SHRM-CP / SHRM-SCP Certification Exam: Behavioral Competencies - Business Skills - Business Acumen

Business Cluster
The Business cluster represents 18.5 percent of both exams’ weighted scores.

There are three competencies that fall within the Business cluster.
- Behavioral Competency 6—Business Acumen
- Behavioral Competency 7—Consultation
- Behavioral Competency 8—Critical Evaluation

This cluster covers the behaviors, attributes, and knowledge for HR professionals to identify, design, implement, and evaluate HR solutions that meet its organization’s goals and objectives. These competencies address HR’s ability to understand the business and environment in which the organization does business, create and implement solutions to meet the human capital needs, suggest and lead change initiatives, and gather/analyze data for informed business decisions.

Behavioral Competency 6—Business Acumen
Understanding how the business (organization) runs, what makes it financially viable, and how it can be guided to greater effectiveness is a role for HR managers that gains importance each day.

Three subcompetencies comprise the Business Acumen competency.

They are defined by SHRM as follows:
- Business and competitive awareness Understanding the organization’s operations, functions, products and services, and the competitive, economic, social, and political environments in which the organization operates
- Business analysis Applying business metrics, principles, and technologies to inform and address business needs
- Strategic alignment Aligning HR strategy, communications, initiatives, and operations with the organization’s strategic direction

Key Concepts
- Business terms and concepts (e.g., return on investment [ROI])
- Analyzing and interpreting business documents (e.g., balance sheets, budgets, cash flow statements, profit and loss statements)
- Elements of a business case
- Business intelligence techniques and tools (e.g., online analytical processing, advanced analytics, business intelligence portals)
- Financial analysis and methods for assessing business health

Definition
According to SHRM, Business Acumen is defined “as the knowledge, skills, abilities, and other characteristics (KSAOs) needed to understand the organization’s operations, functions, and external environment, and to apply business tools and analyses that inform HR initiatives and operations consistent with the overall strategic direction of the organization.”

Proficiency Indicators for All HR Professionals
These are the basic behaviors required of all HR professionals in the area of Business Acumen.

Building Strategic Relationships
Strategic relationships are symbiotic. They provide each person or entity with something that they need. Strategic relations can exist with vendors, customers, regulators, and other oversight groups. HR can contribute to those relationships through its policies, planning, and management of the HR functions. Everything HR does should support the organization’s strategic planning objectives.

Understanding the Business Operations
Business operations are ongoing activities involved in the production of value for the organization’s stakeholders. HR contributes to an organization’s business operations by supporting its people assets in ways that enhance the organization’s strategic goals and objectives.

Learning the Business and Operational Functions
“Operations management (OM) is the business function responsible for managing the process of creation of goods and services. It involves planning, organizing, coordinating, and controlling all the resources needed to produce a company’s goods and services. Because operations management is a management function, it involves managing people, equipment, technology, information, and all the other resources needed in the production of goods and services. Operations management is the central core function for every company. This is true regardless of the size of the company, the industry it is in, whether it is manufacturing or service, or is for-profit or not-for-profit.”40 HR professionals should create “people” policies and practices that contribute to the organization’s operational success.

Understanding the Industry
Industries are collections of enterprises doing similar things or serving similar segments of the economy. Examples include energy, retail, restaurant, communications, consumer products, and business services. Organizations within an industry either compete with one another for a portion of the market or serve those who are competing. HR policies and procedures should be constructed to enable rapid response to industry demands and competitive adjustments.

