Business Acumen – Nature or Nurture? Ross School of Business’ Professor Ray Reilly Shares Valuable New Insight on the Current Entrepreneurship Debate

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Ray Reilly, professor of business administration at the Ross School of Business, University of Michigan, tells the story of an eleven year old girl working in her parents’ shoe store whom the customers flock to, as she implicitly understands their needs and helps them in making their choices – she displays great customer service skill. But she also has re-organised the shop store-room to make stock-control simpler and enable customers to be served more swiftly. The girl is displaying great business acumen, and being eleven years old she has not been formally taught these things or had much opportunity to learn by trial and error – so where does it come from?

Professor Ray Reilly

Professor Ray Reilly

The second level for acquiring acumen has two aspects – knowledge building and thought-process understanding

Ray Reilly is Professor of Business Administration at the Ross School of Business, The University of Michigan, and Director of The Ross Executive Program. He acts as a consultant to businesses in areas including corporate strategy development, corporate valuation, corporate business and financial planning, improvement of operating and administrative business processes, and performance measurement. His current research interests are at the intersection of value-based business decisions and corporate performance measurement.
Reilly explains that some people, like the girl, just have it; but for the rest of us it is an ability that can be acquired through learning and practicing some straight-forward processes.

Business acumen seems like a concept that has been around since the Industrial Revolution if not before – and no doubt there have been plenty people with it since the dawn of time. But as a management buzzword it is under a decade old. Ray Reilly was asked by the some senior HR professionals to design a program to enhance business acumen in 2007 – and when he asked them to define more precisely what they meant, intriguingly they did not really know.

Reilly now defines ‘business acumen’ in the FT Lexicon as ‘keenness and speed in understanding and deciding on a business situation’ – but how do you acquire it? Prof Reilly sees business acumen operating at two levels. The higher acquired level is “when an individual over a business career has a series of experiences in work and formal learning and, if they are good, they relate what they are doing back to the formal principles they learnt, and then keep reinforcing the formal with practiced learning”.

The second level for acquiring acumen has two aspects – knowledge building and thought-process understanding and Reilly says these are a function of three skills:

  • Mindfulness (having an openness and awareness to situations that allows you to understand what are the key things you need to know make a decision)
  • Sense-making (the ability to synthesise complex and apparently unconnected data, so ‘you can do things today to improve outcomes tomorrow’)
  • Resilience (the ability to react positively to events when they do not happen as you expected; this comes from being attentive and informed about evolving situations)

The important factor is that business acumen is not just the result of experience and learning from mistakes, though that is a necessary foundation for it. The three skills set out above are vital to take the experiential knowledge to a state where it can be usefully employed.

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