Business Acumen: Seeing the Big Picture
Business acumen is about seeing the big picture and recognizing that all decisions, no matter how small, can influence the bottom line. It can influence your whole organization and provide that additional edge that will lead to success.
Business acumen requires an understanding of finance, strategy, and decision making. However, most managers and employees are responsible for only certain areas. This can result in having little understanding of the impact that their decisions might have on other areas.
When too much focus is placed on one aspect of the business, it becomes difficult to make decisions that contribute to the well-being of the entire company. The relationships with customers, vendors and employees must be carefully managed by using effective communication and establishing mutual respect. One of the most effective ways to improve your organization’s well-being is by requesting feedback and listening to complaints.
Recognizing Opportunities for Growth
Individuals with strong business acumen are always looking for opportunities for growth. It is important to identify market trends and monitor changes in the market such as technological advancements. Conduct market research and anticipate customer needs. Also pay attention to changes in demographics as they may indicate a potential shift in customer needs. Your competitors can help your business grow as well. Take advantage of a competitor’s weakness and learn from their strengths. Do not dismiss or overlook employee ideas and encourage brainstorming. Pay attention to employee skills by offering training or hiring new employees to accommodate growth.
In stressful situations, it is easy to make decisions based on emotion or external pressure. It is important to recognize these events which may lead to poor decision making to avoid long-term consequences. Here are some tips for managing these situations to make better decisions:
- Be in the moment: pay attention to how you feel both physically and emotionally. This allows you to become aware of conflict resulting from emotional stress or pressure.
- Be clear: identify the type of decision you are making and consult those who will be affected by your decision.
- Make a choice: listen to your intuition and write down your decision. Revisit the decision later and act on it if it still feels right.
Different areas of the business will affect one another, either positively or negatively. For example, poor customer services will result in fewer sales. Relating these areas begins with leadership. There are three things to keep in mind with regards to your organization as whole:
- Be comprehensive: monitor every area of the business to ensure each is meeting their goals
- Be balanced: make sure each area of the company is sustainable and adjust if necessary
- Be incorporated: integrate every aspect of the business to illustrate to employees how each area affects the company.
Measuring Success with Key Performance Indicators (KPIs)
KPIs are metrics that measure goals. Creating and managing KPIs will improve the success of your business and strengthen business acumen. You should develop an understanding of which performances should be measured and how they should be measured. Determine which areas are successful and which areas need improvement. How can you determine the level of success prior to establishing your KPIs? By brainstorming ideas and using them to create criteria that need to be monitored. Determine what the goals should be and how they are applied to metrics. You should not focus on mistakes or get discouraged – learn from them.
KPIs should not remain static and should change as goals change. Having initiative is a way for employees to become more automatous with daily tasks, leading to improved problem-solving skills. KPIs are created from the top down when using dashboards, as dashboards focus on operational goals instead of strategic goals. In order to maximize dashboards, all business users should be involved to determine:
- Which questions need answers?
- Who is affected by the question?
- Why do you believe the question is important?
- Which data do you use to answer the question?
- Will creating KPIs create more questions?
- What actions need to be taken?
- What metrics will you use?
How Can You Effectively Manage Risks?
The purpose of risk management is to identify risks and prioritize them to monitor and reduce threats. Risk assessments help identify potential problems and opportunities. The following list provides the steps necessary to effectively practice risk management:
- Recognize objectives
- Identify potential events
- Identify risk tolerance
- Determine the probability and impact of risks
- Outline responses for risks
- Determine the impact and possibility
As you gather information using KPIs and other metrics, you can determine which strategies are successful. Risks are subject to change based on internal and external factors as well. To be successful, you must always be learning. As you gather knowledge, you will learn from your mistakes and improve your decision making.
Understanding Financial Levers and Creating a Positive Core
There are key financial levers that drive any business. Identifying these levers is the first step in addressing them correctly. One key financial lever are the people. These people are your customers and employees – they are also your greatest asset.
Many companies decide to reduce expenses in relation to employees to save money. This may be a short-term solution, but it has the potential to backfire and could cost your organization qualified individuals. Rather than cutting expenses for employees, you should consider alternatives such as training, bonus incentives, fair salaries, and providing opportunities for advancement. With your employees taken care of, your other top priority should be your customers. Your job is to anticipate the wants and needs of your customer base. Even if you feel that your existing customers are more than satisfied with your services, it never hurts to explore additional ways to invest in them. You can expand your customer base by creating new products or developing a customer experience, and always strive to build and improve these relationships.
Aligning Your Goals
Aligning the goals of all managers and employees with the goals of the business is a major part of seeing the big picture. Aligning individual goals is done at the team level. Team goals are based on goals that start with the upper tier of the company and change as they trickle down to the various employee levels. Once you have team goals, you can identify your individual goals. Keep in mind, these must be based on company goals. It is also not a bad idea to create SMART goals that are specific, measurable, attainable, relevant, and timely.
Strong business acumen means understanding the financial and strategic objectives and how they align within your business. It is strengthened through experience; successes and learning from mistakes are equally valuable. Business acumen helps everyone understand how and why new strategies are being implemented, and because each corporate level has different business acumen, it’s important to work to continue to develop the business acumen of all employees so that the understanding is across-the-board. It takes time and many lessons learned to strengthen your business acumen, but if you follow this article as a guideline, you can be successful. I’m speaking from 25 years of experience running a small business, and I’m still learning!