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Learn how to engage employees and drive profit growth through transparency.
Let’s say you’ve spoken with your customers, as we suggest you do regularly. They’ve told you what they value. After all, it’s your customer that defines the value of your business. Now, it’s time to get excited about the economics of your business. And not just you, but everyone in the organization, from bottom to top. Why? Economics determine profits, and when employees have economic understanding, it only increases profitability.
Employees should understand the economics of business.
The economics of your business are what the customers value (offense) versus your cost to provide the value (defense). They’re also operational. They’re the hands-on metrics your employees deal with every day:
- Call center agents focus on average handle time and customer satisfaction scores to assess service quality and responsiveness.
- Truck drivers measure on-time delivery percentage or fuel efficiency to optimize logistics performance.
- Staff in a restaurant tracks their table turn time to manage kitchen efficiency and profitability.
- Software developers pay attention to deployments without bugs to measure software quality and release efficiency.
- Nurses monitor medication error rates to ensure efficiency and safety in patient care.
- Warehouse workers monitor orders fulfilled per hour to gauge efficiency and accuracy.
Motivation increases when employees have a stake in success.
Once your employees understand how these operating metrics impact overall company success and how they themselves contribute to those metrics, they can focus all their efforts on improving them. This empowers employees to make smart choices and act in ways that drive performance. By giving them a voice in the important metrics of your business, their level of engagement—real engagement—soars.
Imagine two employees working at the same level in the same industry. The first employee has a clear understanding of her company’s economics. She’s not trained to read financial statements, as some experts recommend. Instead, she tracks the operational metrics that drive profitability, such as units shipped—the stuff she has a hand in. Each week, she monitors and forecasts these numbers, actively working to boost them.
As her whole team does this, customers are served more profitably. Value increases. When performance improves, her quarterly bonus improves, funded by the improving financials. Transparency fuels this improvement.
Now consider the second employee who works for a company where he clocks in, follows instructions, and collects his paycheck. He has no real connection to the business because he doesn’t understand how it thrives or fails. Beyond his base pay, he has no stake in the business. He has no psychological ownership. Unfortunately, this has become the norm.
Define what winning looks like.
Transparency is particularly motivating if the focus is on team performance. When employees know the definition of winning, as defined by operational metrics, and whether they’re winning or losing, they can help their team win. However, when employees don’t have their head in the game, it jeopardizes the win for everyone. When employees perform exceptionally, the crowd goes wild. People tend to play accordingly.
We surveyed hundreds of companies to track their strength in the following five drivers of success. Then we compared their scores with their company’s profit growth. The five drivers were collectively referred to as economic engagement:
- Customer engagement is the starting point, since customers define value and, thus, the economics of any business.
- Economic understanding aligns all employees in a common understanding of what defines success for the company.
- Economic transparency enables all employees to see how the company is doing and learn from successes and failures.
- Economic compensation gives all employees a shared stake in the results, making them economic partners in the company.
- Employee participation leads to lower turnover and better relationships between owners/managers and employees.
The link between transparency and economic understanding.
No single driver creates this kind of success—it’s the relationship between them. The customer defines the company’s value, and then the link between the other drivers is clear. When employees can see the key numbers and have a stake in the outcome of those numbers, they can understand how to move them and are driven to do so.
Transparency fosters economic understanding, but the inverse is true too: A culture of economic understanding forces a culture of transparency. Once people have a better sense of the economics, it’s harder for leadership to be secretive with any important measure of performance. Owners are no longer alone in their challenges. Employees have psychological ownership. They share challenges and help innovate ways to bring the company back up to speed.
Economic understanding, combined with transparency, helps people be more engaged, make better decisions, and contribute directly to improving profitability. When you pull employees into a trusted partnership, they start acting like partners. When you give them a stake in the success of the company, they act in their own best interest, which is also the best interest of your company. It’s just about the best buy-in you can get.
This post originally appeared at inc.com.