Whose job is it to make money in a business?
In your business, is there an unspoken assumption that it's your job to ensure that the business makes money, your staff have nothing to do with it and don’t want to know about it.
When business owners employ staff, we naturally focus on the skills that the staff have, to ensure we can deliver the service. But this, as we will see, is not enough.
Let's use the example of a service business that provides plumbing. The owner of the plumbing business employs a plumber who has been properly trained and can perform plumbing work to the required standards. As young business owners we might think, that the better they are at plumbing, the more successful we will be. After some time in business we start to realise that this is not the key to business success. We start to discover that customer service is every bit as important as technical quality from the customer's point of view. So we start to look for plumbers that can also provide great customer service.
By the way, as a reminder, customer service is about setting and meeting expectations, and doing that is about great communication with the customer. Getting back to them quickly, listening carefully to what they need and what they're concerned about, letting them know what they can expect, keeping them up-to-date such as telling them what has changed when things change, and so on.
Sometimes we have to pay a little bit more to find adequate technical skills combined with great customer service skills but we soon learn this is necessary and worth it. An alternative, by the way is to split the roles. When our business gets to a certain size, we can employ a plumber who prefers customer service to tech work, to talk to the customer, and plumbers who don't want to talk to customers but love the technical side, to perform the work. But the same principle applies.
Alright so our business is growing and our customers are happy because the job is done right and they have a great customer experience. But are we making money? All too often, we're not. In these cases, what has gone wrong?
What I discovered, and continue to discover in businesses I work with, is that there is this assumption which everybody has that the boss's job is to make the money, the employees are there to do the work. Profitability, in their mind is simply not the employee's problem.
I put it to you that profitability is everybody's problem. Not only do your staff have to be adequate technicians, and provide great customer service, they have to be focused on efficiency and productivity. That's how they help the business make money. If they are involved in quoting and/or selling, then that's the way they impact profit, by quoting accurately and selling at a profitable price.
Now you are probably not going to find employees that can do this. But that's OK, it's actually surprisingly easy to implement. First you need to measure what they're doing with their time. This means timesheets. Yes, everybody hates timesheets but there is no other way around it. Ultimately, if you are paying salaries, you are buying people's time, you need to understand your costs and therefore you need to understand how time is spent.
Your employees who are on the tools need to allocate their time to jobs or projects for customers. Your first measure, productivity, is to ensure that around 80% of their available time at work [time when they are not on leave] is assigned to something which you can bill out. It doesn't have to be directly billed, it might be a fixed price job, but ultimately that time is still directly earning you income.
However it is not enough just to measure this productivity. You also need to measure efficiency. For each job you need to look at how much time has been billed and whether that job made money, or lost money. If you only measure productivity then staff will “time dump” to jobs to make their productivity look good. It's only when you look at efficiency that you will see that the jobs are not making money. If you only measure efficiency, on the other hand, then staff may be tempted to withhold booking time to jobs to make their efficiency look good, and it's only when you look at productivity that you realise what's going on. So you need to do both.
Now to make all this work, your staff need to see the hours numbers. Think of it as a kind of scoreboard. I suggest you present it to whole teams as a team total, and individuals can see their own numbers privately.
The result will be electric. Every time I have implemented this, or businesses I have worked with have implemented it, the results have been profound. It works because people usually want to win, and you are showing them a scoreboard they have control over. Research has shown that people perform to what they're measured on. They even start coming up with innovative ideas to do things more efficiently.
Make sure that any targets you set are very achievable, if they are not, the whole system could backfire on you. People will become disenchanted and morale low.
In sales roles, you might share Gross Profit per day required, rather than hours.
So there you have it. Plenty of businesses focus on technical quality and customer service, but few think about sharing the numbers, and by that I mean the hours or dollars the employees have control over, but once you do it and see the results, you will never look back.
As always, if you need any help with any of this, reach out.