Updates
Marginalize versus Centralize…
In a recent discussion with a client it became apparent how the issue of company success had become so marginalized among employees as well as many managers. As I thought about this issue I realized how true that was in many organizations. Employees, even some of the highest in the organization, rarely connected company “performance” with financial outcomes. They focus instead on volume, process, quality, head count, growth, ship dates, technology, capital, productivity, etc., etc. Few asked, “are we making money”, or “will this cause us to make more money”. This would be analogous to a football team discussing yards rushing, yards passing, first down conversions and not having a clue whether they won the game or not. I am convinced that in many organizations today, company success…profitability has been marginalized. And it begs the question…why?
In our experience dealing with over 500 companies, we believe the answer can be reduced to two fundamental issues –
- Company performance is not a factor in determining the majority of employee compensation. Most employees exchange time for money, regardless of organizational performance. In fact in some cases, pay is inverse to company results. Someone once said “if we don’t get it done in five days, they will pay us a 50% bonus – overtime – to do it in six!”
- Financial statements are unnecessarily complicated and many managers nod their head yes, but truly do not understand them. But what a person does not understand, they do not trust and are powerless to affect. That is why I believe, that managers focus on statistics of the game rather then the score. They understand pieces, pounds, units, on time, man-hours, efficiencies and focus on these, while hoping the CFO reports that the money showed up. The use of non-financial metrics has proven to be very dangerous because the anticipated financial results frequently do not show up in spite of the above measurements being good.
We believe financial success and employee compensation should go hand in hand, in an understandable fashion and most importantly with real time feed-back. We need to centralize company performance in the minds and hearts of our associates. Not in some half hearted way, but in a way that is dynamic, focused, intentional, and grabs peoples attention every week, every month. We do not advocate sharing the company’s entire P&L, rather we need to measure company success with highly focused, key financial metrics.
Over the last twenty years we have endeavored to do just that. Our Equishare System utilizes a four-pronged approach to organizational performance.
- Define the essence of performance...of profitability. Identify the four most critical factors in your business and measure them in dollars. The definition must be clear, concise, powerful, and universally understood. We call this the Equishare Formula; a robust, sound set of unique financial ratios offering an extremely high correlation to over-all financial results. Without the complications and misunderstandings associated with the entire financial statement.
Thomas Jefferson once apologized to John Adams for the length of his letter to him “… he had not had the time to write a short one.” Concise, well thought out brevity breeds’ focus and allows for the tactical application of your resources. - Measure - frequently, continually, everywhere, utilizing visual workplace techniques.
- Pursue - a focused, tactical, visible plan and effort to achieve gains. Deploy employee education, create awareness, and use state of the art tools, methods, and team communications.
- Connect - every employee's pay to achievement, on a monthly basis, and in a manner that is proven to favorably affect the behavior and performance of associates.
These efforts have met the test of time and have proven to drive significant improvements in our clients operating results and cultural atmosphere.
If you step back for a moment and think about it, it may very well be a revelation. Most employees have no idea if you are winning or losing, whether you are on the fifty-yard line or the five. Many simply don’t care, and that is our collective fault as leaders. Can you imagine coaching a sports team this way? Business is exciting for senior management, because we see and understand the entire game. For most employees however it’s simply the exercise of exchanging time for money.
I would encourage you to order our comprehensive DVD/Video workshop. I believe it will give you a totally new and fresh prospective on “the game”, and offer encouragement in your efforts to improve both your business and the lives of people who work there. One of my favorite authors, C.S. Lewis reminds us how words become diluted over time. Please do not confuse our use of the word Gainsharing with the generic approach of incentives and bonuses; Equishare is different. It is a complete, bold, energetic approach to business performance. Marginalize or centralize… you have a choice. If you are not satisfied with the workshop, return it for a full refund.
If you have any specific questions or issues we can help you with, please post them on the Q&A section of this website or contact me directly at 1-800-835-2681.
Thank you,
Karl F. Muller, President