How this joke hurts the small business bottom line
By Leanne Hoagland-Smtih April 15, 2013 6:56AM
Leanne Hoagland-Smith. | Provided photo~Sun-Times Media
Small business owners understand profitability is critical to staying in the marketplace. They expect their employees to maximize profitability. Yet, how many employees know with 100 percent certainty the answer to this question:
Do you know how this small business makes and keeps money?
No this question is not a joke, but a serious one to be answered.
Recently during a conversation with a local bank vice president, she indicated that the majority of banking employees probably know with greater clarity the answer to this question than the average employees in the business to business or business to retail worlds. However she added that 100 percent of the employees probably do not know how the bank makes and keeps money. My question to her was “What is this lack of 100 percent knowledge costing the bank in terms of profitability, market share, sales and customer loyalty?
Profitability continues to be the guarded secret. No one, meaning the employees or non-shareholders, can know how much money was made. The rationale is if the employees knew they would want a raise, more benefits, etc. This is scarcity thinking and probably has stifled the growth of the majority of small businesses.
Additionally, the small business owners probably look at profit only through a profit and loss statement. Again, this is a scarcity viewpoint and fails to anticipate future trends in the marketplace.
Each small business should have a profit model or better yet a profit process that goes beyond the traditional strategic planning or business planning model. This is a dynamic process that goes beyond operating systems, capital intensity and R&D.
After such a profit model is constructed, all employees need to understand how this model works and then unite together through internal communities of collaboration to ensure the results of business growth continue. This approach allows the entire business to be more proactive than reactive to future trends and thereby have a competitive advantage.
Unless your employees know with absolute crystal clarity how the enterprise makes and keeps money, then you as the small business owner or C-Suite executive are setting your employees and worse yet your business up to fail. The question you must ask yourself is “Does this secrecy make good business sense in today’s marketplace?”
P.S. Shout Out – Great business lunches can be found at Old Style Inn in Valparaiso and Traditions in Highland.