. "Business Acumen Involves More Than Numbers", SHRM, April 2008.
  6. ^ "Troubled CTPartners set to file for bankruptcy". 2015-06-29.
  7. ^ http://www.perthleadership.org/documents/Business_Acumen_WP_Updated.pdf [bare URL PDF]
  8. ^ Selden, Bob. "Is Business Acumen a Substitute for Leadership?" Archived July 19, 2008, at the Wayback Machine, 26 February 2008.
  9. doi:10.1108/09670730810900811
    .
  10. ISBN 978-0-470-82227-2
    .
  11. ISBN 978-0-470-89456-9
    .
  12. ^ Hagemann, Bonnie "2009/2010 Trends in Executive Development" Archived 2016-03-04 at the Wayback Machine, 2009.
  13. ^ Anderson, Dr. Merrill C. "MetrixGlobal Study of Business Acumen Training" Archived 2011-05-22 at the Wayback Machine, March 2011.
  14. ^ Perth Leadership Institute White Paper: Business Acumen and Leadership Development for CEOs and Senior Executives
  15. doi:10.1108/14757700810874155
    .
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