Dr John Sullivan Talent Management Thought Leadership

This comprehensive guide to “knowing the business” will jumpstart both your performance and your career.

It’s important to realize that becoming a top performer in HR may take no more than developing the habit of emphasizing the acquiring of business knowledge over HR knowledge. It is still important to learn tactical HR functional tools as an HR practitioner. However, you must be aware that developing a high level of business knowledge (also known as business acumen) is essential if you expect to become a top performer who significantly impacts business results. 

There is a great amount of data supporting this contention. For example, decades ago, the University of Michigan found that “external business knowledge, not internal knowledge of HR,” is the key performance differentiator. Their faculty (including Ulrich and Brockbank) also found that “delivery of the HR basic practices accounts for only 18% of HR’s influence on business results” (2½ times less than strategic business knowledge).

You will also find the same performance boost from business knowledge among recruiters. More recently, Lou Adler reported a conversation with a VP of Talent at one of the world’s largest firms. He noted that the VP said, “On a recent evaluation of more than 200 recruiters, those with domain expertise made more placements per month with stronger candidates.”

How Business Knowledge Improves Performance

There are many reasons why “knowing the business” is the secret sauce that multiplies both individual and team performance levels, as well as their business impacts. The first reason is when you have the same focus and use the same language as executives. This makes it more likely that you will quickly impress those executives who rarely see a high level of business knowledge in overhead staff. But also, this knowledge will direct you to spend more time on the HR actions that have the highest indisputable business impacts. Those business impacts include increasing revenue and profit margins. Fortunately, BCG has produced a list of the HR areas with the highest revenue/profit impacts.

Using this business knowledge may also cause you to further emulate top management by shifting to more data-driven decisions. Another plus is that more employees both in and outside of HR will be willing to work with you because they can learn how to be more businesslike from you. And your action recommendations will more likely be followed.

For example, a hiring manager is pleasantly surprised to find that their recruiter fully understands their business, the team’s needs, and the requirements for this job. And finally, this acquired business knowledge may also lead to faster promotions for you. Because the higher the level of the job, the more essential it is for the candidate to have broad strategic business knowledge. 

Areas That You Must Understand Before You Can… “Know The Business”

To me, the highest goal of any employee working in an overhead function is to directly and measurably have a measurable positive impact on business results. And that isn’t likely to happen unless, in addition to being good at HR/recruiting, you also know and apply your business knowledge to your work. Knowing the business is often rare in HR, in part because so few working in it have recent business degrees. Fortunately, during my four decades of work as a business professor. I have identified the 15 most important business knowledge areas that you must master. The most critical knowledge areas that you should acquire are listed first.