Making the Business Case for HR Management
HR should contribute key elements to organizational success. This requires the development of a business case. There are specific content requirements for a business case.
The ten elements of an HR business case include the following:
- Problem statement In one paragraph or less, clearly state the specific business problem.
- Background Be sure to include significant information regarding skills, budgeting, and performance that contribute to the business problem. Indicate, in general terms, what’s required to resolve or reduce the problem.
- Project objectives Use a maximum of seven bullet points to state what the proposed solution is trying to accomplish. Some examples may include purchasing hardware and software or selecting a new vendor.
- Current process Identify the organizational processes and units impacted by the proposed solution such as the training department when training is required, as well as other impacted units and relationships with clients, external partners, and the competition.
- Requirements List resources needed to complete the project, such as staff, hardware, software, print materials, time, and budget.
- Alternatives Outline at least four options to implementing the proposed solution. Be sure to include basic requirements for each and estimate project risks, ramp-up time, training costs, and project delays.
- Compare alternatives Compare and contrast each of the alternatives with the proposed solution and the other alternatives. State similarities and differences, benefits, detriments, and costs associated with each option.
- Additional considerations List critical success factors other than return on investment (ROI) metrics; for example, list the effects on partnership agreements with specific vendors or the potential need for help desk or customer support.
- Action plan Propose specific action steps. State your short-term (first 3 months) and long-term (3 months to conclusion) action plans, including major milestones. This section should also include proposed metrics to measure success.
- Executive summary Write a clear, one-page summary of the proposed solution. Tailor it to your audience and offer a high-level overview of research that leads you to make the proposal.

Marketing HR
HR challenges have increased in recent times. Identifying, attracting, and holding onto qualified talent are the number-one priorities in many industries. The trades (carpentry, plumbing, electrical) are in crisis because they don’t have a supply of qualified talent from which to draw. That leads to the need to be innovative in how to “grow your own” or support training programs that will graduate qualified people who can be hired. HR plays a key role in those strategies. Letting people inside the organization know that HR is working on their behalf to accomplish these types of critical functions is important to creating HR credibility within the organization.

Applying Organizational Metrics
Metrics are measurements. Organizational metrics are measurements of individual functions or specific business processes within the organization. Applying metrics involves identifying the things to be measured that are critical indicators of success for the organization. Then, once the measurements have been identified, it is necessary to prepare a plan for implementing or applying them.
Business metrics can include things such as creating policies that attract top talent to fill job openings and identifying applications for social media in raising revenues. HR metrics within those business metrics might include annual benchmarking within the industry for employment policies to be sure your organization remains competitive and HR actions that can support social media programs.

Using Organizational Metrics
HR can employ organizational metrics easily enough. Here are two very basic measurements that impact HR:
- Revenue per employee Divide the revenue by employee head count.
- Expense per employee Divide the expense element (or total expense) by employee head count.

These can be applied to the total organization or to individual elements (divisions, departments) within the organization.
Metrics can be tactical or strategic. Tactical metrics are such things as reasons why people accept job offers, levels of satisfaction with the boss (supervisor, manager), and number of new hires made within the target date on each requisition. Strategic metrics are things like goals or targets met within a period of time (month, quarter, year), value received for HR programs compared to forecast value, and achievement rates for revenue or expense targets and goals.

Leveraging Technology
Technology plays an indispensable role in today’s employment world. Yet technology without proper consideration of its impact on the workforce is not helpful. Technology can have a positive effect on human resources. It can play a key role in communicating, interacting, collaborating, and training workers. Making sure technology is working for you and not against you is the process of leveraging technology to its greatest advantage.
Training used to be done in a classroom environment. People would have to travel to the training location, stay in hotels or long-term housing, eat meals out, do laundry, and do other activities that allowed them to remain in the training for the time required. Technology today allows training to be done electronically, so traveling to a central training site is no longer necessary. People can stay at home and participate in training while on the job or away from the workplace. That saves time and money. Measuring the savings is one way to support HR’s contribution to organizational economic performance.

Proficiency Indicators for Senior HR Professionals
Senior HR professionals are expected to be able to do and say these following 19 behaviors over and above the basic behaviors we have already reviewed. If you are studying for the SHRM-SCP exam, pay close attention to these requirements.

Developing ROIs for All HR Initiatives
Return on investment (ROI) is a way of expressing the financial benefit gained from any given business activity. You can talk about ROI of a new paid time off policy when looking at the impact on absence rates and expenses. You can examine ROI for offering employee access to their employment record on the organization’s computer network. It can allow employees to enter their own data changes (marriage name change, birth of a new child for health care enrollment, or updating educational achievements when receiving a new degree). Such programs can reduce the payroll expense in the HR department and thereby offer an opportunity to compare the payroll savings with the expense associated with the technology program permitting employee record access.

