1. Business Acumen for HR Professionals
Laurie Bassi
CEO, McBassi & Company
October 17, 2013

2. Today’s Discussion Context Components of Business Acumen
Strategic Acumen
Financial Acumen
Planning Acumen
Execution Acumen
Pulling it all together
Q&A
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3. The Ascendance of HR Intangibles drive value.
Human capital is the source of all intangibles.
Human capital management is now an essential organizational competence.
Business acumen is an increasingly important HR competence.

4. Boston Consulting Group/WFPMA, From Capability to Profitability:Realizing the Value of People Management (July 2012)

5. We’ve invested on this insight for over 10 years5

6. Business Acumen: what does it mean?
One definition: keenness and quickness in understanding and dealing with business situations
Components
Business literacy: the knowledge and understanding of the financial, accounting, marketing and operational functions of an organization
Acumen: the ability to make good judgments and quick decisions
Today, we are going to provide an overview to
Increase your business literacy
Connect the dots between HR and the business
Enable you to increase your value to your organization
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7. Four Elements Business Acumen
Strategic acumen: The ability to develop aligned and relevant business strategy to advance the organization’s success
Financial acumen: the ability to interpret financial data and how to act on it
Planning acumen: the ability to develop cohesive business plans that translate the strategy into action
Execution Acumen: the ability to execute the business plan to achieve financial and strategic goals
Strategic Acumen
Business Acumen
Execution Acumen
Financial Acumen
Planning Acumen
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8. Strategic Acumen Talent Development Reporting principles • CTR
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9. Questions What do we mean by strategy?
Where can you get information about the business strategy?
How does HR influence the strategic business objectives?
What do senior business leaders want to see from HR?
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10. Strategic Direction: 4 key elements
The mission: what will be achieved?
The value network: with whom value will be created and captured?
Strategy: how resources should be allocated to accomplish the mission in the context of the value network?
Vision and incentives: why people in the organization should feel motivated to perform at a high level?
Mission & Goals “What”
Value Network “Who”
Alignment
Strategy “How”
Vision & Incentives “Why”
Source:
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11. Elements of A Strategy
Objective: a definition of the ends that the strategy is designed to achieve and by when
Scope:  the part of the landscape in which the firm will operate
Advantage: What your business will do differently from or better than others 
“If you don’t know where you are going, any road can get you there.”
---The Cheshire Cat in Alice and Wonderland by Lewis Carroll
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12. How Can You Learn About the Business Strategy?
Can you state your company’s strategy?
Public information provides insight about your company’s direction
The company website
The annual report
Analyst reports
Obtain, review and ask questions about the strategy; talk to your manager
HBR: July 2010
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13. What Drives Strategic Decisions and Investments?
Types of Decisions
Goals of Corporate Decisions
Goals of HR Decisions
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14. How Does HR Contribute to Strategic Business Objectives?
Creates the enabling capability:
Talent from within or outside
Employee growth and development
Policies and practices
Rewards and incentive
Ideally, involved in creation of the objectives as a valued, strategic business partner
Examples
Moving into new markets
What talent is required to be success in the new market?
What is our build vs. buy strategy?
Acquiring a new operation
What is required to onboard the new employees?
How do we align our performance and pay systems?
Transforming the business
How do we create change-ready leaders?
How do we sustain engagement during change?
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15. What Do Senior Leaders Want to See from HR?
Alignment of HR initiatives to their goals
Help in setting aggressive yet achievable goals for the organization
Help in long-term planning
Help in analyzing & mitigating risks
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16. Financial Acumen Talent Development Reporting principles • CTR
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17. Questions How do companies keep score?
How do businesses make investment decisions?
What do senior leaders want to see from a financial perspective?
How does HR influence the financial statements?
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18. How Do Companies Keep Score?
Accounting is a method of keeping score in business
Uses dollars as the basic score.
Financial reports are used to present the score
Balance sheet
Income statement
Cash Flow statement
A variety of ratios, percentages, and other tools are used to analyze the scores.
Role of GAAP/IFRS
Financial statements enable investors to assess how effective a business is at providing them with a return on their investment
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19. What can we learn from the balance sheet?
