Involve Your Employees, Share Your Profits With Them By Norm Beckert

Want to maximize the effectiveness of your business and improve your bottom line –then
involve your employees!

To start with refer to your employees as ‘our people’ or ‘our partners.’ It’s not a big deal, but ‘people/partners’ tends to signal that they are welcome to be involved in the direction your business takes, and hopefully they truly are. They know more about their portion of the business than most anyone, so honor that knowledge and take advantage of it.

Getting your people involved is easy if your nature is to be a ‘Team Player’. It has been known for many years that a ream approach can leverage individual contributions. Consider having a key employee take on a leadership role and form an action team. You can start with something simple, maybe a fifteen minute meeting with a pre-advertised agenda, Start with small, achievable items if at all possible. For example: “What can we do to become a better company?” Let your people determine the issues on which to focus and to develop the measures to record improvement.

Acknowledge your employees’ contributions and reward improvement. It could be a luncheon to start with, but to really be effective you’ll need to share your bottom line. At SCORE counselor Roy Montague’s specialty parts manufacturing business he did that early on and according to Roy “it really paid dividends”. Roy went on to share his experience.

A Profit Sharing Program was instituted to reward the employees for their contributions and their performance. Key performance indicators (KPI’s) were developed and included: On-time Delivery; Rework Hours; Amount of Scrap; Invoice Errors. Our “can-do” accountant was able to close the monthly books within three days of month end and the Profit & Loss Statement was put on the lunch table for everyone to review.

We had a company wide meeting shortly after sharing the P&L and EVERYONE except for myself, the owner, received a bonus providing we had a profitable month. My bonus was the appreciation of the value of the business. A typical bonus pool of  25% of our profit was available prior to factoring in performance. Within three months we watched billing errors go from 12% to less than 2%; on-time delivery improved from 90% to 98%; and our rework was reduced by 50%!

The major achievements FOR Roy’s Company were a high level of customer satisfaction, increased business from existing customers, more referrals, a high level of employee morale and a low level of employee turnover, and an efficient and profitable operation. Based upon industry surveys for the specialty parts manufacturing business Roy’s business paid the top wages, had the highest customer satisfaction scores and was one of the most profitable businesses in that sector.

No two profit sharing programs will be the same. Start simple and adjust as you go. Be particularly aware and sensitive to the construction of your profit sharing program, knowing that it’s extremely difficult to take away enhancements once they are given!

The bottom line: Share information about performance and profitability with your people and your business will run smoother, with happy customers and little turnover of staff.