HR – How and why we should develop our business acumen

I think we would all agree that HR is vital to the success of an organisation. We are key to resourcing the business with the right people, developing and motivating those people as well as dealing with employee problems (and sometimes problem employees!).

But how can we develop to be more than just transactional or reactive? How can we get involved in the strategic planning and implementation within a business? The answer is by developing and displaying our business acumen.

What is business acumen?

There are many ways of defining business acumen but the one I prefer is: business acumen is keenness and quickness in understanding and dealing with a business situation in a manner that is likely to lead to a good outcome.

It includes a thorough understanding of what drives profitability / cash flow, the markets in which the business is operating and an understanding of the business in its entirety.

Why does it matter?

Ultimately we all want our businesses to succeed and to be part of that success, but senior management aren’t going to involve anybody in the strategic decision making process if they do not believe they will provide sensible or viable ideas / suggestions.

Although the role of the HR business partner has become more prevalent in recent years, the 2015 CIPD HR Outlook Survey suggests that professionals need greater specialist skills such as business acumen to really bring value to their organisation in the future.

Having business acumen allows HR professionals to change senior management’s perceptions by demonstrating that they are a fellow businessperson who understands the business, its environment and challenges. By changing perceptions HR increases the chance that they will be asked to contribute to the Company’s big decisions and long term plans and that those contributions will be valued.

The benefit to a business in having HR involved in the strategic decision making process should not be underestimated. HR is perfectly positioned to bring unique insights about the business’s people as well as having key skills to engage with the workforce and communicate the key messages throughout the business.

Also, if we can understand the business and its long term strategy it allows us to correctly align the HR strategy so that we recruit people with the correct skills / behaviours, ensure that L&D is developing the right skills for the future and we are rewarding the outcomes that drive employees to fulfil the business objectives.

How can we develop our business acumen?

There are many different ways to develop business acumen but below are some suggestions based on my own experience.

Know the numbers!

Unfortunately this is an area that HR practitioners sometimes struggle with, but a big aspect of business acumen is being able to read, understand and analyse financial statements such as profit and loss reports, cash flow statements and balance sheets.

The good news is that you don’t have to like numbers nor do you have to retrain as an accountant but if you want to develop your business acumen it is vital that you have a good understanding of what affects the business’s profit and cash flow and be able to relate this information to your decision-making. If this is an area of weakness I would strongly recommend that you request/book some form of ‘Finance for Non-Financial Managers’ training.

Volunteer for a leadership role in a not-for-profit organisation

A number of years ago I volunteered to be a Director in an organisation whose aims were to generate both employment within their local area and a good level of profit which was then given away to nominated charities at the end of each year. As well as agreeing with their objectives I joined the board to try and develop my general business skills and as a result I gained good exposure to dealing with finances, working with suppliers and helping decide on the future direction of the organisation.

While I appreciate that this may not be an option for everyone I believe there are many not-for-profit organisations that would welcome the expertise that an HR practitioner would bring to their team, and in return you exposure to things that you may not normally get in your 9 to 5 jobs.

Understand business strategy

How can you deal with a business situation in a manner that is likely to lead to a good outcome if you don't understand the business strategy? The simple answer is, you can’t.

It is critical to understand the ‘big picture’ in relation to your business i.e. what are we trying to achieve, how are we going to get there and what do we need to get it done.

Understand the internal and external business environment

By talking to and building relationships with leaders in other functions HR can get a better understanding of the business as a whole. Although some big organisations rotate managers to different departments to give them more exposure to different business aspects this is not always viable in smaller businesses. However by being inquisitive and taking an interest in, for example, operations, customer expectations, finances etc you can still gain valuable understanding of the business. Don’t be afraid to ask questions or worry that you will be viewed as nosy because your colleagues will more than likely appreciate that you are taking an interest in their areas and the business as a whole.

In addition to understanding the internal business environment, it is important that HR has a good grasp of the external environment. Some ways in which this can be developed is by reading the business news and industry publications, identifying and following industry experts on social media, watching what your competition is doing and by talking to your own business leaders to get their take on the external environment.