Let’s Talk Value Creation 101

This article is co-written by David Ryan and Anders Liu-Lindberg 

The purpose of most companies is to create value. Financial value creation, value creation for customers, value creation for society, value creation for employees, etc. Putting an all-encompassing term on this we’re talking about “business acumen”. 

To most business acumen is an intangible term yet, it has now been defined and consists of several distinct qualities that business leaders and now also finance professionals must excel at to create value. Let’s dig further into these.

This is “business acumen” 

What we refer to as business acumen is based on the rigorous research and thought leadership behind the Business Acumen Gauge, which measures 11 capabilities that describe the validated definition of business acumen developed by Quad Assessment 

• Mindset
• Foresight
• Broad Scanning
• Strategic Alignment
• Collaborative
• Resource Management
• Systems and Process
• Decision Making
• Talent Development
• Duty of Care
• Financial Literacy

Many of these shouldn’t be foreign to FP&A professionals who should be able to demonstrate an understanding and competency in foresight (seeing things before they happen), resource management (including people, technology, money, and time), decision-making (effective, well-timed and inclusive), and as already mentioned financial literacy.

Other parts such as broad scanning (checking the external environment for divergent inspiration), strategic alignment (getting others to see, understand and execute a strategic plan) and talent development (tapping, delegating, and building talent around us) we might find to be areas of development opportunity.

For us to be able to contribute and value add most effectively we must learn more about each capability and find out where we have the biggest potential for development. 

Business acumen has previously been undefined, but what does it look like and how is it applied in real life? To try and answer that I’ve invited the co-author of the Business Acumen Gauge to share his experiences on how he has seen it applied in companies and by individuals across the world. 

The reality of business acumen 

In researching and developing the definition of business acumen and the assessment for it – the business acumen gauge, one of our key motivations was to add to the body of knowledge around this critical and all too often misunderstood aspect of leadership and business success.

As I write this I reflect that I have been involved in debriefing over twenty business leaders in a range of businesses in the last few months, and one constant is the incredible impact the Business Acumen Gauge model and assessment has in providing the awakening not only to the participant but also to their direct manager and the organization to the actual multifactorial nature of business acumen.

This fact has been further demonstrated in the current independent research of the BAG by Prof David Gilbert at Monash University –

“Most studies have treated BA as one sub-component of leadership or managerial competencies. Furthermore, although the clear majority of research views BA conceptually as a multidimensional factor, there are only four studies that have empirically tested the concept, as a one-factor construct. 

Financial resource management, human resource management and technology management are the most often cited dimensions of BA. When comparing the BA Gauge to the current analysis, there is a dearth of studies that have paid any attention to other elements of the BA Gauge such as Duty-of-Care and Collaborative Capabilities”

As recently as yesterday I sat with a CEO and reviewed the results of his executive team’s assessment outcomes and we worked through the data that demonstrated the range of behaviours that his team were either focusing on because these were their innate areas of competency and comfort or because they thought that is what they should be doing, but the gaps in the breadth of the capabilities actually required in their roles was significant.

The reality is that in roles there are constant pressures to address emerging issues in business and that most performance review measures are lag indicators – at best – which results in undiagnosed confusion on what are the required areas of focus in a role to contribute to the organizations strategy and are the behaviours the participant is demonstrating being experienced by others as they intend or believe them to be done and is it at the frequency and in the areas the role requires?

Simply put, what value is being contributed and achieved? The BAG first asks all the contributors to the assessment, how important is each capability in the role? Why is this the first step? Because it is the step most often missed, overlooked or assumed not necessary because “we all know what the job description says”.

Across the entire database of assessments, it is rare, in fact, I am not aware of one assessment, where there is more than an 80% match between the participant and their direct manager, more often the misalignment is greater and not infrequently the direct manager achieves insights around assumed issues in performance or outcomes that now are shown to be confusion, lack of clarity or misalignment in what the role requires to be done versus what the “common” opinion is. 

What outcomes have BAG helped leaders to achieve? 

Over the journey in using the BAG as part of the coaching process, it has been demonstrated on multiple occasions to myself and other coaches, that the participant has been able to achieve the Awareness, Insight, and Action steps of development in a much more effective timeframe and manner which dramatically improves the value equation for the organization.

The eleven capabilities first challenge the understanding of what is required to have effective business acumen, then the data collated guides the awareness toward the opportunity to have insight on the what, why and how of being more effective and aligned in the role and the actions required, which are based on fact and objectivity.

 Based on the data and the analysis, we have witnessed direct manager’s (business heads, CEO’s) implement a process of structure and role responsibility review, participants seeking conversations that are objective and fundamentally non-defensive in nature and outcome-focused on improvement, coaching programs being redefined against the clarity of role capability needs and most importantly, the participants have increased knowledge and motivations to achieve in their role and their leadership development journey. 

