Business Acumen is the glue that holds your company together. It impacts more than financial results: it clarifies roles, it improves speed and accuracy of communication, it develops respect and morale. It is essential to financial success and for reaching company objectives.
Why is Business Acumen Important?
In the past, business acumen was only thought of as a useful skill for leaders; now, it is identified as a crucial skill for every employee. Companies realize that every employee contributes to the success of the business, and they need business acumen to do so positively.
Business acumen means employees understand all parts of the business and how they fit together; they know how it operates on a day-to-day basis, they know how the business generates profit, and they can embrace the company goals. Business acumen is necessary because it fosters sound decision-making, cross-departmental collaboration, and improved employee engagement – three pillars that are key to a successful company. Without business acumen, your company will suffer, but with it, your company can thrive.
What Happens When Employees DON’T Have Business Acumen
When employees lack business acumen it leads to wasted time, unnecessary expense and lost revenue, negatively impacting the company and its bottom line.
Without business acumen, employees don’t understand the company’s goals and they don’t see how their decisions can impact those goals. They can unknowingly make poor decisions that don’t align with company goals.
Simple Example: The ACME company has 2 products: Product A is well-known but has a low profit margin and Product B was recently introduced and has a higher contribution margin. Because it is an easier sale, the salesperson focuses on selling A. If the company’s goal is to increase Return on Investment, the salesperson might be working against the company’s goals… and doing it with the best of intentions!
Poor Cross-Departmental Collaboration and Communication
A lack of business acumen can lead to poor cross-departmental collaboration and communication. ‘Silo thinking’ happens when employees don’t understand how their department impacts other departments, and how their decisions impact the ability of people in other departments to make good decisions. They don’t collaborate on business objectives; they work separately toward their own department goals and create inefficient work processes.
A significant part of business acumen is being financially literate and knowing the language of business.
Simple Example: Without business acumen, it can be challenging for teams to communicate on a financial level. A sales team might say, “we made $1,000,000 last month”, referring to sales revenue. The finance department might say, “we lost $10,000 last month”, referring to profit. It becomes complicated to communicate within your company if employees don’t have a common language (‘Finance’ is the language of business!).
Decreased Productivity and Engagement
When employees join an organization, they want to be a part of something bigger than themselves; they want to feel like they are collectively working towards something together.
Without business acumen it is hard for them to understand how their activities fit into the big picture. They can’t understand the company’s goals or why changes occur. This can lead to employees feeling unmotivated and lost, and the company is left with employees who might be leaving money on the table and wasting valuable time, through no fault of their own.
Increased Turnover Rates
In some cases, employees eventually choose to leave the company altogether. Turnover rates increase in the absence of business acumen. When they join a new company most employees are looking to further their careers. They have the hope of promotion and as they rise in the organization, business acumen becomes more critical and necessary to their role. They may be ill-prepared to manage larger budgets or they may be passed over for promotion because they are unable to participate in strategic planning.
They eventually become frustrated with their lack of growth in the company and will look for a better opportunity elsewhere. And the company has no choice but to start the long and costly recruitment process again.
Simple Example: If people came to work on Monday morning and found that a company truck had been stolen over the weekend, the company would put in new security systems to ensure it does not happen again. Not providing business acumen training is like not having a security system to develop and retain employees.
What Happens When Employees DO Have Business Acumen
When employees have business acumen, they are equipped to make decisions that align with the business’s goals. They know the goals and plan to get there; they have the tools and skills to work through complex and ambiguous problems to reach a sound solution, and are able to execute a decision. This is becoming increasingly important as the business world becomes more complex; all employees need the ability to make good decisions quickly to achieve the best possible results for the company.
True Story: Andromeda ran a 2-day workshop for an agricultural products company. The salespeople cut the program short when they identified a key real-world issue: there was a lot of old product sitting in warehouses around the country. They recognized this was tying up a lot of money and they wanted to get out there ASAP to sell it! They learned about the importance of working capital and applied the learning immediately!
Effective Cross-Departmental Collaboration and Communication
Business acumen gives employees a big-picture understanding of the company and how different departments work together. The financial literacy aspect will allow employees to speak a common language (‘Finance’ is the language of business), and fully understand their KPIs. This fosters a synergetic environment for different departments to communicate and collaborate effectively. Teams working together toward a common goal are more likely to get there faster (and maybe with a better result!).
True Story: Andromeda ran a workshop for a small pharmacy chain that provided prescription drugs to a group of long-term care facilities. Two weeks later the owner reported that the budget process had run like a dream – department managers participated willingly in the process and the entire process took a few days (instead of weeks!). They learned that the budget is a useful tool for managing the company so they contributed to it willingly and usefully.
Increased Employee Engagement
Employees with business acumen are more likely to take initiative on the company’s behalf. When you develop business acumen skills in an employee, you give them the tools and knowledge they need to identify inefficiencies and present viable solutions to problems or inefficiencies you didn’t even know existed.
Employees are more likely to be engaged and productive when they have a clear understanding of the company’s goals. They will be and feel more valuable to the company with business acumen. Developing business acumen in your employees will prepare them for more senior leadership roles within the company. Internal hires are more valuable because they know the business’s ins and outs. They also tend to be high performers and usually stay with the company for longer, saving on time and recruitment costs.
True Story: Andromeda ran workshops for a box making facility in Georgia. Several days later they suffered a mechanical failure at a site which caused the loss of one of their production lines – about a third of the plant capacity. Management immediately went into a huddle, trying to think how best to deal with the production and repair issues, and the difficult situation of needing to idle a third of the workforce. Toward the end of the day they had come up with a solution and they headed to the shop floor to explain the cutbacks and shift changes to the crews. Halfway there they were met by a group of supervisors and workers’ representatives who had been in the workshops. On their own initiative, this group had also sat down to think through the problems and come up with their own ideas for meeting management needs while treating the crews as fairly as possible. The workers’ solution met everyone’s needs better than the management solution, and already had buy-in from the workers, so it was the solution that was implemented. They learned to see their activities as part of the big picture – and were able to think about the needs of the company.
Develop Business Acumen in Your Employees Now
Now that you know why business acumen is the glue that holds your company together, you’re probably wondering, “how do I develop business acumen in my employees?”
At Income|Outcome, we offer business acumen training through online and in-person workshops. Our simulations incorporate stealth learning* to teach employees business acumen in a fun and engaging way. Teams work through real-world challenges, experience all the operational roles in the business, and compete to achieve the best financial results for their game board company.
When the simulation is over, the learning continues. We use Visual Finance to connect the simulation experience to the real world. Learners come away with the ability to examine the strengths and weaknesses of the parent company (and competitors, and customers). The possibilities are endless!
Book a demo today to learn more about how Income|Outcome business simulations can help you upskill your employees for a brighter financial future.
* Stealth Learning happens when people are caught up in the excitement of the competition and don’t realize that they are actually developing their business acumen!