Business acumen is the key to progressing into a leadership position
If you're looking to become a leader in a company, business acumen is a fundamental prerequisite. In this article, we explore the meaning of business acumen, examples of skills required to develop it, ways to improve your understanding of business, and interview questions related to business acumen.
What is business acumen and why is it important?
Business acumen is the ability to understand a business situation and make a decision that leads to a successful outcome. Typically, business acumen is instrumental in improving a company's financial performance.
Someone with sound business acumen is a safe pair of hands and a strong leader. They are often integral to company growth, as they understand how organisations are run and achieve success. This is because they know how every company makes money, how their specific company makes money, and how their customers make money.
Business acumen goes beyond a general awareness of business issues. It involves using business sense within a specific organisation to offer sound reasoning and make decisions that will positively impact the company. As a result, when individuals are hired that possess business acumen, everyone in the organisation benefits.
Business acumen is developed through experiences in the working world. These experiences impart learning and knowledge and give people the confidence to make sound, logical decisions that help companies to meet their goals.
As a desirable trait in all employees, possessing business acumen can lead to a long and successful career.
9 examples of business acumen skills
Business savviness runs deeper than just business knowledge. Many skills can help leaders in an organisation develop their business acumen. Here are nine skills to focus on:
1. Strategic thinking
Strategic thinking is a core part of the business acumen skill set. It's a process whereby you consider various factors and variables, goals and objectives, and develop a clear action plan.
From a business acumen perspective, it's about planning effectively and weighing risks and possibilities to ensure the company reaches its goals.
Problem-solving goes hand-in-hand with strategic thinking. The strategist decides which problems need addressing and the problem solver devises solutions.
Those with good business acumen can problem-solve during the planning and implementation phases, often developing contingencies and other measures as part of the plans to ensure that risk is managed effectively.
A good problem solver is adaptable and can implement strategic and creative thinking to devise the right course of action.
3. Analytical thinking
Analytical skills are a crucial part of business acumen. When you flex your analytical capabilities, you gain knowledge, solutions, or ideas about a topic or problem.
Analytical capabilities include:
Identifying an issue
Segmenting the issues into manageable chunks
Gathering legitimate and relevant information from different sources
Assessing cause and effect relationships
4. Financial literacy
Being comfortable with financial processes and metrics is a crucial skill. Financial literacy is non-negotiable as you progress in an organisation and are accountable for a department's success.
If you are financially literate, you have a solid understanding of:
The company's growth drivers, profitability, and cash flow
The company's financial statements
The company's key performance indicators
What affects the company's bottom line
You may not be directly responsible for profit and loss statements, budgeting, or forecasting, but having financial understanding and knowing how to use it to think strategically and take appropriate action is an imperative part of business acumen.
5. Commercial awareness
Someone with business acumen understands how the company makes money and its customers' needs and pain points, and is aware of the industry and marketplace.
With this commercial awareness comes various abilities, such as conducting competitor analysis, identifying and monitoring industry trends, and adapting to market demand.
6. Risk management
Risk management is a fundamental part of business acumen, as it plays a critical role in safeguarding company assets and financial stability. If you can identify and mitigate potential risks and take well-calculated risks, the company can avert financial losses and make financial gains.
Risk management also extends to protecting the company's reputation. If you understand how to comply with regulations and legal obligations, you can ensure the company operates within the proper boundaries. This fosters an environment of ethical business conduct, helps to maintain customer trust, and contributes to long-term success and sustainability.
Leadership skills are an essential part of business acumen. Strong leaders take accountability for the performance of their team. They treat employees with fairness and empathy, have a vision that inspires staff, and are confident in their decisions. In short, capable leaders are imperative if a company wants to succeed.
8. Emotional intelligence
Those with business acumen also need a high degree of emotional intelligence. They can recognise, interpret, and regulate their own emotions, as well as other people's. As a result of this self-awareness, they understand that business decisions and situations can affect how team members feel and can manage responses accordingly.
If you communicate effectively, your team will function more effectively. Of course, no two people are the same, so someone with business acumen can change their communication style to converse in the best way, depending on the person or situation. Strong communication skills can empower staff and generate desirable business outcomes.
9 ways to develop strong business acumen
Many people believe that business acumen is a skill reserved for those in leadership. While senior leaders certainly have business acumen, you must develop this skill set before pursuing a managerial role.
To develop and strengthen your business acumen:
1. Get to know the business model
Understanding the business model is critical to deepening your knowledge of the company's inner workings and polishing your business acumen. This involves learning:
How the business makes money
The business lifecycle
Marketing objectives and positioning strategy
Products and pricing
Strive to gain a comprehensive knowledge of the organisation by getting acquainted with unfamiliar business areas. Also familiarise yourself with the company's growth strategies and the reasoning behind them, to complete your picture of the business model.
2. Understand the financials
Knowing key metrics and processes is a way to develop business acumen.
First, start with the standard values across all businesses, such as customer lifetime value and net income. Then, consider the metrics that are unique to departments and how they are used to evaluate the department's contribution to the bottom line. Dig into business intelligence to understand what numbers are essential to the business and seek support from knowledgeable employees who can explain the data points.
3. Listen to customers
If you want to understand more about your company's goals, speaking with customers to gain their perspective and understand their motivations and pain points can help you to assess how your business's solutions can help.
Sometimes, you can communicate with customers directly and gain qualitative insights. But this is challenging, as you'd need to speak with many people and it may be outside your role. However, some teams in the company may already have this insight.
