I have had variations of the same conversation with several executive clients over the past few months. The topic was whether HR in their organization had business acumen and if not, if their organization should make a push for developing the business acumen of its HR professionals.

Should HR Develop Business Acumen?I have had variations of the same conversation with several executive clients over the past few months. The topic was whether HR in their organization had business acumen and if not, if their organization should make a push for developing the business acumen of its HR professionals.

In its simplest distillation, the purpose of HR is to ensure that the right talent is in the right place so that the business is successful.  The various functions of HR are tasked with supporting this ultimate purpose – this includes recruiting & hiring, compensation & benefits, training & development, performance management, culture & engagement, succession planning, and so forth.

In general, HR professionals are extremely knowledgeable and highly skilled in their area of expertise. They know the best practices and have systems and processes in place that are robust and well designed.

At the same time, the vast majority of HR professionals do not necessarily understand the business side of the organization they support. They are most often lacking business acumen.

Why are many HR professionals lacking business acumen? 

It is not that HR professionals are lacking interest or ability. It is simply that business knowledge has neither been taught to nor expected of them. 

Do HR leaders need business acumen?

Absolutely! Regardless of the sophistication of HR systems and processes in place, it is simply impossible to ensure that the right talent is in the right place without an understanding the business. How does one know what talent the business truly needs if they do not understand the business?

Should companies allocate funds to develop the business acumen of their HR professionals?

Well, it depends. Many in the C-suite see HR as primarily an administrative role that provides valuable legal cover on personnel issues. If that is the perspective of a company’s executive leadership, then spending time and money on developing the business acumen of HR professionals would largely be an unnecessary cost.

However, there are others in the C-suite who view the role of HR as that or a strategic partner who puts the right people in the right place. If that is the case, then growing the business acumen of HR employees would enhance their ability to fulfill this partner role, and ultimately benefit the business. In which case, the time and money spend would be an investment rather than a cost.

It is important to note that HR leaders with strong business acumen can greatly influence the opinion of the C-suite regarding the role and purpose of HR. Spending available resources on growing the business acumen of HR leadership is a wise investment.

Realistically, most companies are choosing not to allocate funds to develop the business acumen of their HR professionals. This leaves many executives frustrated with the lack of business knowledge of their HR support and HR staff equally frustrated in their efforts to become strategic business partners.

Fancy MBAs or in-house training may be the most obvious way to learn about business. However, the simplest way (which just so happens to be free) is for HR professionals to sit down and talk with business leaders … to learn from those who are actually running the business. 

Can individual HR professionals increase their own business acumen?

By focusing on a few key business questions and understand how the answers impact the work they are doing, HR professionals can develop their own individual business acumen.

• Are there regulatory challenges?
• What are major stakeholder issues?
• Who are major competitors?
• What is company’s market share?
• What is the customer promise / value proposition?
• What are strategic threats & opportunities? 
• What is the targeted growth? 
• What are the plans to scale up and how will the company manage growth?
• What are potential pivots?
• What is company credit rating?
• What is the book value of the company?
• What is expected capital expenditure?
• Why are capital investments being made?
• What is the debt ratio?
• How is company leveraged?
• What is the biggest cost center?
• How are budget allocations made?
• What are the key financial metrics?
• What are the key non-financial metrics?
• What are the operational challenges?
• What is the biggest challenge to success?
• What is safety record and areas of challenge?
• What is top priority of each division / department?
• What wakes leaders up in the middle of the night?

Sarah Bodner, PhD is a confidential thought partner for high-level executives and an influential systems thinker who operationalizes the critical link between employees, corporate image, and business strategy.

www.TheFeatherstoneGroup.com