Honesty about profits first step in building growth strategy
By Leanne Hoagland-Smith March 8, 2013 12:28PM
Updated: March 10, 2013 11:22PM
Profits are what make businesses from the micro to the macro churn and turn. For without profits, employees to vendors would not be paid for their services not to mention the small business owners or investors.
The traditional business growth strategy is pretty simple: Sales less costs equal profits.
Most of the attention is focused on increasing sales and decreasing costs. These numbers are held in fairly tight secrecy by the small business owners to C suite executives.
Yet employees are expected to maximize profits at all times. This begs the following question:
If they do not know how the company makes money (profits), then how can they change their behaviors to maximize and sustain profitability?
How many employees have a relentless, precise and intense mindset to not only increase sales, but to keep the money from those sales? If we were honest, the answer would be probably not very many.
The historical behavior by senior leadership is profits are held in secrecy. No one is supposed to know how much money the small business made because those terrible greedy, money hungry employees would want a raise.
What would happen if the culture of the small business would radically change from day one? Part of the employee onboarding process would include a thorough understanding of how the company makes and keeps money. By embedding this belief or attitude early in the employee’s experience is probably one of the first keys to unlocking a high-performance culture.
Then further consider the possibilities if through specific key metrics the employees actually tracked profitability on a weekly and monthly basis?
Would profits increase?
Would the small business owner or executive leadership team actually be more dollars ahead than behind? And would this be less stress for those in management roles?
Keeping profits a secret is old school and does not truly serve a dynamic, ever changing enterprise. Secrecy suggests a lack of trust as well as a mindset of scarcity.
In a small business to even mid-size firm, secrecy also suggests the hiring process probably needs to be revisited. If you cannot trust your employees, then who can you trust to watch out for the interests of your small business?
Next week’s column will further explore this subject of profits.
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