Here’s a cautionary tale about planning, execution and getting your team to buy in to your goals for your company; it applies to the smallest of businesses and the largest of organizations.
Towards the end of the year, the company held a planning retreat. All company managers were invited to a local hotel for an all-day meeting. No agenda was sent out. The owner simply told everyone to be there by 8 A.M. sharp.
When the session started, she announced that the purpose of the meeting was to set goals for the company for the next year.
Results from the current year were revealed. The owner did not provide any specific numbers; she kept things vague, using percentages and arrows, both up and down, while making references to the year before.
“Sales were up two percent” and profits “dropped by five percent” because of “an increase in expenses.” No one except the owner and the controller had any point of reference or understanding of what she was talking about.
“We must work harder,” exhorted the owner. “We must not; we cannot have another year like this one.” The managers wondered what she was talking about, because they all felt that they were working pretty hard.
The managers would be the first to say that they had some slackers on the payroll, but every time they went to the owner to have these folks terminated, she refused, keeping them out of loyalty and not the quality of their contributions.
The rest of the day was spent setting three major goals for the company to achieve. The managers were to each meet with the owner the next day, one on one, to set goals for their departments.
The owner was late arriving to work the next day, so she missed meeting the sales manager who was first on her calendar. During the second meeting a client called, leaving the operations manager sitting in her office for his allotted time. The controller told the owner based on his point of view none of the three company goals affected him. The owner agreed, and he left her office after just two minutes. And that was how the day went, the owner meeting with the managers, and accomplishing very little with any of them.
Nothing changed as the year ended. At the beginning of the second month of the new year, she reviewed the numbers and found they were slightly down from the year before, but nowhere close to the new monthly goals. She had set the financial goals and did not share them with anyone but the controller, who was sworn to secrecy.
Not only were sales down, but expenses were up and profits were non-existent. At the next staff meeting she discussed the numbers, her anger and frustration barely in check. When they left the meeting, the managers wondered what had caused their normally good-tempered boss to be so unlike herself. The owner wondered why she put up with such lousy performance.
Since the owner did not change her own behavior, or the culture of her company, nothing changed and the company’s financial position never improved.
While not every owner wants to share “the numbers” with individuals who are not shareholders, being vague about sales, expenses and profits does not create any sense of ownership. In fact, it does the precise opposite by removing workers from the efforts and success of the company they work for.
With the possible exception of the controller, who was avoiding accountability by copping out about not being part of the company goals, the rest of the managers most certainly do not understand any of the company’s financial metrics.
I’ve known plenty of owners who increase profits by cutting the cost of goods and overhead; by raising prices and reducing quality.
But a company cannot cut its way to growth. One of the best book titles I’ve ever seen, and the book is excellent too, is “Profitable Revenue is Everyone’s Business: 10 Tools You Can Use Monday Morning” by Ram Charan. I recommend it if you want to improve the financial health of your company.
Growing profits is about making small changes in how things are done each day inside the company. Owners who want to make more profits have a responsibility to instruct their employees how the company makes its money and must provide the tools and foster the atmosphere where the employees can help the company make more of it.
Ken Keller is an executive coach who works with small and midsize B2B company owners, CEOs and entrepreneurs. He facilitates formal top executive peer groups for business expansion, including revenue growth, improved internal efficiencies, and greater profitability. Please contact him at [email protected] Keller’s column reflects his own views and not necessarily those of The Signal.