Last week I had the great pleasure of joining one of my clients as they introduced their team to their new business plan. As the dozen or so slides were presented, it was interesting to watch the faces and body language of the team. The occasional glance, shifting of weight, all the usual indications of discomfort, unease, uncertainty. New and different always cause a level of unease.
I have been in this situation many times before…all too often with me presenting the plan as part of a Town Hall, Quarterly update, or whatever the MOS (Management Operating System) called it at the time. Whatever the name, the objective was always the same – a look in the rear-view mirror, to assess how the business has performed, and a look ahead at the changes that needed to be made to forge ahead into the future…for the audience, the former usually informed the latter, and drove the levels of discomfort.
In my many years of leadership, I have learned the true power of diversity, engaging all the team, with their range of experience and backgrounds…and also how to tap into it. Profitability is a difficult concept to get to grips with for a lot of employees, and the best way of achieving it, is by making it real.
At around the 10th slide, my client introduced the concept of an employee bonus scheme, of the kind I have been applying across businesses now for almost 20 years…immediately the mood changed, and questions were being formed…great questions, that would not have previously been considered.
I find many businesses struggling to implement employee bonus schemes, and sometimes, not even wanting to…but in my experience, it’s very simple. Driving change, making improvements, making a business better is hard work… As an employee, as a human being, there is a lot of comfort in maintaining the status quo – we won’t get in trouble, things are less likely to go horribly wrong, we can maintain our routines, and boy, do we all like our routines… So, when it comes to making change happen, why should I? What’s the reward associated with the risk?
There is only one bonus configuration that I have found that works – departmental, personal etc. never really work. They always lead to conflict, and the more clever people try to be with the metrics, the more issues arise (see government contracting as the perfect example of disaster by trying to be too clever…) That configuration is very simple, and easy for everyone – every business, ultimately, is in business to make money. Therefore, a bonus based on net profit is perfect, a true win-win.
When explaining such a system, employees often ask how their daily work can have an impact on the bottom line – obviously this is an amazing question, exposing the lack of clear communications in the past (every employee should know how their efforts correlate to profits) and opening an avenue to future success…and if a manager struggles to explain the link, well, that’s a real opportunity too.
The first step in getting to this level of engagement is for a business to understand its realistic financial forecast. Having agreed that achievement of budget is good, then there must be acknowledgement that anything over and above that can only be achieved by the extra efforts of the team and should be rewarded as such. Acknowledging this allows for profit above budget to be split between the business, and the employees, at a ratio that’s right for that business. The mechanism for sharing the bonus around the team is then another consideration, with an equal share often being the best way (i.e. not being based on a person’s current remuneration).
For an employee, a greater understanding between their role, and the profitability of the business is a huge benefit, and often an enjoyable learning curve. The risks involved with making change are rewarded financially, and the common goal goes a long way to making any work environment happier and safer…yes, this is a great tool for improving retention too.
In the session with my client, the conversation quickly moved to staff asking about how they could impact on profit levels, whether hiring a new employee now was a good idea, or should it be delayed, whether lower priced materials could be sourced from suppliers, and all sorts of other great questions. It’s just a start, but in that 30-minute presentation, the whole dynamic of the business changed. No longer was it about the business owners trying to convince the team to do things differently, it became about the business owners needing to understand the questions the team were asking, assess them, and open a frank dialogue to agree solutions and the ‘right’ way forward.
In the coming weeks and months, I look forward to working with my client and their team, as they manage the new dynamic. The business owners have had to ‘give away’ a little control on the business, as they will now be challenged on many business decisions, as the consequences of them will impact the pockets of all the staff. The employees will ask some challenging questions, and proper analysis and communications will be needed to keep them onboard. But ultimately, this is a path well-trodden, and I can’t wait to see this highly motivated and engaged team take this business on to a new level.
Are you ready to share the success of your business with your team? Are you already there, and reaping the rewards? Or is your business still stuck in the past, with a boss-employee relationship, as was the norm back in the 1950’s?
Want to know more about how to apply this in your business – feel free to contact me to for a free, no cost, in confidence discussion. I would be happy to help your business step up to the next level.