The Challenge Defined:
Not only is it critical that your employees understand how their jobs fit within the company’s operating systems and processes, they also need to realize how they personally bring value. They should understand how they can add to profitability through efficiencies and/or business growth. In other words, they need to know where their activities lie within the company’s Profit Zone. And to do that, you need to share fundamental business information.
I’ve seen three basic misconceptions among business leaders that make them nervous to have these Profit Zone discussions with employees:
- Employees have little interest in how their company makes money.
- Employees just want to “do their job.”
- If employees knew how profitable the company was, they’d demand more money.
Yes, sharing financials with employees has its risks. But there’s a powerful upside to having an entire organization focused on how the company makes and keeps money. You can foster this using the concept of Open Book Management.
Don’t take that phrase literally, It doesn’t mean you overload your people with financial statements and data. But you know as well as I do, there are high-level statements and reports you can share that will help create a common understanding of what drives profitability.
Managers should work with their people to clarify where in those reports the employee should see themselves, for example, accurate/timely billing, client satisfaction, customer service excellence, and quality control. Help them see for themselves how their exceptional performance will specifically contribute to the company’s bottom line.
- What financial tools do you use to drive your decision making and your focus on profitability?
- How can those be tailored for sharing throughout your company?
- Are you employees informed and reminded about how their jobs impact profitability?
Why this Challenge Must be Resolved:
When employees understand what drives profitability, they know what to focus on in their jobs. They ask better questions and they’re in a better position to make suggestions to improve organizational success at the granular level.
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