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Business Acumen Is The Key To Organizational Growth

Business Acumen ModelBusiness acumen is the understanding of how the business operates, makes money, and grows profitably. It is a skill that everyone in your organization needs to develop; Business acumen is everyone’s business, not just the accounting or finance departments. Every business and organization’s ability to grow profitably is affected by the four key elements of business acumen, organizational drivers, organizational performance, external factors, and future trends.

Organizational Drivers

Understanding organizational drivers and how everyone on the team impacts those drivers is a key component to developing business acumen among your team. When employees know and understand how their work fits into the big picture vision of the organization they are not only more motivated and engaged, but they are also better able to improve the way they impact that driver in what they do. Understanding organizational drivers helps give big picture meaning to each employee.

There is a different degree of detail that needs to be known at each level. On a basic level, each employee should be acutely aware of how their job impacts the department, how the department impacts the key driver, and how the key driver impacts the top and/or bottom line of the business. All key drivers have a direct or indirect impact on the overall success of the organization.  This is relevant across all industries and sectors, nonprofit/ service and for-profit organizations. Ask each of your employees how what they do impacts the organization.  You may need to assist by asking the right questions—digging deep to find the “why” and help them identify their impact and understand why their role is important to the organization.  

Key drivers vary based on the industry that the company is in, but they will generally fall into similar clusters. These include people, revenue, operational efficiency, product, and quality.

Organizational Performance

There are two basic philosophies when it comes to transparency about organizational performance generally and, particularly, financial information. Some companies are more open to sharing financial performance with everyone on the team, while others prefer to keep finances closed. There is really no right or wrong answer, it is your decision as the leader. Personally, I am more of a fan of being open about company information, particularly when it comes to the top and bottom line performance of the business.

I do this for two main reasons. For one, it is a great way to help develop the business acumen of my leadership pipeline. I want my team to experience first hand how their work affects the overall financial performance of the business; it helps ignite big picture thinking. The second reason is to give them context. It gives them an answer to their “What’s In It For Me?” question. They are able to understand that when the company is growing and profitable, there are opportunities for upward mobility and extra perks.

Additionally, each department needs to understand how the department budget that they own and are responsible for impacts our budget, so that they get that “hands-on” experience to become bigger thinkers about how they impact the overall financial performance of the company.

Being open about organizational performance also gives employees the context to let them know that their job is meaningful and important to the organization. Everyone fundamentally wants to be on a winning team and to know that what they do has meaning. When times are good, providing that context helps to enforce that feeling.  

External Factors

Leaders need to be aware of how external factors affect the business as well. It’s not just about how the internal performance affects the bottom line, but there are external threats—and opportunities—that leaders and managers need to make sure they are staying abreast of. This includes understanding how regulatory, political, economic, and competitive changes impact business drivers. They also need to be innovative thinkers to help mitigate the potential threats and leverage the opportunities that these changes can create.

Future Trends

Analysis of future trends provides market insights and helps leaders develop proactive insights that improve decision making. Understanding future trends spurs new ideas, new ways of saving and/or making money, new innovations, and new ways of leveraging others’ innovations to stay competitive in the long-run.  The decisions you make today will determine your organization’s future.  

I cannot stress enough the importance of business acumen, particularly across key leadership and management roles. Your ability to use important, relevant information to help make decisions, involve the employees on your team, and develop new ideas is the key to organizational growth and long-term strategic advantage.

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