One sure sign that employees are not clear on their connection to overall business goals is this common business owner complaint : “Why don’t my employees make decisions the way I do? Why can’t they be more entrepreneurial in the way they think?”
Our response to that frustrated owner might be, “Well, do they have access to the same information you do?”
That question generally leads to an awkward silence, a sheepish grin, or a puzzled look on the face of the owner who suddenly sees the nature of the problem – he or she can’t have employees aligning with business goals they haven’t seen or worse, don’t understand. How can an employee help improve profitability in a retail business when she has no knowledge of profitability by item? How can he help increase Net Income when he has never seen the Income Statement? And how can she help optimize cash flow when she has no idea how her actions impact available cash?
In order to make team members partners in your business success, you must offer them information.
They need data as it happens — not six weeks after the end of the month. They must understand your high-level objectives for a given financial period, and their role in achieving them. Front line workers, when given enough education to understand the connection between the actions they take and financial results, become energized and empowered, and begin to change their behaviors in support of the desired outcome.
At KRD, we use models based on the Profit Equation (part of our firm’s Level 5 Advisory Training) to show sales teams, for example, the controllable inputs that lead to increased revenue. Then we have them decide which lever has the biggest impact on increased revenue. The next step is to brainstorm ways to drive change in the desired direction and identifying how each person has direct impact on that result.
Here’s an example. If increased revenue is the financial focus, the sales team might suggest the following actions that are critical activities that might drive more sales:
- Increase price
- Increase marketing campaigns
- Get more customers
- Increase number of units sold on each invoice
- More frequent buying from the same customer
- More items sold per customer
- More expensive items or bundles sold to each customer
Once the team identifies which action they would like to focus on, they determine what to count. They then create metrics which serve as mileposts along the way to achieving their desired goal, take stock of the current baseline value for that metric, and establish a target figure. As they go throughout their day, each member of the team can then check to see where they stand with the given metric and adjust their behavior as needed to move in the desired direction. Within a very short period of time, employees are moving the needle on the desired result and feel like they are making a real contribution to the business.
What is the information you need to share with your teams? What are the Critical Success Factors impacting your outcomes? Ask us how we can help make your teams become partners in your financial success.