Got Business Acumen?

I heard a great talk a few years ago from one of the highest ranking executives at a major company. She advised the audience to think of the three words or phrases that you would want people to use to describe you when you are not in the room. Why when you are “not in the room?” In her view, many of the most significant decisions that impact your career will be made by others when you are not in the room. Whether you get promoted or not, or win the business or not – these decisions happen behind closed doors after you leave. She then advised the audience to think of the three words that people actually use to describe you when you are not in the room.

So while you are thinking of your list, I’d like to suggest that one of the critical phrases that you need is “business acumen”.

Business acumen represents a person’s knowledge and ability to make profitable business decisions. Do you have business acumen? More importantly, do others perceive that you have it? Do people respect your knowledge and ability to make business decisions? How can you develop your business acumen?

Business acumen is critical to your career development in any industry you choose, in every function, and at every level of leadership. If you look at surveys of what CEOs want from their CFOs, CIOs, or leader of sales, marketing, operations, or human resources, they want “business partners”. I recently spoke with one CEO who says that his biggest talent challenge is finding people who have “functional expertise with general management perspective” – in other words, people with a strong understanding of your business. When customers are surveyed about what they want from the supplier sales people who call on them, they want “sales people who understand my business.” When you read press releases that announce executive promotions, they frequently state that the person hired “has the business acumen to lead our company” going forward.

Developing your business acumen will create opportunities for you, while the lack of it may hold you back. So how do we develop it? To make sure we focus our efforts effectively, let’s start with the definition of business acumen –a person’s knowledge and ability to make profitable business decisions – and break it down into the components of knowledge and ability.

Knowledge involves an understanding of how businesses work. This knowledge encompasses understanding of customers, competitors, technology, and regulatory issues that is then translated into a profitable course of action. Applying this knowledge requires both analytical and creative capacity. Analytical skill involves evaluating alternative scenarios to determine the attractiveness and viability of different options. Creativity, applied to business issues, involves developing new options and possibilities for the future. This scope of knowledge is a necessary component of business acumen.

Ability to make decisions is the second key component. Ability to make decisions involves two elements: capacity at the individual level to make decisions and a leadership ability to engage others in decisions and their execution.

Let me illustrate these distinctions with an example of why both elements are important. Let’s suppose you are deciding whether to sell shares of a stock that you own. You first apply your knowledge to evaluate the stock. You apply your decision-making ability to sell the stock. When you click your mouse on your online brokerage account, your trade is executed. This example does require personal decision capacity, but requires zero capacity to engage others in the decision and its execution. You decide, you execute, and it is done.

Now consider business decisions like entering a new market, acquiring a competitor, bidding on a major new customer account, developing a new product, implementing a new IT system, or establishing a joint venture. Engaging others in decision-making and execution is a central piece of the puzzle. As a leader, making a good business decision involves an assessment of your organization’s ability to execute it. If you decide to move forward but your organization is unable or unwilling to execute that decision, then how good was the decision in the first place?

This capacity for group decision making and execution requires both group process knowledge and emotional intelligence. The end result is a decision that involves other people and depends on them for execution. If you proceed blindly without this input, you will make poor decisions and get poor execution. So part of business acumen involves group dynamics. It also involves you and your personal need for approval. If you can’t help a group make and execute a decision because you need their approval, you will fail. They may like you, they may or may not respect you, and you are unlikely to make and execute good decisions.

If you are committed to developing your business acumen, then I suggest you focus on three areas: building your business knowledge, increasing your self-awareness and capacity to make decisions, and increasing your ability to engage other people in a decision-making and execution process. When it comes time for your next career move and you are not in the room, your increased business acumen will be a huge advantage for you.