Byron's Babbles

Share the Financials – the $100 Tool

culture_works_fbad_1This is a guest post from Kris Boesch originally published on www.choosepeople.com/blog

Share the Financials – the $100 Tool

Be open with your team about the flow of money. Sharing tells employees they’re important. Commitment grows and confusion declines.

Every year in an all-company meeting I would share our financials with the team using the $100 Tool (described below). It was amazing to see the light bulbs go on. Their entire awareness and attitude would shift. They would come up to me for weeks after this meeting with ideas on how to make and save the company money. They now realized why it was so important to take care of the trucks (cost of truck repairs) and to charge customers for boxes (high margin product) and not to forget moving blankets at the customer’s home ($13/each – easily four hours worth of profit.)

Some organizations are worried about sharing their financials, either because they’re struggling or very successful. Sharing financials when you’re in trouble is the only way engage your employees’ support. It helps them understand the urgency in your voice. Your employees aren’t stupid. They know if something’s off. Sharing the financials puts fears to rest because rather than grappling with the unknown, they can see what you see and participate in generating money making and saving solutions.

If you’re on the flip side and very successful and fear employees will want a bigger piece of the pie, communicate your growth plan and the need for cash to fund investments in equipment, technology, personnel or assets. Rather than envisioning all the extra money going into your pocket, they see it as a shared savings account. If you’re not looking to grow, make sure your people are well compensated and appreciated. This may also be a good time to share the risks and rewards of owning a business.

Use the $100 Tool to share your financials in a tangible, accurate, concrete way.

  1. Get one hundred one dollar bills.
  2. On a flip chart or white board break down by percentage your high-level income streams:$43 – local moves, $37 – national moves, $12 – storage, $5 – boxes, $3 – insurance. On another page or board break down by percentage your high-level expenses (fuel, truck repairs, truck maintenance, furniture repairs, regulatory fees, marketing and networking, utilities, insurance, rent, payroll – including workers compensation, payroll taxes, and benefits.
  3. Speak about how your organization makes money. Share which verticals, products and services are the most and least profitable. Explain why you choose to keep those that are less profitable — (loss leader, bread and butter, competitive edge.
  4. Then speak about expenses. As you detail each expense, hand out the dollar bills to individual employees. Saying for example:
    You are my landlord you receive $4 for rent.
    You are my accountant you receive $2.
    You are my utilities you receive $5.
  5. Speak to employee payroll, payroll taxes, work comp and benefits last. Employees are always wowed by the comparatively large piece of the pie that is directly theirs.
  6. Then show them, with the dollars left in your hand, how much profit is left.  Explain this profit is taxed, leaving a net profit and how that money has to be used to pay off debt as well as to reinvest in the company to spur growth. Explain how it is this money – the money that’s left over – that funds raises, better benefits, new uniforms, additional staff, or new equipment.
  7. Help them understand which numbers they can impact and which ones they can’t. You want them to leave knowing how they individually can help the organization make and save money.
  8. Depending on your team, it can also be valuable to explain the difference between profit and cash available. You may want to share the role of revenue to profit. Clarify that without profit, revenue is wheel spinning. Small increases in revenue beyond goal can cause exponential increases in profit due to the relatively static nature of overhead costs.

Owners tend to wonder how to represent their compensation when sharing financials. In the process I recommend above, simply roll your compensation into payroll. By being open with your team, you can begin to create a culture of honesty.

*****

Kris Boesch is the CEO and founder of Choose People, a company that transforms company cultures, increases employee happiness and boosts the bottom line. Her new book, Culture Works, and accompanying workbook are available now on her website and will be available on Amazon around May 15.

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