How Much Business Acumen does a project manager need?
I doubt this question has one definitive answer, I will try to address this critical aspect from my own experience. Firstly why is this question important? Previously PMI looked at the technical project management competencies as the essential skills to have in a certified project manager. In 2015 PMI introduced the PMI talent triangle (leadership, Technical project management, and business management) to suggest the ideal skill set for a project manager.
In a few years later I was doing internal consultancy for a unit and used this model to assess a technical team who was embarking on new projects that needed a lot of business sense. I found the assessment realistic because we gave a good portion for business skills. However elevating business skills is not exactly having business acumen. In such case some leaders prefer to outsource strategic projects, as a matter of fact the last few years have witnessed and shown an increasing trend of customer projects compared with organizations’ internal projects. But why do project managers basically need business acumen skills? And what is business acumen in the context of project management? Simply put when a project cannot be successful without understanding and applying business rational and situation, business acumen skills are essential to have for the project manager. But projects are basically two types, internal projects and outsourced projects.
Outsourced projects have a buyer and a seller, for the seller the project budget belongs to a profit center, however the buyers outsources projects with a budget that is from a cost center, here the seller does the project for a profit, and the buyer is more interested in the deliverables. Internal projects however might need business acumen perhaps on a smaller scale especially if the organization is not seeking profit or revenues from the project. Projects that have bigger budgets have to have a business case, and perhaps a feasibility study, the return of investment is usually behind why the business is requiring this project. Project managers who manage projects with such, need to be aware financially, and should keep revisiting the business case to qualify the ROI incrementally.
Financial Acumen is one of the components I have seen to be essential as having business acumen, still this is not the end of the show. The industry and sector experience are in my view as equally important, consultants are not generously paid for their MBAs only, qualified senior managers and partners know their industries inside out. These professionals qualify to manage strategic projects if they have the credentials, the experience and successful project management track record. I do advice organizations to spend on qualifying their capable project managers to have the relevant business acumen skills needed.
I have seen many organizations generously qualifying the human capital, however I do recommend that smaller organizations who are reluctant to pay for the training can check the extra cost of a qualified business project manager, with the cost of a failed project, the calculated ratio is very convincing. I do believe each organization is unique in several aspects, not only the industry or sector differentiation, but geography, culture, maturity and size all play a role in being so unique. Having said that, project managers who need to be qualified as business project managers, will need varying amounts of business acumen skill sets based on many triggers and drivers. however to make things happen for a client , you need to place more than a certified project manager , you will probably need a business project manager , with a relevant business acumen skills to the project context. I would classify financial ability , industry knowledge , leadership style , analytical skills and having deep personal emotional intelligence as the top five basic components of business acumen skills to have , the appetite for a project manager to top that is possible and I would strongly encourage such as each project has a unique business context.
Last but not least, Project Management is definitely proving its worth, by being able to adapt to work with the business. The pandemic has brought new businesses, and maybe some of them will not stay around for too long. Now more than ever we need to relate our projects to the business, make sure we are spending on the right projects and keep moving forward, certainly better times are ahead.