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Improving Profits With Engagement

Improving Profits With Engagement

Employee engagement determines a company’s health and profitability. Across a wide number of companies, Gallup reports that the level of employee engagement follows a “1/6 : 2/6 : 3/6” ratio.

  • 1 out of 6 employees (including management) resist the ownership’s goals and vision.
  • 2 out of 6 support the ownership’s goals and vision.
  • 3 out of 6 are “neutral.” They can be swayed by either the “resisters” or the “supporters.”

Owners and executives should understand that they are competing every day with the “resisting “1 /6” to win over the neutral “3 / 6.”

To improve the chances of winning this competition, leaders should recognize and avoid two common flaws:

FLAW #1:  CRITICAL LEADERSHIP

“Critical Leadership” results in staff feeling less than fully rewarded for making informed but unrequired risks that could be in the best interest of the company’s ownership.

Example: The CFO and the controller of a privately held company understood how a specialized tax credit and cost review would recover substantial amounts.  “The problem,” he said behind closed doors, “is the owner of this company would criticize us for not being able to find this money all by ourselves without you. We can’t have that.”

FLAW #2:  REMOTE LEADERSHIP

The best leadership is close enough to offer clear guidance, incentives and accountability to ensure the organization’s health and profitability. When personal attention is too remote for too long, the important opportunities that should be first brought to the owner/CEO for an informed decision and then implemented by the staff are not.  Instead those opportunities are left for the staff to review and pursue or ignore according to their interest. This “Abdelegation” (combination of delegation mixed with abdication) is why great decisions don’t get made in time, if ever.

Example: For the last few years, an AP audit/recovery service recovered millions for a Fortune 1000 company.  In response to a corporate directive to cut costs, the accounting department either had to let go of a well-liked staff member or discontinue the AP audit/recovery service which was paying for itself many times over. The department discontinued the service. The company is now in worse financial condition than when it asked staff to cut costs.

In both cases, the decisions made by executives and staff were inline chiefly with the best interests of the company’s management, not the company, or the company’s owner.  The alternative is for overbearing and remote bosses to apply a leadership practice that can help them rise from being a “Boss” to being a “Leader.”

To lead better, an owner/CEO should start with the assumption that the employer’s profitability is still secondary to other work-related priorities held by his VPs and department heads. Their priorities include: pay, job security, career advancement, benefits, time off, office relationships, peer respect, recognition from superiors, personal development,  and the avoidance of more stress/work for which there is no extra reward.

It isn’t uncommon for owners and CEOs who want to believe the best about their leadership style and their staff to say, “This explains other companies, not ours!” But a wiser approach would be for the leader to understand that people have the same needs in virtually all organizations including high performing organizations.

One simple improvement leaders can use to improve employee engagement and corporate profits simultaneously is our “3-A Communication.”  The 3-A’s are:

  1. Show how your decisions/goals align with the big picture.
  2. Show respect and care for those touched by your decision.
  3. Clarify roles and expectations for people carrying out your decisions.

As an example, clients of ours use this memo which incorporates “3-A Leadership” principles:

Memo:

Our executive team is committed to continually improving our cost structure and financial health without reducing the quality of the services we give or the services we receive.

To achieve this goal, we have engaged a third party to identify opportunities within our tax and overhead structure for additional discounts, credits, and refunds. Their mandate is to help us see worthwhile recoveries and cost savings without creating unreasonable burdens on our staff.

At some point they may request your time or input in order to expedite a savings for the good of our company.  Your cooperation in this matter is necessary and appreciated.  The resulting success reflects well on each department and person involved.

If you have any questions, concerns, or needs that cannot best be addressed by them directly, please feel free to contact _______________ the chief advocate reporting to me for this project.

To learn more about our Tax and Cost Savings methods visit rareintro.com

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