Assets =
Liabilities + Capital
Shows the financial position of a company at a specific point in time.
The balance sheet balances
Left side: assets (things of value owned by the company)
Right side: liabilities (debts the company owes)
Below liabilities: capital (the amount belonging to the owners after liabilities are subtracted from assets).
What can we learn from the balance sheet?
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20. What can we learn from the income statement?
Summarizes the results of a company's operations over a period of time
The income statement includes:
Sales
Cost of sales
Gross profit (#1- #2)
Operating expenses
Operating profit (#3 - #4)
Non operating expenses
Net profit before taxes (#5 - #6)
Taxes
Net profit after taxes (the bottom line) (#7 - #8)
What can we learn from the income statement?
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21. Cash Flow Statement
The cash flow statement tells you what is happening to cash and if there is adequate cash flow to pay the expenses as they arise
The cash flow statement includes:
How much cash is generated from a company's products or services (cash flow from operations)
Use or sources of cash from purchasing (or divesting) of new equipment, buildings or short- term assets such as marketable securities
Cash (in or out) resulting from debt, loans or dividends 
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22. What Do We Learn from Financial Statements?
Balance Sheet
How much do we have invested in assets?
What is our current level of obligations?
What is the level of owner’s equity?
Income Statement
Did we make a profit last year?
Over the past three years, did our profits grow at the same rate as our revenues?
What is the total of our expenses for last year?
Cash Flow Statement
How much did we invest in our equipment?
How much did we repay on our bank note?
What portion of our expenses went toward depreciation?
A company’s financial statements show you where a company’s money came from, where it went, and where it is now.
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23. How Do Companies Make Investment Decisions?
Detailed financial model of decisions (e.g. ROI,NPV, IRR,)
Comparable situations from respondent's or firm's experience
Examination of project risks along with risks of other projects in firm's portfolio
Sensitivity analysis and financial models of the risk
Global Survey: McKinsey & Company , 2009
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24. How Does HR Influence the Financial Statements?
Income and Cash Flow Statements
HR costs are included in Overhead or SG&A (Sales, General & Administrative)
So higher HR costs lead to higher total costs which lead to lower profit
However, HR initiatives will also increase revenue and reduce costs
So, properly designed, the net benefit of HR should increase profit
Balance Sheet
The higher profit due to HR initiatives will increase retained earnings
Unfortunately, since the Balance Sheet does not include human capital, the impact of HR initiatives does not increase the reported value of assets
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25. What Do Senior Leaders Want to See from HR?
Business case for key initiatives showing expected impact, dollar benefit, total cost, and net benefit or ROI
How can you help me increase revenue?
How can you help me reduce costs?
Basically, bottom line impact
Also interested in a reduction in opportunity costs
Like the value of the reduced time spent in training using WBT instead of ILT (assuming WBT can accomplish the same)
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26. Planning Acumen Talent Development Reporting principles • CTR
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27. Questions What is included in a robust business plan?
How does HR contribute to the business plan?
What do senior leaders need from HR?
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28. What Is A Business Plan? What Is Its Purpose?
What it is:
A formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals.
May also contain background information about the organization or team attempting to reach those goals.
Purpose: A decision making tool for a defined audience
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29. Elements of A Business Plan
What’s included?
Specific, measurable goals
Critical success factors
Assumptions
Identification of risks
Discussion of new products or services
Strategy and implementation plans
Financials
Request for resources
Staff, capital, budget
May include intermediate goals required to reach the high-level goals
Development of a new product, a new service, a new IT system
Finance restructuring
Refurbishing a factory
Restructuring of the organization
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30. How Does HR Contribute to the Business Plan?
HR needs to have one!
HR should use the same planning process as everyone else and be held to the same standards
Implication: HR develops specific, measurable goals
HR will contribute to the business plan of other units by enabling them to achieve their goals
HR initiatives will support their goals
Depending on the funding model, costs for HR may be part of the unit’s costs
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31. What Do Senior Leaders Want to See from HR
Plans with
Specific, measurable goals
Expected outcomes
Effectiveness goals
Efficiency goals
Total costs
Business case for the proposed investment
At least for the expensive initiatives
Basically, that you are willing to play by the same planning rules as everyone else
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32. Execution Acumen Talent Development Reporting principles • CTR
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33. Questions
What process should an organization use to ensure it delivers to planned results?
