Sharing # 3 Part One Sharing between Management and Employees

Sharing # 3  Part one

Sharing between management and employees.

The more people know what their part is in the “complete picture” and the more they are clear about what is expected of them the more productive they will become.

We used to believe in “Mushroom Management” by keeping employees in the dark and feeding them absolutely nothing of worth.

But, mushrooms don’t offer ideas for improvement and people without information not only tend to believe the worst they react as if the worst were true.

Sharing company vision / goals is a great step and sharing the detailed plans to reach that vision or goal is even better. The best is sharing your current (weekly, monthly, and quarterly) position in regards to those goals.

The concept of “Open Book Management” has been a controversial one with many contractors. A lot of presidents I talk to are resistant for three major reasons:

  1. 1. “I don’t want them to know how much money I am making!”

I would agree with them but for a different reason than most contractors think. Many should be embarrassed by the relatively small amount they are paid by the company.

In fact, individual salary and wages must be kept out of the sharing process. It is an invasion of privacy and probably not legal.

  1. 2. “They don’t understand the numbers and they will jump to the wrong conclusions!”

I have two responses to that statement. First, I agree, that many employees don’t understand the numbers. I have heard quite a few service techs say, “He’s ripping me off! I get paid $17.50 in an hour and he charges $125.00 so he’s making $107.50. That’s not fair!”

My second response is that it’s worth the time to train employees to understand the relationships between: Revenue, Cost of Sale, Gross Profit, Overhead and Net. When we understand that a company has to pay from profits to replace the cost of items, given away, lost or stolen and that the replacement cost should be computed on how much we have to sell to get the profit dollars for replacement.

The replacement cost of a $50.00 gas valve at 10% net profit is $500.00 and at 2% net profit is $2,500.00.

When service tech’s and others understand that profit dollars pay for unapplied labor they also begin to count the number of service calls needed to pay for one warranty call.

Next- Sharing #3 Part Two “They don’t have the ability to understand the numbers”

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