Entrepreneur’s Notebook – Making Workers Aware of Profit Aids the Bottom Line

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If your company has a fantastic financial year and makes record profits, where do your employees think the money goes?

Many might say into the pockets of the owners or shareholders. And in that case, it can be difficult for employees especially those at the lower levels of the company to envision how company profits benefit them.

Unfortunately, this same feeling can be found among employees at the middle and even upper levels of a company.

In reality, employees at every level are responsible for profits. But if they don’t feel there’s something in it for them, what motivation do they have to create profits?

Owners and shareholders need to educate workers about how profits affect everyone in an organization.

When you ask employees about their major responsibilities, you will get a variety of answers. Salespeople say their job is to make more sales. Financial people report that they must keep accurate records. Delivery people answer that they have to get products to customers in a timely manner. Manufacturing staff replies that they must make a quality product.

So who is responsible for generating profits?

In many companies, the only individuals viewed as having that job are the chief executive and perhaps a few top executives. But that attitude limits progress in bottom-line improvement, because it’s difficult for a few people to bear the full weight of realizing financial success in any company.

Employees need to develop a new perspective of how they affect profits and how profits affect them.

Profit payoffs

On the surface, “profit” means different things to different people. Closer examination, however, reveals a common thread that unites everyone in a company: the desire for security.

Everyone shares the fear that tough times in the future will mean the loss of jobs and dreams for them and their families. And in fact, even the healthiest firms have difficult financial periods.

A total of 46 percent of the companies that made the Fortune 500 list in 1981 had been removed by 1991. That’s compelling evidence that profit is the mortar and brick that builds longevity into a business, thus providing security and peace of mind for the entire staff.

It also serves as a score for your employees’ performance and a report card for customers’ satisfaction. So it’s essential for employees to understand the implication of their actions on the bottom line.

Profit pays for everything beyond the cost of goods sold and overhead expenses. It allows you to escape survival mode and provides the resources to proactively dream and plan.

Profit allows a business to take advantage of opportunities that arise, obtain more-favorable banking and financial relationships, develop new products, implement aggressive marketing plans, acquire competing or related businesses, purchase new equipment, negotiate better terms with vendors, reduce debt, and hire high-quality people with new skills.

Profit can also provide raises and increased benefits to reward employees while creating many intangible incentives like enhancing skills through training programs and contributing to an atmosphere where recognition for accomplishments will flourish.

Imagine what it’s like to come to work every day in an organization experiencing severe cash-flow pressure. People spend most of their energy fighting fires being reactive instead of proactive. Good employees burn out quickly from the high stress and low morale.

Profit allows you and your people to enjoy being on the job.

In the job description

Are profits everybody’s job? Certainly.

Why should your business pay salaries to employees who don’t feel responsible for improving the bottom line? Managerial positions may oversee functional processes within organizations, but individuals are responsible for bottom-line results. Delegate profit responsibility by reinforcing that it’s everyone’s job.

Besides having a traditional title, every person in the company acquires the additional role of profit enhancement officer. Making workers aware of the resulting benefits uncorks profit-generating creativity that too often remains bottled up in companies.

Two qualifications must be present for a business to change. First, the owners must acknowledge that their company is not realizing its profit potential.

Second, they must accept the fact that old ways of looking at ideas won’t uncover new profit possibilities.

Management teams must become “possibility thinkers” instead of relying on the way things have always been done. Patience is a modern-day excuse for not performing at higher levels.

When you await future events before making changes, you harm your company by not capitalizing on tomorrow’s opportunities today. If you always do what you have always done, you’ll always get what you’ve already got.

David Krajanowski is co-managing partner at Singer Lewak Greenbaum & Goldstein, a certified public accounting and management consulting firm. He can be reached at [email protected].

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact James Klein at (213) 743-1759 with feedback and topic suggestions.

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