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Enlisting Workers in Push for Profits Can Have Payoff

If your company is not achieving its profit potential, you should focus your attention on areas that can make a big difference.

The following steps can help you do that:

-Objectively look at your untapped profit opportunities. Do this by analyzing sales and marketing, staffing, organizational structure, operations and financial management.

Ask yourself the following questions: Do we maximize sales from our complete product line to existing customers? Are our employees focused on generating profits and do they have a plan to follow in order do to so? Is management encouraged to receive ideas from throughout the company?

Don’t do the analysis alone. With only one set of eyes, seeing all the opportunities is impossible. Involve your management team to help identify initiatives. Once you are done with your analysis, compare your company’s performance with one of your competitors that is running efficiently.

-Expand responsibility for company profits. Communicating and assigning responsibility are key ingredients in your profit quest. If you go to the lowest-level employee in your company and say, “Our firm is having a great year. Where do you think the money is going?” the individual will probably respond that it’s going into the owners’ pockets.

People at higher levels of the firm may also share this view of corporate profits. Communicate to your managers and other employees so they understand how profits are reinvested to make the company more competitive, how important their roles are in making the business more profitable, and how they benefit from these increased profits.

People have to know what’s in it for them.

-Eliminate departmentalism. A car dealer noticed sales were strong but overall profits were weak. On paper, individual departments performed well. When asked how things were going, each manager replied that they were having the best year in a long time.

The managers, however, were focused on their own departments and not on improving the corporation’s overall performance. For example, the used car manager had his inventory serviced at a garage down the street that charged lower hourly service rates than the dealership.

This type of behavior is a cancer that will destroy your business. Stellar performance by certain departments is meaningless if the whole company is not on strong financial footing.

Continually communicate to all your employees that individual and departmental performance is encouraged and rewarded, but improving overall corporate profits is the No. 1 priority.

-Erase the fear of retribution. For your management to become a team and help you identify profit ideas, no sacred cows can interfere with the process. In other words, individuals should feel safe in voicing an idea that might benefit the company but might differ from the opinion of a top management member or an organization’s traditions.

Your company can stagnate if important but controversial ideas are silenced. You can’t use additional sets of eyes to help you identify profit opportunities if those eyes are closed for fear of retribution.

-Implement your ideas. This may seem obvious, but there are several reasons why employees often fail to do it: no one takes responsibility in their company, deadlines aren’t clear, no benchmarks exist to measure progress, and priorities are unclear or nonexistent.

Successful implementation requires a process that includes a system of accountability. When people have profit initiatives to be completed by the 15th and 30th of the month, often the work isn’t started until the 14th and the 29th. If no one checks progress, deadlines will likely be missed.

Assign someone on your management team to the role of a profit activities leader. This individual is empowered by the chief executive to ensure that the profit team’s ideas are carried out, rewards are given, and consequences for inaction are clear. Your implementation process is destined to fail without the backing of the CEO.

There are several activities that will help establish your profit enhancement process. Empower your management team. Compare your status quo with perfection. Demonstrate that everyone wins when profits grow. Allow any issue to be brought to the table. Institutionalize an implementation process.

Take the following test to measure your profit enhancement process. Make a list of six people who report to you. Next to their names, write five proactive profit initiatives they have suggested in the past six months.

Record the date when each initiative was or will be completed, who’s responsible for doing the work, and the amount of profit it added or is expected to add to your bottom line.

If your sheet is full of ideas that are consistently implemented and your financial performance is at your level of expectation, congratulations you’re successfully following a profit enhancement process.

If your sheet is incomplete in any of these areas, you might need a profit coach.

Examining your untapped profit opportunities, expanding responsibility for your company’s profits, eliminating departmentalism, erasing fear of retribution, and implementing your ideas through a profit enhancement process will increase profits for you, your company, and your employees.

David W. Free is a partner at Singer Lewak Greenbaum & Goldstein certified public accountants and management consultants. He can be reached at dfree@slgg.com.

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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