Essential Components of Business Acumen

A company’s leadership pipeline is often a testament to its vision and culture. In an

increasingly disruptive marketplace, key business decision-making is not a trait that
is restricted to a handful of employees at the top. It is important for companies to
enable employees at all levels to understand how the business works for them to
make the right choices in their everyday work. A study by the Economist Intelligence
Unit and BTS showed that 65 percent of leaders felt that insufficient business
acumen limits their organization’s ability to realize strategic growth to a strong
extent.

It is at the middle manager level that business acumen is shaped. In short, business
acumen means understanding how a company makes money. And it includes a
variety of attributes:
1. Strategic perspective: Understand the business, its critical
interdependencies, and the short- and long-term trade-offs of decisions.
2. Financial acumen: Know the drivers of growth, profitability and cash flow;
interpret a firm’s financial statements and key performance metrics.
3. Market orientation: Understand macro-economic trends and synthesize
market and competitor data. It also means having a deep understanding of a
customer’s business objectives.
4. Leadership and teamwork: Execute strategy through others; to create
alignment, a positive mind-set and build capability in people and collaborate
effectively with others.

These skills enable middle managers to answer key business related questions with
ease, something Indian companies struggle to address today. Examples of these
questions include:

• In which part of the business is cash being tied up? And what can you do
about it?
• How do you spot opportunities in the market and how does this relate to the
strategic objectives or the big picture in your company?
• How can you explain the health of a company using financial statements?
To grow and nurture these skills, there are three critical focus areas that middle
managers need to master:
1. Understanding finance
Middle managers need to understand how to read a P&L and how to interpret
key financial statements and how to analyze annual reports.

2. Understanding of the market

Having a customer-centric orientation means being able to understand the
needs of the customer and being able to think from their point of view.
Another key element that middle managers need to focus on is their
competition. Who are the competitors and what value do they bring to their
customers? While middle managers can be enabled using training modules,
on-the-job mentoring and coaching are critical to driving business results as
well as developing people capabilities in the business.

3. Cross-connect business areas

This capability is critical to middle managers aspiring for leadership roles. For
example, An HR professional, Branch Manager or an Operations Head should
be able to understand the importance of customer experience and see how it is
linked to employee performance and to the enabling culture in the
organization. Being able to cross-connect ideas also means that professionals
without conventional exposure to the business are alert to the potential
opportunities.

There are several innovative methods by which companies are enabling their
managers to develop these skills – gamified learning modules and business
simulations tend to be the most effective approach for sustainable learning. It is
important to remember that business acumen is not merely shaped by training alone.
It is honed by application in real life situations, and it will take years before
professionals start to exhibit the right leadership behaviors that are essential to drive
actual business results. Hence, it is critical to developing the business acumen of
middle managers today, as this will shape tomorrow’s leadership.