Assessing Risks/SWOT
There are two sources of risk for any organization: internal and external. Internal risks come from strengths and weaknesses. External risks come from opportunities and threats. Together, they form the acronym SWOT.
- Strengths Advantages you and your team have that will help you reach project goals. It’s important to know your special skills that give you an advantage. Lack of strengths in a specific area can define a risk.
- Weaknesses Anything internal to your organization or team that could prevent you from meeting objectives. Something that gives you a disadvantage relative to others.
- Opportunities External facts that could lead to a positive outcome in meeting objectives. Overlooking opportunities can be described as representing specific risks.
- Threats External elements that could jeopardize your project.

Aligning HR Strategy, Goals, and Objectives
According to SHRM, “Identifying and implementing workforce strategies in a challenging global economy is a high-priority issue for top executives. To be successful, HR professionals and business leaders together must grapple with the many variables that affect the organization’s ability to attain its strategic objectives. They must develop quantitative and qualitative approaches to efficiently and effectively attract, engage, and retain human capital.”

Once HR strategy, goals, and objectives are all in alignment, the outcomes are more likely to be positive. Creating action plans to implement strategies and then achieving specific goals and objectives become easier once they are identified and written. Even more important for other managers in the organization is the ability this will provide for showing how HR can support them in their efforts toward their goals and objectives.

Demonstrating Business Language Fluency
It has become clear that for HR professionals to be accepted as strategic business partners with other executives in the organization, they need to be able to talk about what they do using business terminology. So, expressing the budget impact for a new employee benefit program and then showing the offset that can be accomplished by reducing turnover costs will speed acceptance and credibility for HR. Business language includes profits, loss, cost impact ratios, industry position impact for given programs, and revenue impact ratios for HR programs that can be sold outside the organization.

Examining Organizational Problems
Problem identification is a critical step in the process of finding solutions. Too often, people rush to express their thoughts about solutions without first identifying the problem they face. Problem identification is a process of questioning what is getting in the way of achieving specific goals and objectives. For example, what is preventing us from getting more employee enrollment in the company retirement savings program? Why is the turnover rate in the accounting department above normal? How can we reduce the cost of training managers in the new safety requirements? Once the problem is identified, you can begin working on solutions but not before.
Sometimes, people rush to recommend solutions without a problem having surfaced. That situation presents a solution in search of a problem. If you are to be part of the executive team in your organization, you should get into the habit of clearly laying out the problem before rushing to identify solutions.

Developing Solutions
Problem-solving techniques are many and varied. They all basically have these steps in common:
1.   Define the problem. What is it that gets in the way of our reaching our goals?
2.   Identify options. What might we do to eliminate the problem? These are the solutions we think might work.
3.   Evaluate the options. Develop a list of criteria any solution must meet to be acceptable and then compare each of the options identified against that list of criteria. Any option that doesn’t pass this test must be discarded. What remains is a list of those options that can work.
4.   Choose an option and implement it. Make a judgment about what might be best of all the options that pass the criteria screening. Identify what is necessary for the successful implementation in the form of an action plan.
5.   Evaluate the solution. Ask if the chosen solution actually solved the problem. Did it create other problems? What other follow-up action might be required?

Evaluating Proposed Business Cases
Business case analysis (BCA) looks at programs, solutions to problems, or other action plans with the eye on how they will impact the business. In every analysis, consideration must be given to the impact the activity or plan will have on the overall business operation. What is the impact on profit or loss? What is the impact on corporate image in the marketplace? What is the impact on product liability? What is the impact on employee retention? Not all of these will be the focus of any one evaluation. But all are eventually going to be part of some business case analysis at some time.
Ultimately, business case analysis is a means of projecting accountability for taking any action. Business case analysis demands accountability. Any senior HR professional these days must be willing to be accountable for the success or failure of their programs. Putting their job on the line is something HR professionals are expected to do every day. It is no longer acceptable to duck accountability by excusing results as unmeasurable people issues. If it can’t be measured, it shouldn’t be done.

