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 in which you can improve your understanding of business, and example 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 the financial performance of a company.
Someone with good business acumen is a safe pair of hands and a strong leader. They are often an integral part of company growth, as they have a solid understanding of how organisations are run and achieve success. And this is because they understand 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 and logical decisions that help companies to meet their goals.
As a desirable trait in all employees, possessing business acumen skills can lead to a long and successful career.
Examples of business acumen skills
Business savviness runs deeper than business knowledge. There are many skills that can help leaders in an organisation to develop their business acumen. Here are eight skills to focus on:
Strategic thinking is a core part of the business acumen skillset. It's a process whereby you consider a range of factors and variables, goals and objectives, and develop a clear plan of action.
From a business acumen perspective, it's about planning effectively and weighing up risks and possibilities to ensure that 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.
Analytical skills are a crucial part of business acumen. When you flex your analytical capabilities, you gain knowledge, solutions, or ideas related to 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
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.
If you communicate effectively, your team will function more effectively. Of course, no two people are the same, so someone with business acumen will be able to change their communication style, depending on the person or situation, to converse in the best way.
Strong communication skills can be used to empower staff and generate desirable business outcomes.
Being comfortable with financial processes and metrics is a key skill. As you progress in an organisation and are accountable for a department's success, financial literacy is non-negotiable.
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.
Someone with business acumen has an understanding of how the company makes money, customer needs and pain points, and an awareness of the industry and marketplace.
With this commercial awareness comes a range of abilities, such as conducting competitive analysis, identifying and monitoring industry trends, and adapting in line with market demand.
Those with business acumen also have 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.
How 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 need to develop this skill set before you pursue a managerial role.
To develop and strengthen your business acumen:
Get to know the business model
Understanding the business model is a key way to deepen your knowledge of the inner workings of the company and polish 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 areas of the business. Also, familiarise yourself with the company's growth strategies and the reasoning behind them to complete your picture of the business model.
Understand the financials
Getting to know key metrics and processes is a way to develop business acumen.
First start with the values that are common 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 important to the business and seek support from knowledgeable employees who can explain the data points.
Stay educated and informed
There's only so much knowledge that you can source off your own back. Sometimes, you need to seek education from external people or platforms or partner up with an expert within your organisation or industry as part of a mentorship or coaching scheme.
There are less time-intensive ways to stay informed too. Following prominent business leaders in your industry via their blogs and social media channels is one option. Another is to sign up for industry newsletters and visit industry online publications regularly for the latest insights.
Listen to customers
If you want to understand more about your company's goals, speaking with customers to gain their perspective and to understand their motivations and pain points can help you to assess how your business's solutions can help.
In some instances, you may be able to communicate with customers directly and gain qualitative insights. But this is challenging, as you would need to speak with a large number of people and it may be outside of your role. However, there may be teams in the company that have this data already.
Collecting and analysing customer data is another avenue, and the easiest way to obtain this is via your organisation's CRM. Again, if this falls outside of your remit, reach out to the relevant teams for insights.
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 that demonstrate several relevant capabilities. For example, you could draw on successes relating to your management of 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 are 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 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. These questions are practical, yet conceptual, and 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 own 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
If you were given the responsibility of starting a new department from scratch, what are the basics that you'd need to consider?
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 the abilities you possess and the minor limitations you have, 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.