Do you struggle with how to develop business acumen in employees?
If so, you’re not alone. It’s a common concern of managers and business owners.
Your employees may be great at their individual jobs, whether they’re creatives, salespeople, engineers, IT personnel or something else. While they’re intelligent, capable employees, they may lack a formal business education or even awareness about what other business functions contribute.
In the long run, that can equate to a lack of understanding in how to add value to your company or act in its best interest.
Why is business acumen important?
Business acumen is a critical quality for all employees to have. After all, your employees make decisions and take actions daily that can impact your company’s operations, reputation and profitability.
When employees lack business acumen, organizations can suffer negative repercussions:
- Employee engagement and productivity tend to decrease when employees don’t understand how their role fits into the bigger picture, which can hurt your bottom line.
- Employees can make decisions that don’t align with strategic goals. These missteps can result in lost revenue and wasted time.
- Employee turnover can increase, especially among those who seek promotions to leadership roles. Certainly, a lack of business savvy can be detrimental to career advancement. Some employees may feel as if they’ve hit a roadblock, and they aren’t sure why. Then they get discouraged, leave and must be replaced.
- Businesses miss out on meaningful employee input; specifically, their ideas on how to improve the business. This input could otherwise enhance efficiency, reduce costs or upgrade the customer experience.
- Customer, vendor or partner relationships can be impaired.
- Businesses can open themselves up to liability in worst-case scenarios.
No employee wants to make a mistake at work. They want to perform well and be valued within a team. In many cases, they just don’t know what they don’t know.
As a business owner or manager, you can maximize employee performance by investing your time into training your workforce about business operations and strategic goals, and how each person makes an impact.
What basic business knowledge should all employees know?
Ideally, your employees should be able to answer basic questions about your business:
- How does the business operate?
- Who is the customer?
- How does the business make money (and what are the revenue-generating areas versus cost centers)?
- How do all the functions or departments of the business work together and impact each other?
- Which internal and external factors affect profitability?
- What are the strategic goals of the business, and how can they be achieved?
8 ways to develop business acumen in employees
Employee development is a critical part of any successful business. Here are a few ways you can add to your team’s skill set and build the business acumen your company needs.
1. Educate employees on key business goals.
If you understand your personal goals and know what’s expected of you, it’s easier to make decisions and complete your day-to-day work.
That’s why you should routinely share with employees strategic business goals and how each employee’s role contributes toward these goals.
Once this discussion has taken place, all projects given to employees need to align with a strategic goal. Understanding how their contributions help to drive business success can be a strong motivator.
2. Implement cross-training.
It’s easy to get caught up in a daily routine and focus only on your own job. Silos can form, and employees can start to work without much consideration for what everyone else around them is doing.
Once employees understand how their job fits into the overall strategy, it’s critical that they also understand the purpose and function of other departments.
Cross-training, during which an employee sits with another department and learns how their colleagues perform their jobs, can broaden perspectives, increase awareness and even alleviate a sense of isolation.
At the end of the training, ask employees to describe:
- What they learned
- What was meaningful
- How this learning experience impacts their job
- What suggestions they have for how to improve these other departments
3. Facilitate cross-departmental problem solving.
Closely related to cross-training, cross-departmental problem solving involves gathering a representative from each business function – marketing, accounting, finance, sales, operations or service, to name a few – to discuss how to solve a specific problem.
Diverse perspectives help produce more creative and comprehensive solutions to problems.
This exercise also enables employees to continue thinking about what is going on with other departments and how they all interact with each other.
4. Explain your customer lifecycle to employees.
- How do customers first come to your business?
- What is the customer experience throughout their interaction with your business?
- How can your business keep customers for the long term?
This lesson could be turned into a game in which employee teams represent the different business functions. For every customer scenario, each team explains at what stage of the customer lifecycle they interface with customers and how they affect the overall relationship.
This can help employees better serve customers because they understand the entire process. And if one employee is unable to help a customer with an issue, they know who can within your organization.
Furthermore, employees will be able to communicate to customers clearly and more comprehensively about what they can expect in dealing with your business.
5. Teach important financial statements to employees.
All businesses have cash flow statements, budgets, departmental numbers and the like, but few employees ever look at it – or even have the opportunity to see it – much less decipher it.
Employees need to know how your business made or lost money over a designated time period, and how their role and department impacted that outcome. They should also discuss, as a department, how their performance can improve over the next month and overcome any barriers to doing so.
If your company is publicly traded, it’s a great idea for employees to listen to quarterly earnings calls to learn about other factors influencing the company’s success.
6. Encourage and celebrate employee ideas.
No, we don’t mean a celebration in terms of a party with cake.
Set aside a few days each year during which employees feel empowered to present ideas for how to improve their jobs and the overall business.
Employees may want to make a difference, but they might feel they don’t have the opportunity.
Ideas that align with strategic initiatives should be considered and, if possible, implemented to demonstrate to employees that their feedback is valued.
7. Establish business acumen as a core competency.
You probably have a list of behaviors and characteristics that you require your employees to demonstrate. If you prioritize business acumen as a core competency and can define what exactly that means to your organization, this trait will continue to be cultivated within employees.
During annual reviews, you should discuss with current employees how well they demonstrated business acumen and how it can be developed further.
For prospective hires, try to gauge their understanding of this knowledge base during the interview process. Over time, it will help to reduce your training efforts if new hires already possess a minimum acceptable level of business acumen.
8. Empower employees to further their education.
There’s only so much a business owner or manager can do to teach an employee. The final step is to offer your teams the tools to educate themselves.
- Collect books or online resources on various business skills and topics for employees to review during breaks.
- Partner with local academic institutions to facilitate continuing business education for employees.
- Offer online training courses focused on developing business acumen.
By implementing any of these strategies, you’re granting employees free access to better their own understanding of business issues. This simple step could make a big difference in one of your employees performing better tomorrow.
Summing it all up
Once your employees demonstrate business acumen, they’re no longer simply doing a job.
- Are aware of the specific targets they need to reach and can align their work output accordingly
- Understand what their role – as well as their colleagues’ roles – contributes to the bottom line
- Can differentiate between smart and poor business decisions, and can safeguard your business against costly missteps
- Are constantly on the lookout for ways to improve your business
A workforce that can make educated decisions on behalf of your business is a powerful tool to have at your disposal. That’s why it’s crucial you understand how to develop business acumen.
For more information about unleashing your employees’ potential through training, download our complimentary magazine: The Insperity guide to learning and development.