Building Better Business Acumen

Developing business acumen enterprisewide is a difficult undertaking, but it meets a critical training and development need as well as restores much-needed street cred to the learning function.

What does business acumen have to do with leadership development? This is a common question among CLOs. The fact that it is still asked speaks volumes about where leadership development is — and where it is not.

We are just coming out of the deepest economic recession since the 1930s. Millions are out of work. Companies are still trying to figure out how to produce profits in the face of such challenges as carbon caps, health care reform and social sustainability. If nothing else, business acumen is a critical need for all companies if they are first to survive and then to prosper. Business acumen is a key requirement for being an effective leader.

Business Acumen Before the Great Recession

Flash back to two or three years ago, when companies were still prospering and no one was talking about business acumen in reference to leadership development. When everyone is making money, they all feel that they have high business acumen and that they don’t need any training or development in it.

However, today it has been made clear that many of these executives did not have high business acumen and sorely needed it. The results of ineffective or bad financial behaviors usually appear several years in the future rather than in the year they occurred. In fact, it is often precisely when enterprises are most profitable that business acumen is at its lowest, and anyone promoted into a leadership position will appear to have been responsible for that profitability, even if he or she had no business acumen at all.

Many senior executives in all industries tend to be deluded about their own levels of business acumen. The delusion may actually become stronger as they move up the corporate ladder since the progression reinforces the notion that they got there because of their business acumen.

Before the Great Recession, leadership development was essentially a boom-time phenomenon. It could afford to focus on traditional leadership competencies such as interpersonal skills, emotional intelligence and decision making. To some extent, leadership development had atrophied into the study of leadership when things are going well.