How does business acumen add value to an organization? 

For the companies that have used the BAG to assist them to achieve their strategy and leadership development, which has included - listed, public, not for profit, government, membership-based, PE-backed, startups, financial services, FMCG, tech, industrials, NASDAQ, healthcare, national and global, being used to support and develop business leaders, coaching programs, succession programs, High Potential programs, M and A environments, restructuring projects, and the list goes on, what was the common need? They all need business acumen. Not just financial literacy or resource management or talent development.

All organizations need all eleven capabilities of the BAG model of business acumen to survive, thrive and succeed. A not for profit is also a not for loss – it needs leaders who can be aligned, capable and focused on developing its mission and managing its culture, assets, finances, supply chain, product/services development, its people and its clients or customers, the same as a financial services company or a biotech.

The points of difference are the importance of each capability in the individual roles at that point in time, which provides the people in the clarity and alignment on what is required for the organization to achieve its strategy and purpose.

If you are a leader, you need to have, demonstrate, develop and achieve business acumen. Your technical skills, be it as a CFO, supply chain manager, GM of Disability Services, CEO or Head of Sales is a part of what contributes to your business acumen, they do not define it, but if you focus on them alone, they may constrain your ability to be a successful leader with good, effective business acumen. 

What is value? 

In asserting that anything adds value, there is always the question of what the definition of value is. This varies depending on the organization, the industry, the culture and the people involved.

For the BAG, its purpose is to add value by providing a framework that defines, challenges, clarifies and offers alignment to the business acumen needs of an organization and those responsible for its success.

For each person involved, there is a learning journey from the moment they are engaged in answering the questions in the assessment through to the report produced and the debriefing that guides the ongoing development steps. And with that clarity and alignment comes the opportunity for increased business performance and more effective leaders. That is value. 

Now we can get serious about business acumen 

We bet you never imagined there was such a structured way to work with business acumen!?! Yet, unless we take a well-structured approach towards improving it we’re leaving a lot of value on the table!

For FP&A professionals there’s another benefit of applying a structured framework. It gives you a way of challenging business leaders on their own business acumen. You can likely find the cracks in their armour and make suggestions as to how they can improve.

This gives FP&A a multitude of approaches to create value in the company and deliver on its purpose “to drive the right strategic choices in the company”. The question is then which steps are you going to take to start improving your business acumen?

If you want a copy of my ebook "Business Acumen - How You Can Apply Business Acumen To Create Value" then just send me a message.

This was the thirteenth and final article in the series "Here's To The New Look FP&A Professional". You can the previous article(s) below.

Here's To The New Look FP&A Professional

Forget Numbers, Start Building People Relationships

First Step In Solving Any Problem Is Recognizing There Is One

EQ Trumps IQ Any Day And It's Time We Make It Count

Are You An Influencer Or Do You Take A Backseat?

FP&A Professionals, Do You Dare To Say "No"?

Model Me This. Model Me That. FP&A Can Model You Anything!

Is FP&A Listening To The Business Or Just Playing Along?

Don't Be A Techie - Be A Techknow

When Finance Speaks No One Listens - Are You Ready To Change That?

Once Upon A Time In Financeland: How Storytelling Helps FP&A Professionals Succeed

Is Creativity A "Dirty Word" For FP&A Professionals?

You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box” where you set the ambition for your transformation. You should join the Finance Business Partner Forum which is part of the Business Partnering Institute's online community where we will continue to discuss this topic and you can click here to follow me on Twitter.

4 Steps For Business Partners To Make An Immediate Impact (part of an eight-article series where I share lessons from the business partner trenches)

Why Did You Become A Business Partner - Ranu Sharma

Your Journey To Successful Business Partnering Explained

How To Create Value Through Business Partnering

Everyone Can Adopt A Business Partnering Mindset (part of a six-article series about FP&A Business Partnering)

From Business Partner To Working Within The Business (part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)

Is Your Product Optimized For Value Creation? (part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)

How Business Partners Turn Analysis To Insight (part of case study series where I interview business partners about how they drive value creation using real cases)

The Future Of FP&A: Two Ways To Take The Reins

What Is The Accounting Profession Paradox?

What Defines A Finance Master?

The New Career Path For Finance Professionals

How Finance People Can Be More Successful

The CFOs Roadmap To Transforming Finance

How To Become A Finance Business Partner

Financial Analyst vs. Finance Business Partner

Finance Business Partner Is A Bullshit Job

How Business Partners Keep A Plan On Track

Anders Liu-Lindberg is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more 8,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger with 40.000+ followers.