Business Acumen for Project Managers [Free Checklist]
‘Business acumen’ is one of those skills that you see on role profiles for jobs. It’s also something mentioned in the standards for professional project management bodies. Apparently, business acumen is something that project managers should have.
In 2022, PMI updated the Talent Triangle to include business acumen. It used to be called ‘strategic and business management’. So how is business acumen different?
It really is a core skill for project professionals.
I believe that my success at working with senior stakeholders and on difficult projects is to do with business acumen. Equally, when I’ve messed up, that’s because of lack of business acumen.
So what’s it all about? And how do you know if you have it? In this article I’m going to give you some specific actions you can do to improve your business acumen.
If you like, you can download a summary of this article as a free checklist so you can work through the actions at your own pace. Simply follow the links to the free template library and you’ll find the checklist in there.
What is business acumen?
PMI defines it like this:
Professionals with business acumen understand the macro and micro influences in their organization and industry and have the function-specific or domain-specific knowledge to make good decisions. Professionals at all levels need to be able to cultivate effective decision-making and understand how their projects align with the big picture of broader organizational strategy and global trends.PMI, 2022
In other words, business acumen is the ability to see the bigger picture and understand and respond to how your work contributes to organizational strategy given the influences in the organization and the industry, and the global world of work as a whole.
Do you have business acumen?
Ask yourself this:
Do you know how your company makes money? I’ve done inductions for a number of new project managers who couldn’t tell me how their new company (i.e. my company) made money. That’s fine; you’re not expected to know everything on Day 1. But you do need to work it out pretty quickly.
Action: Talk to your boss about what income streams the company has. How many main customer groups? How do you balance their needs?
Action: Find and read the last annual report for your company. Even if you don’t work in a company obligated to produce a formal, public annual report, you’ll often find companies do their own for internal use. Ask about the things you don’t understand.
Where does your business invest?
Investment decisions shape what projects the company does.
For example, let’s say a leisure chain owns a number of brands.
- Cheerful Coffee shops generate a 46% return.
- Happy Hotels generate a 16% return.
- Delicious Diners generate a 3% return.
Your business will invest in Cheerful Coffee shops until the market is at saturation. Why? Because that’s where they will get the best return.
While what counts as ‘best’ return is different for different businesses and in different economic conditions, 10% above base interest rates is good right now. In other words, if you left your money in the bank you’d get the interest rate. Doing a project with the money instead would give you a +10% return on that above what the bank would pay you. Although it’s riskier.
When the market is saturated with Cheerful Coffee shops the company would then look at doing projects to launch some more Happy Hotels. If the bank interest rates are 3% then it’s likely they would bother doing any projects to open some new Delicious Diners because that’s a lot of work and they’d get the same return just by shoving the money in the bank.
That doesn’t mean there will be no projects once all the coffee shops and hotels are built. In reality, the Board will be under pressure to find the next Cheerful Coffee.
Shareholders are unlikely to say: “No worries, just move on and do some projects on a 16% return.” They’ll want the company to uncover the next big thing, the next thing that will give them 40%+ returns on their investment.
Action: Find out if your market is saturated. Read the company’s 3 year plan or their strategy document (this might be a section in the annual report). Make sure you understand where they are headed.
Business acumen is more than money
Well, the money side of things counts for a lot. But there is more to business acumen than just strategic financial decisions.
It’s also to do with the operational context of your work, whether you’re in a traditional business environment, start up, charity or any other sector.
Knowing that gives you ‘acumen’: the ability to make good decisions and to use your professional judgement wisely.
You don’t have to have years of experience to have professional judgement. You just need to – in most cases – apply common sense and good project management skills like involving the right stakeholders, reading the landscape and applying what you see to the recommendations you make.
In other words, it’s being able to see the big picture, understand the commercial reality and act accordingly.
Applying business acumen to your project
Stakeholders are often most interested in project cost and the time it is going to take to finish the work, and your business acumen comes into play hugely here.
You should be able to talk about the business context and financial context of your project as it sits within the wider operational strategy.
Action: Calculate the direct financial impact of your project on the company’s products or services. Is it decreasing the margin on your offerings or increasing it?
Action: Establish how your project is going to affect customer service. If it doesn’t, how could you address customer service through the work you are doing, either to maintain it or make service even better?
Action: Talk to Finance about how best to manage your project budget. Don’t sit on reserves of capital if you don’t need them until later in the year. If you have large bills to pay, make sure they know in advance so cash flow isn’t affected.
Action: Review your project schedule. Is there any value in being able to deliver faster? Perhaps you’d be able to realise some benefits more quickly, which, in the bigger scheme of things, would offset the cost of an additional resource required to do the work faster. Talk to your sponsor if you spot anything.
Dealing with the numbers
I know it all sounds like number crunching. Some of it is. But even I can do it.
I don’t have the ability to deal with numbers in my head. I’m fine with Excel, a calculator and
Business acumen isn’t all about being able to hold revenue figures in your head and calculating the impact of a scope change on business benefits with a click of your fingers. If you can do that, good for you. You can be on my team (because it’s important to surround yourself with experts on your project team).
Business acumen is far more about asking sensible questions. Assimilating information and making connections. Thinking about value and what the business values. Thinking about strategic fit. Taking project decisions with one eye on the big picture.
It makes you a better project manager than someone who simply works through the plan and doesn’t look outside the walls of the project.
Having said that, if you lack confidence dealing with numbers, it certainly won’t hurt to work on that.
Want to boost your business acumen? Download my free checklist which summarizes the actions in this article. Access the Resource Library here and I’ll message you back a link where you can download the templates and gain access to my free Resource Library.