1. Be able to quickly name and recite your company’s business model – this is the first and the most important area of knowing the business differentiator. Because the mere use of the phrase “our business model” instantly sets you apart from 90% of your coworkers. If you’re not aware of the term, your company’s business model is a brief one or two-sentence narrative description of how your company creates, delivers, and captures value. The model’s primary focus is on revenue generation, so it is also called your “revenue model.” It is normally recited to potential investors, bankers, and strategic partners. For example, Google’s business model might be described, “We generate 90% of our revenue by leveraging search and video views to maximize the placement of high-margin revenue-generating ads that target individuals.” When dealing with executives, you must understand and use this critical phrase “following our business model”. If you can’t find it written down anywhere. Ask any low-level executive because each will be able to recite it from memory.
2. Know the company’s strategic goals and success measures – strategic goals tell high-level people where they should focus their time and resources. Your company’s strategic goals are spelled out in its strategic plan each year. Typical strategic goals might include increasing revenue, improving market share, developing new products, executing an M&A, or increasing customer satisfaction. Rather than attempting “to align with strategic goals,” HR professionals must instead move beyond alignment. And spend most of their time and resources on activities that directly improve the designated success measures for each listed strategic goal. It’s often difficult to gain access to your company’s strategic business plan. However, your VP of HR will be able to recite the top goals for the year from memory. Work with the COO’s office to help identify which specific HR actions (like recruiting and retention). Will have the highest impact and be able “to move the needle” on this year’s company’s strategic goals.
3. List your company’s current strategic business problems – for a company that is struggling. Knowing its current strategic business problems may be more important than supporting your corporate goals. Because helping to solve business problems often has a more immediate and noticeable impact. So make it a habit to continually develop and update your own list of your company’s problems. And commit to impacting at least one of them this year. Once again, the COO’s office can help with an informal verbal list of those problems, weaknesses, and opportunities. You should also work with this office to determine which specific HR actions you can take will likely have the most impact on resolving each problem. Directly aiding in resolving at least one of these immediate strategic problems may be the most important thing you do in HR.
4. Identify your company’s mission-critical business units – among the dozens of business units in the company. A few key business units (like sales, marketing, product development, and customer service) will have a much higher impact on reaching your company’s strategic goals. These key business units are almost always given a top priority for funding and executive attention. In most cases, administrative and overhead units don’t qualify as key business units. Your VP of HR or the COO’s office can tell you verbally which business units and teams are “mission-critical” (be extremely careful about repeating this information). You should also develop the capability of “connecting the dots,” where you learn the key interrelationships and dependencies between the different prioritized business units. If you’re a recruiter, you also want to focus your best efforts on the open jobs in those critical business units and teams.
5. Know the “key players” in your company – it’s essential to know the executives, managers, and employees with significant influence because they have high formal titles or informal power. So you should know the names and influence areas of everyone on the executive committee and all founders and the company’s heroes. If you can get access to your succession plan, you can also get a good idea of who the company considers its future leaders.
6. Know your key shareholders and stakeholders – you also must be aware of influential individuals and groups that are not employees. Start by learning from the annual report who controls most of your stock. You should also be aware of the interests and needs of the many corporate stakeholders. These stakeholders have an interest in the company because company actions directly impact them. Usually, they include groups of retirees, potential investors, customers, consumer groups, environmental activists, and regulators.
7. Know your company’s major customers – and most successful companies, like Amazon, knowing and fully serving the customer is the first priority. And obviously, no employee can better meet customer needs or improve customer service unless they know your company’s largest customers (or categories of customers) and their needs. Any manager in sales or marketing can instantly rattle off who these customers are and how much revenue each one contributes.
8. Know your company’s major competitors – business is fiercely competitive, so you must know a great deal about each of your company’s major competitors. You will need to know the names of the major competitor firms and where specifically they have a competitive advantage over your firm. You also need to know where they are superior in producing revenue and market share. You also must know when their products, services, brand, or business practices are superior to yours and why. Most companies paid for business information sites (like Bloomberg and D&B Hoovers) list the key competitors for each major firm (here’s a free site listing the competitors for Apple). Or simply ask any manager in sales or marketing. You should also know the benchmark firms (in business and talent) from which you can learn best and next practices. And finally, you should also show how each of your company’s HR functions are superior to your competitors. And specifically how they provide a competitive advantage in practices and results. 
9. Know your company’s strategic products – because products and services often generate the most revenue. You must know your company’s current and emerging products that provide the highest total profit, profit margins, revenue, and highest growth rates. You will also need to know the most strategic products in your industry. Anyone in marketing can reveal both your own and the industry’s best-performing products. Because product development is so critical to future revenue, you should prioritize HR actions that improve innovation and product development. 
10. Knowing key business terminology, buzzwords and acronyms – it may seem like a minor thing, but you won’t be able to understand or communicate with executives and managers unless you know and use the same common company and industry terminology that they use. You should especially focus on instantly recognizing acronyms. Because often, executives and managers will use your level of business terminology in order to quickly assess and reject you. Ask around (try your onboarding professionals first) to see if anyone has already developed a glossary and acronym list. Otherwise, look for frequently used terms in communications, industry publications, and presentations. Once you know the words, there are plenty of online business dictionaries to help you understand their meanings.
11. Track major environmental factors that impact organizational success when they change – perhaps the most important knowledge area most ignored is the industry’s external environmental factors. You need to identify and track the ones that impact company success the most when they change. Those changing economic e-factors may often include GDP growth, interest rates, inflation, tax rates, regulations, and weather. You must also monitor influential social factors like consumer trends, sustainability, DEI, and corporate social responsibility. Either the COO or the CFO’s office will know these external factors.
12. Acquire current and historical industry knowledge – knowing your company simply isn’t enough. You must also be aware of major historical failures/successes and current and emerging trends within your industry. A key step is knowing which industry associations to join and what key learning sources and publications to read. You must also know the CEOs of other major industry firms and all industry icons. And finally, you must learn the critical success factors of your industry. They are so well written down anywhere, but you can identify them by asking every industry expert that you can. They consider the current and the future “critical success factors” for leading companies in your industry.
13. Understand emerging new business technologies – because technology will play such a large role in future business success. You must have a general idea about the technologies that are being considered by leading companies in your industry. These emerging technologies often include hardware and software in many areas, including AI, robotics, supply chain, production, quality control, and customer service. You should also be aware of the criteria that should be used to determine whether “new work” should be done by employees or robots/software.
14. Identify key future skills and competencies that the company will need – the odds of a company’s future success improve dramatically when its workforce has the needed skills and competencies. And since recruiting and learning/development greatly impact whether those future skills are present in sufficient numbers at the right time. So it makes sense for HR professionals to work with the COO and the L&D office to identify each of the emerging strategic skills and capabilities that must permeate your workforce in the next year or two.
15. Know how to improve your company’s current workforce’s productivity level – almost every program and action in HR should be designed to increase individual and team productivity. Workforce productivity is the value of employee output compared to the cost of labor. So to establish a starting benchmark number, all HR professionals should know their company’s productivity level. The most used measure of workforce productivity is your company’s “per employee” each year. Next, you should compare your company’s productivity number with other major competitor firms. Then, you can calculate it yourself by simply dividing your company’s yearly revenue by your number of FTEs. You can also find this metric for all major companies on MarketWatch.com (a revenue per employee example for Google can be found here). And finally, those in HR need to work with the CFO and the COO’s offices to identify which HR actions have in the past had the highest impact on improving workforce productivity (i.e., recruiting, retention, and better internal movement). 

