Business Acumen: More Than Just Business Knowledge

By Joe Jones, Ph.D. Mar 11, 2016
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A busy sales manager sends you an e-mail at 8 a.m. to ask how you can help her take advantage of something she read in that morning's headlines: “With the news today about our competitor's takeover, what can we do to hire their salespeople? We wanted to recruit a couple of them, and this might be the opportunity we were looking for!” As her HR liaison, it’s time to rely on your business acumen to help her achieve her goals.

What Is Business Acumen?

To some, business acumen means understanding certain business disciplines—finance and accounting, for example—or knowing the specific details of other functional areas in an organization—say, logistics or sales. But, in practice, business acumen is about more than that, important as that knowledge is.

Business acumen is much broader in scope, as Society for Human Resource Management (SHRM) researchers developing the SHRM Competency Model learned from HR professionals around the world. HR can handle the what, how and why of business, and this competency includes many other behaviors that are necessary to prove it.

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. But it also uses that information to effectively make business decisions. As a member of such an HR team, you therefore would be able to:

  • 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.

Good business acumen shows the people in your organization that they can trust you. Your recognition of their value, in understanding customers to achieve the organization's mission, demonstrates your respect for them, so they are more likely to respect you.

Becoming Proficient

Building your proficiency in business acumen is not as easy as it may seem. The knowledge and abilities you need depend on your career level.

If you're just starting out as an HR generalist for a small company, for example, you need to learn more about how your organization is structured and how its business and financial systems work. Read the appropriate books and background materials. But you also need to understand that information from the perspectives of your colleagues and leaders. Does what you're reading about align with the actual culture and practices of your organization? You can only learn about that by talking to and interacting with those business partners.

As you move 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. This may require coaching or mentoring. Seek out someone in your organization with significant experience who can work with you.

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—the smaller, the better—that focus on business strategy from a multidisciplinary perspective.

Here are some ways to start becoming more proficient in business acumen right now:

  • Read general business management books and articles.
  •  Keep abreast of business news pertinent to your organization and its customers.
  •  Take a course in business statistics or accounting.
  •  Join chat rooms that include non-HR business professionals.
  •  Ask for a temporary work assignment in a different functional area, such as finance or marketing.
  •  Request feedback from other key business stakeholders regarding the quality of your business decision-making.

In a recent HR Magazine article, “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 is a key part of HR. Increasing proficiency in this competency will help increase the legitimacy of HR in the eyes of the business world. The sooner you do so, the better for your career and the HR profession in the long run.

Joe Jones, Ph.D., is director of HR Competencies for SHRM. 

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