Understanding business acumen is a key priority for any organization looking to stay competitive, win, and grow.

Business acumen involves understanding how a business makes money and making good decisions around the money-making process. The people who are leading an organization and making decisions are the ones who dictate the overarching results of the organization, so it makes sense that they ought to understand how they help drive business results. Thus, developing the business skills of leaders in an organization is a top priority for L&D and HR leaders.

Well, at least it should be.

Identifying Key Gaps in Business Acumen

Most organizations have a competency model they use to help focus their efforts. These models typically consist of cultural competencies, soft skills, and hard business skills. There may be other things that make up the competency model, but good L&D and HR leaders are always trying to identify gaps in their people in relation to that model.

Sometimes, it's explicitly stated in a leadership competency model that business acumen itself is a core competency of a leader within their organization. Other times it may be hidden in there. Nevertheless, learning how to see if there are gaps in business acumen within the leadership ranks is a crucial skill an organization needs to stay competitive.

Lack of Alignment

It's easy to see that a gap in business acumen may exist if there is a lack of alignment between the strategic level decisions and the overarching goals of the business. People who propose plans, projects, or other ideas that don't align with the business goals and priorities may not fully understand how the business makes money and how to make good decisions around that process.

As Tim Cook, CEO of Apple emphasizes, "Strategic alignment is critical to the success of any organization. It ensures that everyone in the company is working towards the same goals and objectives, which ultimately leads to better decision making, higher productivity, and greater success." If there's misalignment, you likely have a business acumen gap.

No Rigor or Depth to the Budgeting Process

Another indicator of a gap in business acumen is the budgeting process. If there's no rigor or depth to the budgeting process, or the numbers don't make sense in terms of a budget that could be profitable in the long run or aligned with the organization's strategic priorities, there may be a gap in business acumen.

Assessing your budgeting process and how effectively your finance team interfaces with non-financial leaders is a great starting place to close this gap.

Poor Turnover or Retention Rates

Higher than expected turnover and retention rates can be caused by a variety of factors, including poor management, lack of career growth opportunities, or poor company culture. However, the employee's lack of business and financial acumen can also play a role in this issue.

According to a study by the American Management Association (AMA), employees who understand business and financial concepts are more likely to be engaged and committed to their work. The study found that employees with financial training were better able to understand the company's goals and strategies, and were more likely to feel a sense of ownership over their work.

Conversely, employees who lacked financial knowledge were more likely to feel disconnected from the company's goals and were less likely to see the relevance of their work. This can lead to a lack of motivation and a higher likelihood of turnover. Thus, poor turnover or retention rates can also signal a gap in business acumen.

Closing the Gap

One way to close the gap is by using a simple framework called The Five Drivers. This framework demonstrates the five areas that all businesses need to focus on, and it's done in the context of the organization through its strategy.

By helping people make the connection between what they do every day and the C-suite level and shareholder level priorities and strategies, they will be better equipped to implement strategically aligned projects, speak the language of the business, and ultimately drive better business results for the organization.

In conclusion, identifying gaps in business and financial acumen within the leadership ranks is crucial for any organization looking to stay competitive, win, and grow. L&D and HR leaders play a vital role in identifying these gaps and implementing the necessary business acumen training to close them.

By investing in the development of their leaders' business and financial acumen, organizations can ensure long-term success, empower individuals to take ownership of their work, and contribute to the company's growth and prosperity.

As Mary Barra, CEO of General Motors, put it, "Business and financial acumen are crucial skills for any leader, allowing them to make informed decisions that drive growth and profitability."