In this four-part series, we are looking at areas where your business may be leaking profit. In this post we are looking at how a lack of communication can cause profit leaks.
In Part I, we looked at poor gross margin and cost of good sold and the need of having a clear target for the gross margin of your business.
It’s critical to know your targeted gross margin so you can make sure you are executing against that number. Every dollar that is eaten up in COGS cannot drop to the bottom line.
We recommended tracking this KPI on a monthly basis, using a platform which allows your entire company to see this critical KPI, therefore driving performance. For a deeper dive into this topic see the first blog post in this series.
In Part II we looked at sales and sales compensation. Sales comp can be a huge motivator OR de-motivator depending upon how it’s structured.
We discussed the fact that your core values matter, especially when it comes to your sales team. You want individuals that believe in your vision and are not JUST out to make money. It’s my personal opinion (and experience) that solely money-driven sales people likely can wreak havoc on your company, so choose your sales team wisely. Pay them well, but pay them in a way that makes sense for the overall good of the company. Don’t tolerate behavior that you wouldn’t tolerate out of your other employees just because they can “close deals” (easier said than done…I know).
In Part III we looked at marketing and how massive profits can leak out of that function, due to a lack of diligence around marketing data. Do you know which marketing channels generate the most leads and the most deals?
In Part IV we are going to look at what I believe is THE biggest area where you may be leaking profit. It’s not an area of your company in a way that operations, sales or marketing is. You aren’t going to see this area show up on your P&L, but it’s huge. This area encompasses everything. What is it? Communication of your company goals. Plain and simple.
Communication, or the lack thereof, has the potential to drive tremendous growth and profit. How? Let me show you. Here are six question to ask about how you communicate.
Are Your Company’s Goals 100% Clear In Every Employee’s Mind?
If you ask your management team, or those members of your team that help you run your company, to list the top three things that the business is focusing on over the next 12 months, are you positive that they would all list the same priorities? If not, you will have massive profit leaks.
It’s pretty simple, but if your team doesn’t know the top priorities, there is a strong chance they will focus their attention on something else. As a leader, you cannot take that chance.
Is Every Employee 100% Clear On How The Company Goals Relate To Their Day-To-Day Activities?
This question is a follow-up to the first one. If the company goals are not clear, each employee will be, at best, guessing on what they should be focused on. They will try to interpret their priorities based on the emotional reaction to events within the company. Again, if every employee is not 100%, they will spin their wheels and you WILL leak profit.
Is There 100% Clarity On How Success Will Be Measured? How Will We KNOW That The Company Goals Have Been Achieved?
Once there is clarity around the goals, you need to have some way to determine if they are achieved.
A lack of clarity here will again cause your team to spin their wheels. Make sure that each goal is SMART. If you haven’t heard of SMART goals, you can learn about them here.
Essentially, SMART goals allow you to drive 100% clarity around each goal. The “M” in SMART stands for “Measurable.” If you do not have 100% clarity around how success will be measured, you will be leaking profit.
Are You 100% Clear About Who Is Responsible For Each Goal?
Who is responsible for each goal? I understand that everyone on your team may not be willing to stick their neck out and agree to be accountable for a goal. In addition, not all goals are the result of only one person, but that shouldn’t stop you from assigning accountability.
As the leader, you need to drive accountability and ask each member of your team to step-up and agree to be accountable.
This is not a perfect process, but one which needs to be applied and adjusted over time. The end goal here is that the accountability is spread across your entire management team. Need help starting this process? You can read about it here.
Is Everyone In The Organization 100% Clear About WHY You Do What You Do?
This moves more into the motivational aspect of your team that taps into why they get out of bed every morning and come to work.
It’s no secret that employee engagement is extremely low. Only about 1/3 of all employees are considered engaged. According to Wikipedia an engaged employee is “one who is fully absorbed by and enthusiastic about their work and so takes positive action to further the organization’s reputation and interests.”
Employee engagement can be directly linked to employee productivity. Just do the math, if you have 40 employees and only 1/3 are engaged, that is 26 employees who are NOT engaged. That gap can have an enormous impact on profitability. How do you get them engaged? Help them to understand how what they do each day in connected with a greater purpose.
Is Everyone 100% Clear About How We Will Behave – Our Core Values
Your core values are the basis of your culture. I think about core values as the fuel that allows your business to execute efficiently allowing you to execute without a ton of added “drama”.
Core values keep the right employees in and the wrong employees out of your organization.
I’ve consulted with many clients who can trace internal problems or fires back to a violation of core values.
Defining your core values is time and money extremely well spent. If your core values are not defined and communicated, you WILL have profit leaks and more problems.
The good news is that Envisionable can help you eliminate all these profit leaks. We’ve developed a consulting and software system that creates clarity to drive real results. Click the button below and schedule a FREE 15 min strategy call today!