What do senior leaders want from HR?
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34. What Is It? Why Is It Important?
What is included in execution acumen?
Function leadership: The ability to effectively and efficiently manage your unit / department / BU to deliver the planned results
Leading & driving change: The ability to bring about strategic change, both internally and externally
Project leadership: The ability to effectively and efficiently lead initiatives, manage stakeholders, and take action
Why is it important? Ensure that initiatives realize their goals with the anticipated resources in the planned time horizon
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35. Critical Execution Elements
Set clear goals and expectations
Establish clear accountability for results
Provide the necessary support for your team
Schedule monthly meetings to review progress against goals and take appropriate action
Will need reports containing the relevant measures
Discuss variances
Decide what, if any, action is required
Learn from variances and surprises
Louis Gerstner of IBM called engagement imperative the hard part. It is where strategy execution fails or succeeds. It is where the work required to achieve the goals based on metrics and to transform structure and culture meet the demands of ongoing operations
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36. Example The stats How they execute
$14B in revenue in 2012 = 20% growth
Over $13B of the transactions on eBay were via mobile devices (estimated at $20B in 2013)
Reached over 84M people in August 2013
43% of US adults with annual household incomes of $250,000 or more shopped at eBay over the past 12 months
How they execute
Clear funding model
Budgeting: annually
Prioritization: 2 times/year, driven by strategy and business objectives
Portfolio process: run quarterly
Technology: reviewed annually
projects per year
20 projects / quarter are changed, modified, deleted or substituted
Leverage a shared services model for staffing projects
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37. What Do Senior Leaders Want to See from HR?
That a disciplined execution process exists
That good decisions are being made
No year-end surprises
High-level reports or scorecards with plan, YTD results, and forecast
Key outcome and impact measures
Key effectiveness and efficiency measures
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38. Putting it all together
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39. Question What is the thread across all areas?
What role can HR play in tying it altogether?
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40. What’s the Track Record?
Only 30% of companies actually reach their goals
Only 15% of employees can identify their company’s goals and priorities
51% of employees don’t understand what they need to do to meet the goals
51% work on things that are urgent but not important
81% feel no ownership in getting the goals completed
“If path finding identifies a path, aligning paves it. Organizations are perfectly aligned to get the results they get. Think about that. If you are not getting the results you want, it is due to a misalignment somewhere in the organization and no pushing, pulling, demanding, or insisting will change a misalignment.”
---Attributed to Steven Covey
Harris Research, 2006 Study
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41. Critical Success Factors
Clarity of responsibilities and accountabilities
Once made, decisions are rarely second guessed
Appropriate metrics and access to data to measure the key drivers of business performance
Information flows freely across the organization
Organizational discipline in its end to end business planning and execution process
From: The Secrets to Successful Strategy Execution; Gary L. Neilson, Karla L. Martin, and Elizabeth Powers; Harvard Business Review, 2008
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42. What Is Our Role? How Can We Contribute to Organizational Success?.
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43. What Is Our Role? How Can We Contribute to Organizational Success?
Our role: Be a valued business partner helping our company achieve its mission and realize its vision
How can we contribute?
Align initiatives to company goals
Get agreement upfront with sponsors on expected impact
Create a business case for key initiatives
Execute with discipline and deliver planned results
Manage the initiatives well
Set effectiveness and efficiency goals
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44. Greatest Opportunities for Improvement
Adopt a business mindset
Focus on alignment, impact, outcomes, cost
Do a better job planning
Do a better job executing
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45. Advice to Those Who Want to be Promoted
Speak the language of business
Look for opportunities to get in front of senior business leaders
Take on special projects and assignments
Get experience outside HR
Take (smart) risks
Improve your business acumen
Strategic
Planning
Financial
Execution
Huh?
What’s the ROI on HC?
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46. Contact Information
Laurie Bassi
Phone: (303)
Dave Vance: Executive Director
Phone: (970)
Peggy Parskey: Assistant Director
Phone: (323)
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