The importance of business acumen in people management

It’s critical that everyone at all levels of an organisation, especially HR, has good business sense, argues Ange Gabriel Missamou

In today's dynamic business environment, understanding the broader business context is crucial for effective employee evaluation. Business acumen, once confined to the boardroom, is now recognised as vital across all organisational tiers. Peter Drucker, the ‘father of modern management’, emphasised the importance of discernment in all facets of human resource management. Henri Fayol, an early pioneer of management theory, also highlighted the importance of understanding business operations as a cornerstone of management. Fayol's administrative theory defined key principles of managing organisations, recognising the importance of organisational structure, strategy and operations. 

Fayol's perspective on organisational structure was groundbreaking indeed, focusing on clear pathways for decision making, responsibility and accountability. He believed that strategic planning should be a guiding star, illuminating the path for the entire organisation. Effective operational management required a deep understanding of processes, resources and objectives, not just doing things right but also understanding why certain processes existed, how resources were allocated and the outcomes the organisation aimed to achieve. His principles of business acumen have become essential in today's dynamic business landscape, where organisations face complex challenges, technological disruptions and shifting consumer behaviours. HR plays a crucial role in cultivating and propagating business acumen within the workforce. Modern HR practices emphasise holistic hiring, continuous learning, cross-functional collaborations, feedback mechanisms, performance evaluations, thought leadership and recognition and reward systems.

To date, holistic hiring ensures that potential hires align with the company's values and broader business vision, while continuous learning and development provide insights into the organisation's ecosystem. Cross-functional collaborations foster a culture of collaboration and break siloed thinking, essential for modern businesses to thrive. Feedback mechanisms and performance evaluations enable employees to adapt and align their actions with business objectives swiftly. Thought leadership content encourages employees to engage with experts in their fields and understand market shifts and global trends. Recognition and reward systems celebrate not just individual or team achievements but also their contributions to broader business goals.

HR plays a multi-dimensional role in today's businesses by actively fostering a culture that values and promotes business acumen. This emphasis equips employees with the foresight to anticipate and shape future business landscapes, thereby guiding the organisation's human capital towards a future marked by informed decisions, strategic thinking and sustained growth.

Another famous author, Marcus Buckingham, highlights strengths-based leadership and development, leading HR professionals to use tools to identify individual strengths and align them with organisational goals rooted in clear business understanding. A recent survey by the Society for Human Resource Management revealed that more than 60 per cent of HR professionals now include business scenario-based questions in their interviews, demonstrating the shift towards assessing business acumen from the onset of an employee's journey. Likewise, the CIPD indicates a growing emphasis on continuous learning initiatives geared towards enhancing business comprehension across all organisational levels.

The essence of business acumen is vital, but recognising its importance and successfully integrating it into an organisation are two distinct challenges. The Human Capital Institute highlights a gap between the universal acknowledgment of business acumen's significance and the effective dissemination of this wisdom within an organisation. In today's complex and rapidly changing business environment, every decision has macro implications, and an employee's choices, strategies and understanding ripple through and affect larger organisational objectives.

HR professionals and organisational leaders must enhance the traditional employee evaluation process to encompass an assessment of business acumen, gauging an employee's understanding of the broader business landscape and assessing their ability to apply this understanding in their daily roles. Addressing this cultural shift is pivotal, as it involves instilling a belief that views one's role as interwoven with the company's broader objectives, and nurturing a workforce that thinks and acts strategically, aligning individual goals with the company's mission and vision.

In today's modern workplace, business acumen has become increasingly important. The aforementioned writers have emphasised the need for this trait to be embraced by all employees. This shift is not just about theoretical knowledge but a practical philosophy that permeates daily operations. It requires employees to connect their actions to the company's goals and strategies, make informed decisions that align with the organisation's vision and understand how their contributions impact the bottom line. It also requires the ability to evaluate performance and identify opportunities for improvement through a business-savvy lens. Business acumen must become a core competency, woven into the DNA of every individual within the organisation, to foster a culture of alignment, agility and accountability. As we move forward, we must heed the wisdom of these thought leaders and HR institutions to chart a new course, where business acumen serves as the compass for success in the dynamic world of business. The path forward has become clear: business acumen, once the sole domain of the C-suite, must now become the compass for every employee, guiding actions, decisions and evaluations with a view to maximising corporate return on investment.

Ange Gabriel Missamou is a consultant in career development and OD