If you can only do one thing© – because nothing reveals the hot issues facing a company more concisely than the meeting agenda of the executive committee. Try to find someone in the company that has access to it. In some cases, you may need to settle for agendas that are months old. But that’s okay because the issues covered are still likely to remain relevant to those in HR.

If You Want To Become A Top Performer In HR… You Also Will Need These Capabilities

In addition to the business knowledge areas outlined above. There are certain other business-like capabilities that the best-performing HR professionals must-have. They include:

• The capability of building a compelling HR business case – it’s difficult to be a great performer without ample resources. So work with the CFO’s office to identify how the best in your company can use numbers to convince executives to fully fund their new ideas. Begin by opportunities to find and review previously successful business cases from leaders in and outside of HR. Start by asking around in the CFO’s office.
• Gain credibility by working on the business side – there is really no substitute for the credibility you gain after working in an actual strategic business unit. Even if it’s only a short-term rotation or serving on a committee on the business side, the experience will help you learn the business faster than anything else. And in addition, the contacts you develop will be helpful for future business learning.
• Shift to a data-driven decision-making approach – the best way to emulate executive behavior is to move away from intuitive and historical HR approaches. And gradually shift to the decision-making model that they use, which relies on data, evidence, and facts to support every important decision they make.
• Becoming an expert in one area will build your credibility – making everyone aware that you are an expert in one important area will provide you with instant credibility. Both because of your current accomplishment. But also because it shows that you can do it again in another important area when new expertise is suddenly needed. If you can, in HR, I recommend becoming a technology, metrics, or diversity expert. Because these three HR competencies will surely continue to grow in importance in HR. And finally, because few executives really understand it, becoming an expert and helping them with social media may also help to make yours valuable to them.
• Learn to make informal forecasts – in direct contrast to most business people. Unfortunately, almost everyone working in HR focuses on either the past or today’s issues. So you will stand out if you occasionally forecast potential risks and what is likely to happen in the near future in your team or company. You can get help in forecasting by tracking what is happening and being planned at the most advanced and fastest moving companies in your industry. Your company’s strategic business planners can also be helpful.
• Continually learn the best practices in your function – because it’s still important to be a tactical expert in your HR functional area. It’s important to set aside time each week to learn about the “best and next practices” in HR and those best practices in business areas that might be transferable to HR. One of the best ways to learn fast and with less effort is by building your own informal “learning network” with five other HR professionals with similar learning interests.
• Identify which jobs have the highest business impact – everyone in HR but especially those in recruiting. Need to know which jobs have been prioritized because of their increased business impact. So identify those priorities or convince your hiring managers to prioritize their job based on their business impact.
• Learn how to create a process map – very little impresses both executives and engineers as fast as presenting a well-done, comprehensive process map. So learn from project managers how to develop and present at least one of them.
• Gradually shift your language so that it becomes more strategic – and finally, you must consciously change your language so that it is less HR-centric and more strategic and businesslike. That new language should include using more strategic terminology. Which would include using phrases that include numeric business impacts (Example – “Our new recruiting process with AI will hire an additional 20 salespeople over last year, and each will sell 150,000 dollars more during their first year.” Your new language should also avoid the use of any “bad language.” Which often includes these words/phrases (basically, a lot, I believe/think, I tried, I’m not going to lie, and I’m risk-averse). Learn how to talk strategically here.

Final Thoughts

Over the years whenever I have been asked to describe myself, I have always stated without hesitation that “I am a businessperson that happens to be working in HR.” I always emphasize my business knowledge and experience. First, the data reveals that it is #1 factor that leads to becoming a top performer in HR. But also, like it or not, I have discovered that many executives don’t fully respect those who work in administrative or overhead functions. But also because I have found that most executives self-identify as business people who talk about and work on strategic business problems every day.

Executives almost always differ from those in HR. By being data-driven, fast-moving aggressive, and competitive risk-takers that love winning and hate losing. I have also discovered that all high-level business people love numbers, precision, and accountability measures. So whether you simply want to get executives to even listen to you. Or if you someday want to become an executive yourself. I find that those in HR often need to pleasantly surprise executives and managers by emulating their “businesslike talk and action.” Which often includes using strategic language. But it also includes talking about strategic goals and problems, a focus on metrics, numbers, and dollars, and a never-ending emphasis on gaining a competitive advantage. 

And by the way, it’s not just an important thing to do. It is literally the most important thing you can do to accelerate your career movement while in HR. And of course, it is essential if you ever want to be promoted into a business unit where all of the real money and power resides.

Author’s Note