Benchmarking the Competition
According to Ross Beard, “Competitive benchmarking can be defined as the continuous process of comparing a firm’s practices and performance measures with that of its most successful competitors.”

For HR professionals, that may mean identifying compensation levels through periodic compensation surveys. It could involve comparative analysis of insurance benefits being offered in other organizations within the industry compared to those offered in our organization. What “leading-edge” programs are being offered by competing companies? Might they work here? What would be the business impact of adapting such programs?

Communicating Global Labor Market Direction
Communicating global labor market direction first requires identifying what that direction might be. Is there a trend for exporting manufacturing jobs to Asian countries? Is there a trend to return manufacturing jobs to the United States? What trends are politically motivated, and what are economically motivated?
Once identified, the trends can be articulated and communicated to executives within the organization. Perhaps there is an impact on technology workers because it is suddenly no longer economically viable to produce computer components off-shore. Maintaining a competitive edge in the marketplace requires following those economic benefits and moving production units to locations where the work can be done for less money. The executive team needs input from HR professionals that will allow them to make these types of decisions.

Maintaining Expert Knowledge
HR is responsible for identifying sources of expert knowledge that can be used when job openings occur in any department of the organization. It is also critical that HR protect its own expert knowledge. That is often done through specifying a certification requirement when searching for HR professionals. When expert knowledge leaves through normal turnover, the organization’s goals and objectives can be negatively impacted if there is no backup available. Fast replacement is often needed. That means HR must have done its homework and already identified sources for candidates with that knowledge.

Developing HR Business Strategies
In the beginning, there are corporate strategies. These are normally developed by executives representing each of the major organizational work units such as legal, production, research, engineering, accounting, and, of course, HR management. Once organizational strategies are clearly defined and documented, each individual work unit can begin developing their specific strategic plans to support the larger organization.
Administrative support entities are unique in that they serve all operational units in the organization. What they do impacts the internal client groups. So, strategic planning for support groups must be focused on the services they offer to internal clients. That means fancy HR initiatives and the latest fashionable HR programs should take a back seat to delivering the HR support needed by the client groups. Once clients are satisfied, HR professionals can spend time thinking about upgrading to the latest versions of HR management programs.
For each strategy there should be at least one action item in the action plan. Implementing a strategy is necessary to reflect its reason for existing. If you don’t plan to take action on the strategy, scratch that strategy off your list because it is going to use energy for monitoring and maintenance without delivering any practical value to your group.

Maintaining Knowledge of Economic Factors
Human resource management is a function that embraces pieces of each organizational unit, carrying some influence over the success or failure of those portions of the internal client functions. If staffing is not done in a timely way by HR management, the production and accounting organizations cannot perform their tasks successfully.

HR’s influence is dependent upon knowledge of economic factors. The annual company budget is dependent upon knowing the cost of compensation in all departments. HR holds the key to those numbers and any adjustments that will be required and appropriate in the coming year. The cost of employee benefit plans is also something that HR oversees but shares with client organizations inside the company. If HR professionals don’t understand the economic impact of these expenses, the support they provide to other groups cannot be sound or effective. It would be like the legal staff providing bad legal advice to other departments.
HR is often responsible for a large portion of the employer’s compliance efforts, from safety to equal employment opportunity. Done improperly, the economic impact to the business can be quite severe, including fines and legal judgments.

