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Encouraging Employees to Think Like Entrepreneurs

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Business Advice

We all want people who think like us – smart, goal-oriented, business-minded people who are just as passionate and motivated about work as we are. Why? Because you know that if your people treat your company with the same dedicated effort and passion as you do, without a doubt, you’ll see your profits soar.

While it may seem like a far-fetched goal, with the right training, getting your employees to think like invested business owners is not an impossible feat. Establishing a positive company culture built on goal setting and dedication is definitely a good way to get started. If you advocate a certain ‘ways of doing things’ and certain ‘way of thinking,’ then your employees will see the bigger picture and understand the type of work ethic it takes to succeed. And, if everyone shares the same motivated incentives and workplace ethic, then you can rest assured that your business is operating at an optimal level.

However, to really get your employees thinking like owners it’s going to take more than just preaching productivity. You need your people to share in the same risks and opportunities that motivate you every day. The best way to do this is to link employee bonuses to performance. As one thing’s for sure: telling your employees to work harder and then keeping them on an hourly wage is not going to cut it!

You need to show your employees what working harder is and you need to give them a reason to work harder.

Show your employees what ‘working harder’ is:

Communicating sales and production numbers, as well as your goals for improvement, is one way to deepen your employees’ understanding of your business. Once they have a better understanding of the scope of your business, they’ll understand where your business is now, where you want to see it go in the near future and what it will take to get there based on concrete data. Most pay-by-the-hour employees are used to having access to one number and one number only: their hourly wage. As a result, there is no correlation between their rate of efficiency and their daily work. You need to communicate measurements with employees to see results.

Employees will prioritize their work and improve their productivity if they understand and are rewarded for their contribution to a company’s performance. And the more you communicate measurements, the more your employees will understand the business and what it takes to produce certain – better- results.

Understand and educate employees on company financials

As the owner/ manager, it is your job to improve performance. You can improve performance by training your people on company processes. With good systems, employees don’t need an owner/manager telling them what they need to do or how they need to do it – there’s a system that tells everyone exactly how to carry out a specified job – the same way that the owner would.

The purpose of implementing an open book style of management is to show employees how the company is doing as a whole and where each individual worker fits it. Because of this goal, an open book policy places value on all employees, which is a surefire way to boost confidence and performance.

But to understand their contribution and the importance of their performance, employees need to know how to interpret the financial information you provide them with and how to measure themselves against it. In other words, you need to educate your people on what “better” performance is.

How do you educate your employees? Start by explaining how financial statements, budgets and forecasts are created. Show them your sales goals against your actual numbers. Show them what makes the company profitable. Educate them on the different departments within your company – help them see the connection between their work, the work of other departments and your company’s bottom-line. 

You don’t have to show every number!  For those of you who are worried about sharing too much, relax. You don’t have to open your accounting to share some basic information. Use ratios to help you “hide” information you need to keep private. You can let your employees know that wages are calculated based on 20% of sales (note: this number is for example purposes, and may not suit your company), or that overhead expenses represent 27% of each sales dollar, and that equipment takes up 15% of every sales dollar. Simple numbers can communicate the results just as effectively.

You might want to consider sharing and posting the following information:

  • Sales to date – share both your sales goals and your actual numbers. Consider posting production sales numbers by crews to spark a little friendly competition for better performance
  • Production numbers – share your total sales dollars per payroll hour. Is it increasing or decreasing?
  • Labor ratio – share the percent of sales you spend on labor costs. Show employees how you will use this number to measure their production rate and pay them what they are worth
  • Customer satisfaction – share customer satisfaction rates. Consider posting customer satisfaction rates by crew to motivate crews to improve customer service
  • Safety – share safety records and, once again, consider posting safety records by crew, as well as training completion records
  • Problems and solutions – chart problems, including who found the problem and how the cause of the problem was solved
  • Goals and forecasts – chart and graph sales and production goals and forecast
  • Suggestions for improvement – get employees involved in offering suggestions for cutting expenses

Give your employees a reason to work harder:

Next, you need to provide your employees with legible performance measurements in the form of graphs and reports, which will allow them to weigh their own performance level (based on concrete numbers) against other employees and professionals in the industry. With tangible numbers and measurements, you have a common language that all your employees understand and that you can use to communicate goals and expectations. They’ll know exactly what it takes to work harder and receive more rewards because they have access to the right information.

Use the numbers as a measuring point for improvement

By opening your books to employees you’re not only demystifying gains and losses, but you’re giving your employees actual performance numbers to measure themselves against. Opening their eyes to what it actually takes to reach sales and production targets helps them see what they need to do to step up their game and share in the success. 

Make sure you post visual representations of performance rates and goals. Graphs are a good way to clearly show employees how they measure up – particularly how their daily decisions and production rates affect the company’s bottom-line. Once they understand that certain performance levels need to be reached to hit a particular goal, employees will start prioritizing activities and making smarter decisions. 

  • Use graphs to report performance instead of charts – it will allow your employees to visually note any pattern changes in production and the variables that could be causing different performance results.
  • Make sure your performance reports are actually answering the questions you’re after – have we achieved our target? Are we actually performing at the level we need to? Are we getting closer to accomplishing our goals? What is working, what needs to change? At this rate, what does the future look like?

Give employees a stake in the outcome

Everyone needs to share in the rewards to see the benefit of performance measurements. Inspire your best contributors with gift cards, bonuses, profit sharing plans, or other prizes and rewards.  Prove to them that the company’s best interest is their best interest as well.

In time, you’ll build people, and a company, focused on productivity, waste elimination, and bottom line results.  When employee performance is evaluated based on productivity you can expect the following results:

  • Retain Industry Superstars – accurately identify and reward your best performers
  • Improve Productivity – better performance = better opportunity + better pay
  • Reduce Warranty and Rework – warranty and rework increase labor costs without increasing sales.  This hurts both the foreman’s opportunity for increased pay and the company’s profitability
  • Think Like Owners – when you’re paid and evaluated like an owner, you think like an owner.

Using key metrics to educate and motivate your employees – and establishing a compensation plan that rewards employees who have mastered their skills and met their goals – is the best way to improve your business. The more you communicate measurements, the more people will understand and share the responsibility for success.

See how communicating measurements to his employees helped Nathan Helder of Gelderman Landscaping change his business.

Landscape Management Network is a collection of systems, tools, and training to help great contractors build and manage great businesses. Visit the LMN website.

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