This is Challenge #19 and there are very good reasons it shows up in Stage 6.
Happy People = Happy Profits. I get smiles when I talk like this to CEOs. It’s true! When people are happy, when they understand how what they do every day impacts the bottom line, when they enjoy coming to work, when they believe in what they are doing, when they feel valued, a company will be more profitable. A study in the book Primal Leadership by Daniel Goleman shows, “In 75% of cases, climate alone accurately sorted companies into high vs. low profits and growth. And for every 1% improvement in service climate there is a 2% improvement in revenues.” A financial equation can be drawn between engaged employees and a company’s ability to improve profitability. It’s critical that you help CEOs recognize that each employee needs to understand how their job impacts the company. Help them understand that their employees want to bring value to their company.
Employees work hard to prove to that they are valuable. There is nothing that makes an employee feel better than when they can look at something they have done and know that it brought in money, helped land a new client, know that a project was successful or that it increased profitability. For your CEOs of a Stage 6 company, show them that it’s their job to make sure their entire company understands how the company makes and keeps money. There is no doubt that, like so many CEOs, many are afraid to share financials with their staff. Many believe that if their staff knew how much money the company made, they would demand bigger salaries. If a CEO is prepared to carry the entire financial burden all alone, more power to them (and more’s the pity too)! Teaching each and every person in a company how their job affects the bottom line will not only improve staff engagement but will add to a company’s overall profitability.
Help your CEOs start with small steps. Have them meet with their leaders and managers and make the commitment to create a culture of engagement. What does that look like? Do employees find meaning and purpose in their jobs? Do their managers and their teams have the power to shape their work and environment in ways that allow them to perform at their best? Are employees stretched and challenged in ways that result in personal and professional progress? Do people see positive and worthwhile outcomes and results from their work? Do employees feel a sense of belonging? Do they connect to the vision, mission and values of the organization?
Ask your CEOs to create a picture for their team of what engaged employees act like. Leaders of a Stage 6 company should be able to identify and seek out the type of people they want to be a part of the company’s future. Have them challenge everyone to improve their own leadership skills and be proactive by setting aside budget dollars for leadership development. Be very clear about being an organization that invests in people, that sets clear expectations and that holds people accountable.
Teach Financial Literacy to Every Employee
Make sure employees understand the difference between cash and revenue generation. Ask the following questions and expect answers to:
- How does the business generate cash?
- How much cash does it take every month to pay expenses?
- What are the sources of cash generation?
- How is cash being used?
This exercise is the responsibility of every leader in any organization. Conversations around cash, cash flow and cash flow cycles will help take the mystery out of how the company is performing.
I found this interesting fact in Robert Fleury’s book, ‑ e Small Business Survival Guide: Sixty-five percent of businesses that fail are profitable. This disturbing statistic alone should cause CEOs to teach all employees to pay attention to cash flow.
Work with the leadership team to identify critical financial indicators that tell a company when things are going well and (even more important) when things aren’t. Managers should develop their own key indicators, too. Ask them: How do you know when your department/division is performing well? That’s what they should be tracking.
Zeroing in on Your Company’s Profit Zone
Many of you are familiar with my Profit Zone Program. This is a financial literacy program that educates the entire company on how the company makes and keeps money. This powerful program allows participants to understand how the 9 activities listed here impact a company’s ability to be profitable.
The 9 Activities of a Company’s Profit Zone are:
- Revenue Generation
- Strategic and Tactical Focus
- Gross and Net Profit Margins
- Cash Flow
- Cost Structure
- Customer Satisfaction
- Staff Voltage
- Product/Service Quality
- Company Innovation
When a company is sloppy or ineffective with any of the 9 profit zone activities, it makes and keeps less profit. If it underperforms on too many of these items, it goes out of business.
Conduct Stakeholder Surveys
I’m a fan of the book by Chuck Blakeman, Why Employees Are Always a Bad Idea. The concept of an “employee” was invented during the Industrial Age. The Factory System required people to run the machines. In 1911, Fredrick Winslow Taylor (considered by many the Father of the Management Process) wrote his definitive Principles of Scientific Management.
In his book, Blakeman presents the concept of Stakeholders vs. Employees, which is a forward thinking, well thought out and exceptionally valid idea. For instance, a Stakeholder requires leadership; an Employee requires adult supervision. A Stakeholder is rewarded for results; an Employee is rewarded for how long they stay at a company. Stakeholders focus on expanding their own competence; Employees focus on their next promotion. A Stakeholder is concerned with finding meaning in their work; an Employee believes in making money by working longer hours. A Stakeholder figures out how to do more than asked, figures out what isn’t being done and does it; an Employee waits to be told what to do.
Every six months a company should take a temperature read of how their employees view different aspects of the company. One reason there is such a huge sense of disengagement from employees is because so many organizations don’t ask for regular feedback from them. This causes employees to feel their opinions do not matter. Or worse, that the input they provide isn’t taken seriously. The only thing worse than not tapping into the intelligence of your company is to not utilize the feedback and share it with employees. They’re the ones who can help come up with ideas to make things better.
Starting on page 203 in my Stage 6 book, Fostering Happy Employees: How to Ensure Staff Alignment and Engagement with 96 – 160 Employees, you’ll find more specific ideas for these critical areas of focus to address the challenge of Impact Staff Satisfaction Has on the Company’s Profitability. You can get your Stage 6 book at http://gcspecialists.com/products.
Your Success. My Passion.
Laurie Taylor, FlashPoint!