Evaluating Critical Activities
Each effort we make in our jobs should be subject to review and evaluation. Review involves checking to be sure we have included the topic in our action planning. Evaluation is the effort to determine the value achieved by the action taken.
Balanced Scorecard
Developed by Robert Kaplan and David P. Norton, a Balanced Scorecard44 helps evaluate HRM effectiveness. The Balanced Scorecard contains four dimensions: financial performance of an organization, its customer service, its internal business processes, and its capacity to learn and achieve growth. Within these four areas, managers need to identify key performance indicators the organization should track. The financial dimension reflects a concern that the organization’s activities contribute to improving short-term and long-term financial performance.
Customer service perspective measures such things as how customers view the organization, as well as customer retention and satisfaction. Business process indicators focus on production and operating statistics, such as order fulfillment or cost per order. The final component relates to the human resource and its potential to learn and grow. This perspective seeks to focus on how well resources and human capital are being managed for the company’s benefits.
The Balanced Scorecard provides a balanced picture of current performance as well as the triggers for future performance. The scorecard helps managers align their business units, as well as their financial, physical, and human resources, to the firm’s overall strategy.
What needs emphasis is that the HR evaluation should not be confined only to the people dimension of the scorecard. The HR professional should be judged on all the dimensions of the scorecard. HR executives tend to believe that their success should be judged only by the extent to which they meet employee needs. As the scorecard indicates, employee commitment is only one criterion for effective HR performance, and HR professionals will be held accountable for all the dimensions like other managers.

Knowing the Business
It is up to HR to understand the business it supports. Are there seasonal workflow fluctuations? Are there peaks and valleys for employment activity? How important are specific educational backgrounds for future employees? What colleges will provide the skills that new hires will require? How much do employee benefit programs contribute to employee retention programs?
How do labor relations efforts work in this employer organization? What type of employee benefits are needed to attract and retain the type of qualified people you need?
Brainstorm the specific questions you must ask so that you understand the business you are supporting. Revisit these questions and others at least annually. Invite critical updates from internal client executives at any time during the year.

Setting Technology Strategy
The information technology (IT) department is responsible for corporate technology initiatives. But HR professionals are responsible for IT developments within their own realm of influence. What programs will permit employees to access and update their own employee records in the human resource information system (HRIS)? What types of programs will give employees the opportunity to do online comparisons of various benefit programs they may want to consider? How can new policies be introduced online so training costs can be controlled?
Overall, HR professionals are given the responsibility of identifying the strategy they will apply for IT within the HR department. Knowing how that will impact and contribute to company strategies is something the HR professional must undertake.

Serving as a Strategic Contributor
For years HR professionals have been clamoring for “a seat at the table,” meaning they want to “play with the big boys and girls” in the corporate suite. That is not something that is given to HR. It is something HR must earn. Proving that HR belongs at the executive table can be done only through demonstration of strategic contributions to the corporation. HR professionals have been welcomed into the “C-suite” (corporate executive suite) discussions when they have been able to show they add value to the discussions and programs.

Influencing Government Policy
Compliance with government regulations is often delegated to the HR department. Occupational Safety and Health Administration (OSHA) rules about safety require compliance efforts for all employers, regardless of size. Department of Labor (DOL) regulations about wages and hours of work, federal contracting, and the Equal Employment Opportunity Commission (EEOC) all require compliance efforts.

Employers can influence government policy by monitoring the Federal Register postings of proposals for regulatory changes. Identifying how those proposals will impact their employer is a service HR professionals can provide. Submitting those studies with editorial comments to the agency proposing the changes will help by giving “real-world impact” input to the government. Testifying at government hearings at local, state, and federal levels is another way to offer input to government changes governing employee management issues.

Developing Business Strategy with Top Leaders
HR professionals have a great deal to offer their organization’s strategic planning process. Participating with the top leaders of the organization in that effort will cement HR’s relationship with the executive team. Offering to take on responsibility for key strategic plans will assure the executive team invites HR back to participate in the future.

Defining Strategy for Managing Talent
We know now that any HR strategy must compliment overall employer strategy. Managing talent is a strategic contribution to the organization’s interest in maintaining a workforce needed to produce products and services for financial success.
Talent management requires recruiting, onboarding, training, probationary observation periods, and assessment of match for talent to needs. HR can likely develop a strategy for each of these components of workforce oversight.

Summary
Assessing financial impacts of business proposals related to employee management is an important HR contribution to executive discussions and proposal considerations. All HR programs should be assessed periodically using business management tools, including profit and loss sheets and balance sheets. HR professionals cannot have credibility with other executives unless they have this ability to analyze programs using business considerations, business and competitive awareness, and an alignment of strategies in HR with corporate strategies.