In a practical application, business acumen combines an understanding of how a business works and what it takes for the enterprise to make money. It combines financial literacy—the ability to understand numbers on financial statements—with business literacy: recognizing how strategies, behaviors, actions, and decisions not only affect the numbers but also drive profitable and sustainable growth.
 

Everyone! In many organizations, business acumen is a missing core competency. Individuals without a strong business acumen skill set are unable to understand how their actions impact the company’s profitability. They often struggle to articulate and execute on strategy.

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CREDENTIALS

Directors & Executives
This demographic has more influence and decision-making accountability than any other level in an organization. Some organizations assume their directors and executives are 100% proficient on business acumen and financial literacy. Contrary to this assumption, most directors and executives can benefit from a refresher on some of these concepts – especially when they are new to the role or organization.  Lacking the knowledge needed to properly adjust the business levers that impact the top and bottom lines can be a costly skill gap.

Day-to-day Operations
Organizations that prioritize business acumen provide a clearer vision and an overall context within which employees can work, while creating an environment that is more likely to break down internal barriers. There is less waste and less ambivalence. There is increased innovation. Employees are more engaged, they understand their role and its impact on business results, and they are more likely to believe that their efforts really matter. They are more likely to think like a business owner.

Budgeting and Forecasting
When an individual has a keen understanding of their organization’s goals, metrics like Return on Sales (ROS) and how to budget and forecast within those parameters, they will make well-informed business decisions.  Return on sales (ROS) - financial ratio (net profit divided by net sales) measuring profit in relation to sales (how much profit is generated by each dollar of sales).

Buying and Selling
Understanding Cost of Goods Sold (COGS) and Gross Profit Margin (GPM) will have a large impact on how organizations negotiate with vendors and how their sales professionals work with clients.  A sales professional’s understanding of targeted GPM will allow them to leverage their price setting latitude and mold their client dialog. Being able to position their product or service as having the potential to improve their client’s GPM changes the dynamic from simply buying and selling. They’re empowering their clients to make informed, business-savvy decisions.

Onboarding New Hires
New hires coming into an organization can contribute faster if they are grounded early on in how the business makes money, how they fit into the big picture of the business, and how they can be part of the organization’s financial success. Understanding these topics doesn’t make new hires feel just oriented to the organization – it makes them feel connected to the organization’s mission.

Onboarding programs have been shown to increase retention by 25 percent and even improve employee performance by up to 11 percent. - SHRM

Turning High-Potential Employees (HiPOs) into Leaders
Many high-potential employees in an organization receive a promotion without expanding their current skill set or big-picture thinking. Some of them even begin managing P&Ls without training about what a P&L is!  Sixty-nine percent of more than 300 execs and supervisors test-takers couldn't pick the definition of "free cash flow." - Inc. Magazine

There is NOTHING that will equip a HiPO through their journey better than to arm them with an understanding of how their decisions affect bottom-line results. With strong business acumen as a baseline, everything else in their development journey to becoming a future leader will come into focus.

Teaching Finance to Nonfinancial Managers
No matter what department a nonfinancial manager belongs to, he or she will benefit from understanding the dynamics of how their business works. And it makes perfect sense. A manager can’t help lead a business if they don’t understand how money moves throughout their organization, what their gross margins are, and the organization-wide impacts of their department's decisions.

Teaching these managers the key metrics that are used to analyze whether or not an organization is making the right business decisions will lead to business-savvy leaders.

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For organizations today, no matter how successful, it’s critical for employees, managers and leaders to be able to accurately assess the competitive landscape and connect day-to-day decisions and activities with key financial, functional, and business performance metrics and goals.
 

Although most organizational goals will focus on profitability, growth, and sustainability, fostering a culture of strong business acumen will have far-reaching, organization-wide impacts.

Culture
Instilling a culture of ownership, accountability and entrepreneurial thinking allows individuals to make clear links between their business decisions, the impact of those decisions, and the success of the enterprise.

Among teams with strong business acumen skills, individuals will begin to embody values (through their decisions and actions) like accountability, integrity, fiscal responsibility, entrepreneurship, and others. This will create an environment and culture of ownership that will transfer over into a culture in which individuals take responsibility and ownership for positively influencing business results.

Profitability
Strong business acumen skills create a culture of data-driven decision-making. Being able to articulate the story behind the numbers leads to people at all levels in an organization taking action and making decisions to affect the bottom line, whether by managing costs, improving processes, eliminating waste, or doing more with less.

Growth
Managing the day-to-day decisions of a business, and leading a business with a big-picture understanding of leading and lagging indicators, working capital management, and generating returns on investments, can lead the way for sustainable, organic growth.

Talent Acquisition
When teams understand the financial impact of turnover and the costs of unsuccessful hires, they’re better equipped to make good hiring decisions. Furthermore, a successful organization that fosters an environment of strong business acumen is a company that people want to work for.

Marketability
Beyond being a company that people want to work for, being a financially savvy organization makes you a company that customers want to work with.

Project Management
Ensuring that individuals understand how scope creep or key stakeholder influence can impact a project’s potential outcome sets project team members up for success. Bad project management can bring even a large organization to its knees.

Competitive Advantage
Sales teams with strong business acumen can better position the value of their products and services, in alignment with customer pain points, to create effective customer solutions. Internally, individuals that foster an ownership mindset take accountability for contributing to the business in a fiscally responsible way. Internally and externally, employees with business acumen can create a competitive advantage in growing their top line and optimizing their cost structure to increase profitability.