Collecting and analysing customer data is another avenue, and the easiest way to obtain this is via your organisation's CRM. Again, contact the relevant teams for insights if this falls outside your remit.
4. Study competitors
Going hand-in-hand with listening to customers is gaining competitor insights, which is vital for developing business acumen. Assessing competitor performance against the business can provide basic benchmarking, highlighting the company's strengths, weaknesses, opportunities, and threats in the market.
You'll better understand effective business practices if you can scrutinise competitors' strategies and performance. Combine this with assessing market dynamics and anticipating industry trends, and you're unstoppable. These activities enhance your strategic thinking and help you to navigate the business landscape with excellent insight and proficiency.
5. Stay educated and informed
You can only source so much knowledge off your own back, but there are many ways to stay informed. One option is to follow prominent business leaders in your industry via their blogs and social media channels. Another is to sign up for industry newsletters and visit industry online publications regularly for the latest insights.
6. Consider a mentor or coach
A mentor or a coach is a surefire way to develop your business acumen, but there's a clear difference between the two roles.
A mentor shares their knowledge and relevant experiences to inspire and help you grow. Suppose your mentor is a senior person in an organisation or has leadership experience in a well-established business. In that case, they can pass their experiences onto their mentees in a personal and tailored way.
Conversely, a coach provides specific guidance related to your goals, to help you attain them. They possess robust business acumen and can guide you along suitable stepping stones and measure your performance.
7. Take a professional development course
A professional development course is a structured way to enhance your business acumen. This could be a good option if you respond well to active learning. A professional development course usually involves in-person or online training, workshops, lectures, and seminars.
In addition to learning about business acumen and being assessed on it, a professional development course often results in a certificate, which can help to expand your job opportunities in the future and give you a competitive advantage.
8. Develop a growth mindset
Embracing a growth mindset is instrumental in cultivating business acumen. A growth mindset, a concept championed by Carol Dweck, is the belief that a person's most basic abilities can be developed through dedication and hard work. In short, if you believe you can and actively strive to be your best, you will.
In the context of business acumen, a growth mindset is about learning to fail, taking on challenges, and having confidence. A growth mindset fosters a range of sought-after soft skills, like adaptability, resilience, and a proactive approach to problem-solving, which contributes to developing business acumen.
9. Drive your personal brand
Business acumen isn't just about knowing how a business is run or how customers behave. It's also about how you act and are perceived in a business setting. A professional personal brand is a way to develop your business acumen. It won't necessarily broaden your knowledge, but will let others know that you mean business.
Your personal brand in a workplace setting should be tied to business values and be authentic to you, too. Ensure it's consistently reflected in your interactions, from emails to how you conduct yourself in meetings. Leverage your social media and online presence, too. X (formerly known as Twitter) and LinkedIn are the key places for this. Consistently demonstrate your expertise and share knowledge by actively participating in conversations.
How to add business acumen skills to your CV
As business acumen incorporates a range of soft and hard skills, the best way to describe this quality on your CV is by highlighting achievements demonstrating several relevant capabilities. For example, you could draw on successes relating to managing business issues and scenarios, or ways you contributed to a company's goals and bottom line.
You can add examples of your business acumen competencies, supported by facts and statistics, to your employment history section. If you're applying for a leadership or executive position where business acumen is a fundamental requirement, you can also reference business acumen traits in your key skills section. They may include:
To impress the prospective employer and increase your chances of an interview, review the job description closely and research the company's history and growth strategies to identify priority business acumen traits to list on your CV.
For example, if the job description states that the ideal candidate is “a creative strategist with the ability to influence and engage stakeholders at all levels,” and your research reveals that the company has ambitious growth plans, prioritise including successes which demonstrate your strategic thinking, problem-solving, and communication skills on your CV. These skills could be of more value to the prospective employer than your financial literacy, for example.
Business acumen interview questions
If you're looking for a management position, you may be asked business acumen questions during the interview. The interviewer wants to get a sense of how much you understand business, plus how you would act in a given situation that may impact the business beyond your role.
These business acumen interview questions give you an idea of what you may be asked:
How would you rate your business acumen?
Can you explain what business acumen means?
Give me an example of how you've used your business acumen in the workplace.
Tell me about a time when you've used your knowledge of the organisation to get an idea approved.
What basics would you need to consider if you were responsible for starting a new department from scratch?
Recall an occasion when you had to explain your department's losses.
What role does corporate culture play in the success of a company?
How have you participated in planning processes?
Have you ever performed a cost-benefit analysis? Tell me about it.
Have you ever been over budget? Why? How did you handle this?
What would you do if the budget you proposed was rejected by upper management?
What is the difference between profit and cash flow?
What does a company's financial department typically do?
How to answer “how would you rate your business acumen?”
The interview question “how would you rate your business acumen?” is a broad behavioural interview question. The interviewer is looking to get a sense of your self-awareness, as well as your business savviness and how that could be of value to the organisation.
The key thing to do is to strike a balance between highlighting your abilities and minor limitations with a proposed solution of how you could close the knowledge gaps.
Once you've assessed your strengths and weaknesses in line with the job requirements, form your answer using the STAR approach to tell a concise, persuasive story that will satisfy your interviewer.
Business acumen is an essential skill set, especially if you have your career sights set on a leadership position. Check that you're emphasising your business acumen clearly by submitting your CV for a free review.