Profitability: Employee Perceptions vs. Reality
How much profit do your employees believe you are keeping? Have you ever asked them? If you did, you would probably be very surprised!
In an industry where keeping seven to nine cents per sales dollar is considered high performance, where three to four cents per sales dollar is the minimum for long term survival, and where dealers often struggle to keep any money in lean years, it is not uncommon for employees to think that the owner’s share is much larger than it actually is.
Try this exercise at your business: Give all your employees a blank piece of paper and ask them to anonymously write down their best guess of how much of every dollar they believe the owner keeps in the bank at the end of the year.
When many of our clients ask their employees this question for the first time, it is not uncommon to hear employees respond with answers of 20 to 30 cents per dollar or even more! If this is what they believe, what is their attitude about giving a discount to the customer and fighting for the margins needed?
Without correct information, employees tend to dramatically overestimate the profitability of the business and may believe they are being cheated! They might think “Why can’t I get a one-dollar raise when they are getting rich?” When often in reality the dealership is actually struggling and has bad cash flow.
Typically, business owners end up telling their employees next to nothing about the true financial operation of the business or have tried to share data and it has backfired. As a result, owners are unsure of what to share and how to share it, worried that their staff will not understand.
Until this gap in understanding is closed, it is very difficult for owners and employees to truly be on the same page when it comes to the key metrics that drive the business.
What if you could bridge this gap between the perception of your employees and the reality of your business?
Would you like to:
- Illustrate to employees the key drivers of profit in your business and the part they play in it?
- Explain the financials and the metrics of the business so your staff takes ownership of them?
- Share the key metrics of the business in a way that will actually motivate your employees?
- Have truly win-win pay plans that have the key company goals and needs built in and automatically share good profits with the employees?
- Get your employee to think like owners?
We invite you join the thousands of others who have learned how to do these and many other things at Total Management 1 offered by Spader Business Management.
For more information, contact Spader Business Management at (800) 772-3377 or visit Total Management in our Training section.