Do your employees know your financial game plan?

Do your employees know the game plan?
In most businesses the majority of employees don’t have a clear knowledge of the “game plan,” which is the annual business plan and/or the strategic plan.
In an equally large number of companies, they have little or no idea of the “score” – the financial and operating data the company uses to measure its results.
If you want to test your own company, try asking several employees what the objectives are for the company this year. If your company is like most, you will get a broad range of vague answers. Worse yet, in many companies even upper management can’t answer the question clearly and succinctly. What are the consequences of this situation and how can it be remedied?
Consequences
Every day we ask each of our employees to process work and make decisions that move in the direction of the company’s objectives and goals. How well will they make those decisions if those goals are vague?
A set of well-defined and articulated goals is necessary to motivate employees at a level that has impact. Those goals should encompass company, department, and work-team focuses.
Employees are motivated by their view of the overall vision and purpose of the company. Also, they are motivated by how they see their efforts contributing to the achievement of those goals.
Goal setting
Before goals and objectives can be communicated to employees, they must first be formulated and recorded. Those goals can encompass one or several years.
The preparation of an annual operating plan is the process by which one-year goals are developed. The company goals generally are formulated by using a structured process in which the top management team discusses and agrees upon the goals for the year.
Multiple-year goals are usually formulated using a process called strategic planning. Again, the top management spends concentrated time developing those goals and objectives.
Once company goals have been formulated, the next task is to communicate them to those responsible for helping to achieve the goals. There are many ways to accomplish this communication. However, the key is to make sure that they are communicated clearly and concisely.
Then, after the company goals are established, department and work-team goals can be formulated.
Goal formulation at each level should include in the process those employees who can help to effect the achievement of the goals. This includes employees down to the lowest level in the organization. The lower the level, the more specific and narrow the goals become.
Motivating employees
The reason for including all levels in goal setting is one of motivation. The best way to motivate employees to achieve the goals is to include those same employees in the formulation of those goals.
Once the goals and objectives have been formulated and recorded, the next step is to establish timetables and reporting mechanisms, which will enable the tracking of progress toward accomplishing the goals.
That will provide the basis for the next step in the process, which is feedback. In order to maintain motivation, employees must know that progress is being made toward achieving the goals. Feedback frequency should be more often for the lower-level goals and less frequent for the higher-level goals. For example, progress on individual or work-team goals can be reported daily or weekly; department goals monthly; and company goals quarterly.
One of the great fears in planning is that once goals are set, they must be adhered to unswervingly. Goals can be changed if there is good reason for the change.
The fact that the goal isn’t being met is not of itself a valid reason to change it. The reasons for not meeting the goal need to be examined and, if necessary, corrective action initiated. Nevertheless, goals that aren’t being met should also be part of the feedback process, along with the corrective action or the revised goal.
Planning, goal setting, communication and feedback are essential to managing your company’s progress. The lack of those exacts a high price in terms of unproductive, counterproductive, or aimless decisions and work by employees.
Planning system
The first step in establishing a system of planning and goal setting is making a commitment to the continual process of planning. Planning is a never-ending cycle of planning, communicating, measuring results, taking corrective action, and then starting the cycle again.
The planning portion is a process type of activity. Here the need is to establish a time to do it, decide who will participate, and how the process will work. Large benefits can be gained from using an outside facilitator for this process. The facilitator can keep the planning team on task and bring an outside objective view to the situation.
Keeping score
The communication portion involves deciding what, when, and how to communicate with various groups of stakeholders (managers, employees, board members, shareholders, bankers, vendors, etc.). Again, there is a need for commitment to establish and stick to a schedule. First you communicate the plan. Then, you communicate the score – how you are doing compared to the plan.
Jack Stack at Springfield Remanufacturing Corp. has had notable success and has written about his experiences in using financial measures to focus and motivate employees. He uses what he calls Open Book Management, which he defines as communicating with people via the numbers. His book, “The Great Game of Business,” details how he and his fellow employees turned an unprofitable, highly-leveraged management-buyout of an unglamorous business into a highly successful business using a system of goal setting and scorekeeping to motivate and lead the employees.
Measuring results can be as simple as comparing actual sales to the goal (often called the plan or the budget). However, sometimes it requires establishing new measurement and tracking systems. Each goal must be analyzed to determine what must be done to track results.
Corrective action
If we are accountable to somebody or some group, we will be more likely to take corrective action.
The CEO of a highly successful regional distributor reports: “When I purchased the company, I had a nagging concern that maybe too little accountability could be a problem. I’d be able to rationalize poor results and discount their implications. I could easily fall into a pattern of denying things with no fear of repercussions. I had certainly seen that happen in other privately held companies, and there was no reason to think I’d be immune to the practice myself.”
Your communication system can be part of the accountability and corrective action process. Just the fact that you must report to some stakeholder group on why a goal was missed will generally force you to take some sort of corrective action so that you are able to report what you are doing to the group. If your employees know the game plan and the score, they can be part of the team that helps to keep you on track to reaching your goals.
Michael Devitt is president of Devitt Consulting Group in Shorewood. Small Business Times readers who would like to see a business financing issue discussed in this column can contact Devitt at 962-4414, or via e-mail at Devitt@execpc.com.
April 1998 Small Business Times, Milwaukee