What is Business Acumen in HR?

Business Acumen, or the ability to understand business, is arguably the strongest predictor for business impact. It is a skill that is scarce among HR professionals. 4 out of 10 CHROs believe business acumen is the most scarce skill among HR talent. So what exactly is Business Acumen? The term refers to an individual’s ability to understand an organization’s goals, purposes, and vision and create processes, policies, and activities that are aligned with them to best serve the organization. It is one of the fundamental qualities of a business leader. Sometimes Business Acumen is also referred to as “Business Savy” or “Business Sense”.

HR professionals who gain business acumen can grasp the core business principles, internal and external operations and the company’s objectives. By which they will be able to tailor-make policies and day-to-days that best serves the company, strategically. Simply put, this will include the hiring process and type of employees they will want to look for. If you hire the right people that align with your vision, they will take care of the customers accordingly and that will ultimately drive profits. Such HR professionals understand business strategy is not entirely distinct from the purview of HR. Rather it is a fundamental part of fully understanding an organization and best serving both its employees and customers.

Why is business acumen important for HR professionals?

The scope and KPIs of the HR profession are evolving now and business acumen is quickly becoming a core competency today. However, 41% CHROs agree that business acumen is lacking skill even among newly graduating recruits. The key reason for HR professionals to understand the business they are in is that it adds value to the organization they work with. If they can fully grasp and speak the language of the business leaders, even they can make a significant strategic impact in business. As an HR professional, it helps you understand the goals, values and mission of your organization better, which in turn helps in the evolution of what is needed. This boosts your confidence in your decision making and implementing changes. It is important to note that there are various heads of HR around there who do not demonstrate any kind of business acumen and possess a negligible amount of knowledge of the business they are in. The HR strategies and policies drafted by such leaders will never align with the business needs.

What does business acumen for HR professionals entail?

Apart from Business Acumen, AIHR has identified a very particular set of core competencies every HR professional must possess to be impactful and effective in their capacities. 

1.     Data-driven

2.     Digital integration

3.     People’s advocate

Business acumen comprises three key components:

1.     Context interpretation

2.     Customer orientation

3.     Strategic co-creation

Business acumen is a vital competency for all HR professionals

In conclusion, business acumen must be considered a KPI in today’s business world. Not only will it strengthen the HR department, but it will also help you connect HR strategy with the wider business strategy and enable you to provide real value to the organization that leaders notice.