As part of my research in preparing to work with an employer, I will sometimes walk up to random employees and ask, “How does this place make money?” Most times, I get a mixture of confusion or some general statement like, “We sell widgets.” When I ask how much the company makes, most will say, “A lot!” The truth is they really have no idea. In a survey of supermarket employees years ago, for example, most estimated their store’s profit margin around 50%. Historically, the industry average is about 1%.
The fact is most people have never been taught how the business model for a firm enables it to turn a profit. To put it crassly, they know they show up to work and a paycheck arrives periodically in return. Wouldn’t it be helpful if they had a more informed understanding of how their employer operated? You bet!
There are two major reasons for teaching those who work for you more about the firm’s process for making money.
- It improves retention. The more a person understands about how they fit into the larger picture, the more likely they will feel a sense of belonging. They will relate more to the mission. They will feel like they’re apart of something larger. They will also develop more of an understanding about costs.
- It improves decision making. Knowledge is power and knowledge encourages reason. When a person understands the larger context of the problem they’re solving, they are more likely to think creatively, rather than simply following the rules. If you share your intent and overall goals, everyone will feel more empowered to take care of the day-to-day decisions without checking in on every detail.
So, how do you teach this business model? It does not have to be complicated. If fact, it would be better if you provided a simple illustration. The more employees can relate to the illustration, the more they will become invested in what you have to say. You might even create a short video so newcomers can be taught these insights as well.
Is it okay share some numbers? Absolutely! It’s not necessary to share proprietary data. Just a sample transaction or project will do. If you sell a tangible product, take your people through the process of revenue and expense. Some will be quite surprised that you’re not making a ton of money on each sale. If you sell a service, explain the estimating process, the cost of materials, overhead, cost of expertise, and everything else involved. Elapsed time to do this? No more than 15 minutes. Make it quick and clear. Those who are interested in more detail can ask you later.
So here’s your assignment – Regardless of where you are in the organization, make a point of providing your people with a basic overview of how the “the place makes money.” You will be rewarded in an improvement in both retention and decision making.