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Summer 2001 Partners in Profit

If business is a “battle,” then you’re in it to win. As the five-star general, you study the terrain, plan a strategy, and lead the troops. But can you win if your employees are only taking orders?

Not really. You don’t need soldiers—you need “partners:” a staff of doers who take the initiative, solve problems, meet customer needs, and help lead the campaign for greater profits.

Turning employees into “partners in profit” isn’t easy. Maybe you’ve tried a suggestion box to inspire them to identify and solve problems. (Was the result a bunch of unusable ideas? Or worse, an empty box?) Maybe you tried one of the fashionable management theories like “MBO” (management by objectives), where you made a list of critical goals and asked everyone to reach for them. Or maybe “Q circles,” where you asked them to work as a group to take control of the quality of their job functions. (Did you get the sound of silence?) All right, once more into the breach. Perhaps you informed them that they were “empowered.” (Did they simply smile?)

Meanwhile, customers are unhappy with poor service (an epidemic these days), allowing your competitors to gain ground. Frustrated employees are wasting time and energy grousing, clock-watching, and other time-honored, passive-aggressive behavior. Add it all up, and it’s not good for business. It’s not profitable. But how do you turn things around?

By getting your employees to “buy into” your business: to care about and work toward your goals and vision, your customers, even your excitement about the potential of your retail business.

Bringing them in

Employees can’t care about your business if they don’t understand it. They need to understand not just their individual jobs, but the big picture, the underlying philosophy and behind-the-scenes reality that you deal with every day. They can’t contribute to the big picture if they don’t know what it looks like. So it’s up to you to show it to them.

Motivation experts say that successful business owners do the following to turn worker bees into partners:

  • Educate employees about business financial statements.
  • Show how employee actions affect business profits.
  • Establish employee rewards, based on increased sales revenues.

You need to change your business from a traditional employer-employee relationship into a business partnership, says Kenneth H. Blanchard, author of the long-time best-seller, The One Minute Manager. In a business partnership, everyone understands how the business makes a profit, who the customer is, and what the margins are, he says. “People need to know how their actions impact profitability.”

It’s called “open book management,” where everyone has equal access to the financial reports of the business. This helps them understand how their actions on the job directly affect your business’s finances. It’s “empowerment” in action.

“We used to say to employees, ‘Tell us your ideas,’” says John P. Schuster, a principal of Capital Connections (Kansas City, MO), a consulting firm. “Trouble was, they didn’t know enough about our business to come through with good ideas,” he says. “Educating them about the business puts some real teeth” in the empowerment idea.

If this sounds too corporate or big-business to you, you’ll be happy to know that small businesses can do this far more easily than larger ones can. That’s because for most big companies (including your larger competitors), employee attitudes are ingrained in a corporate culture that’s usually cast in stone. As Blanchard puts it, “It’s faster to turn around a speed boat than the Queen Mary.” Here’s the five-step plan that can turn your employees into your partners in profit:

1. Plan for success.

Have your plan firmly in place before announcing it to your employees, says Ian Jacobsen, president of Jacobsen Consulting Group (Sunnyvale, CA). “You really have to prepare.” Part of that preparation is to be ready with answers to questions like these:

  • What are the financial goals of your plan?
  • How much time will be spent training your employees? Who will do the training?
  • How will you communicate financial results to your employees? How often?
  • How will you track each employee’s involvement in the plan?
  • How will you reward employees for good performance?

Thomas J. McCoy, partner of The Performance Services Group (Kansas City, MO), suggests that you prepare a strategic plan. In it you set out your goals for the coming year, and the next three and five years. You also outline the steps you need to take to get there. Keep this plan in front of you throughout the year—like a map. “Otherwise you’ll easily get lost,” he says. And stay on track.

2. Move gradually and steadily.

Don’t overwhelm yourself with a large, unwieldy (and possibly unrealistic) plan. Start small and build. Begin where it makes the most sense for your business. “Before you launch the new plan for the whole business, start with a single department,” says William Byham, president of Development Dimensions International (Pittsburgh, PA). “Train the employees, get some feedback, and see what the results are. Then rethink what you said. Did you communicate fully? What could you do better?” Then after you assess the results, move on to another area.

3. Show them the numbers.

“You can’t have power without numbers,” says Jacobsen. “Financial knowledge is an essential ingredient of empowerment.” Educate your employees so they understand the financial information, which can be very easy to misinterpret. And be willing to answer the sometimes uncomfortable questions they might ask. Your business will be stronger for it, as long as your answers are logical, credible and true.

Start the training process with basic concepts—sales, expenses, net profit—before you move on to the more obscure corners of the balance sheet. “Don’t try to run a cram course on financials,” says Schuster. “Let things germinate for a while,” like a garden, where you plant specific seeds and watch them grow. Without concrete knowledge, your employees will get excited about your new results-based bonus system… but they won’t have the foggiest idea how to take concrete steps to improve the business and get the bonus. And then you’ll have a morale problem among confused and frustrated employees.

So schedule regular, short training sessions throughout the year. Tie the lessons to current business reports. “You need constant communication on how you are doing on those numbers,” says Schuster.

4. Know the score.

Make your employees’ involvement something of a game. That’s the surest way to keep them motivated. The object of the game is, of course, to improve the financial results of your business. Use those financials as the “game score.” Some businesses post this key financial information where employees are sure to see it. This lets employees track the score and see the effects of their actions, says Jacobsen. In fact, score-keeping is essential, he says. “Say you go bowling, but you’re prevented from seeing the pins the ball hits.” But every so often a supervisor says you’re doing okay. “You can’t perform well under these conditions: you need information to see exactly how you are doing,” he says. The whole point of disclosing the numbers is to let employees monitor their own performance—”see how they’re doing”—on the job.

5. Share the wealth.

To transform your employees into partners, think about what partners have that traditional employees don’t: a vested stake in the business,” says McCoy. Cheer them on! Tell them they can succeed. Then put your money where your mouth is. When pay is linked closely to performance, people focus on it—and perform accordingly. The actual reward system can be any combination of individual bonuses, profit sharing, even team incentives.

Incentive pay for performance is critical. But even better, it also causes something magical to happen in your workplace. When employees are rewarded for initiative and performance, their work becomes meaningful and enjoyable to them. They begin to feel like achievers. They feel part of something. They believe they can create their own future. And they pull together with other employees to make success happen.

“Increased pay is the scorecard that helps people know they’re winning,” says Schuster. “But it’s the greater sense of internal growth and personal achievement that are the lasting motivators.” Says McCoy: “Suppose you improve… to the point where every employee is a partner who knows as much about the business as the other partners. So each employee makes the right decisions that affect company profitability.” And he points out that with that dynamic at work, you also gain a great competitive edge.

What about customers? According to Blanchard, it’s your customers who ultimately drive employee empowerment. “Customers don’t care about the [owner's] ideas and actions,” he says. People decide where to buy based on how they’re treated by the sales staff, the cashier or the person on the phone when they call. So as your employees take a more active “partnership” role and their job performance improves, the customer benefits directly, sales go up, and revenue and profits increase for all to see.

Nobody loses!

A sense of empowerment, achievement for employees, plus bonuses for performance… happy customers… and a fatter bottom line year after year. Whether you view the “partnership” strategy as a “battle” or a game, it can make you a winner.

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