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Profit Power: Does your team have skin in the game?

June 20, 2018 -  By

 

Every company that’s attempting to operate with open book management has suffered some kind of financial downturn and is using transparency of their financials to help turn around their profitability.

But is that enough? Before I answer that, here are nine best practices for sharing ‘open book’ financials in a systematic way.

  1. KISS: Keep it super simple, sharing the minimum amount of info (budget line items) needed, to the right people. When everyone grasps the basics, you can ramp it up to show more of your financials to more people.
  2. Commitment: Be consistent month to month or week to week, build the habit and the credibility. Set your dates in the schedule when you plan to share your numbers. Don’t wing it because it will backfire.
  3. Yearlong Plan: It will take up to a full year to get your team understanding what they are looking at. So plan on that.
  4. Measure what you manage: If you don’t manage it, don’t measure it. They say, ‘What gets measured gets managed,’ but too much is too much.
  5. Use charts and graphs to show your numbers, i.e., pictorial representations of how you are doing. Many people can read and interpret the numbers, but most everyone can interpret the Red Cross thermometer.
  6. Support: Have the manpower and brainpower in your company (or as a vendor) to put numbers together and set up handouts.
  7. What’s my number?: You also need to take time to share with the person (crew, department) how they are performing in their niche within your company. It’s not enough to just share the big picture. You have to connect the dots to their part of the big picture.
  8. Interactive learning: Your meetings must involve everyone and be exciting. If it is just you doing the talking, then only you will learn. (People need to talk, or at least write, in order to internalize and process.)
  9. WIIFM?: This question (what’s in it for me?) must be answered. You want your team to have skin in the game, just like you do, in order for them to take on the ownership thinking.

I see powerful profit improvement when companies I work with give their employees skin in the game, whether it is through profit sharing, some other kind of gain/leadership sharing or actual minority ownership. In fact, a whole book (“Skin In The Game” by Nassim Taleb) was recently written on this phenomenon, proving that people make different (and better) decisions when they have skin in the game, e.g., a stake in the outcome.

An example to drive the point home: I received an email from a member of my Irrigation Leaders peer group. It was from a division leader and new minority shareholder in a full-service landscape company. He said having skin in the game made all the difference to how he thinks about costs and how he teaches his direct reports about costs. When I questioned him, he was not referring to ownership, but rather the annual profit sharing that he (and his No. 2 in his department) now participate in. He said it was changing the conversation.

Three questions for you to think about as you consider implementing some form of open book management:

  1. Do you believe there is room to improve your financial performance?
  2. How well is your team aware of how you are performing financially?
  3. Does your team have skin in the game?

Note: Jeffrey Scott will be showing contractors how to implement open book management and better incentive systems in his August workshops in Baltimore and Nashville, Tenn. Become A Destination Company.

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Jeffrey Scott

About the Author:

Jeffrey Scott, MBA, author, specializes in growth and profit maximization in the Green Industry. His expertise is rooted in his personal success, growing his own company into a $10 million enterprise. Now, he facilitates the Leader’s Edge peer group for landscape business owners—members achieve a 27 percent profit increase in their first year. To learn more visit www.GetTheLeadersEdge.com.

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