Streetwise: Happy People = Happy Profits

July 3, 2021

From our friends at Eure Consulting:

Happy People = Happy Profits. When people are happy, when they understand how what they do every day impacts the bottom line, when they enjoy coming to work, when they believe in what they are doing, when they feel valued, a company will be more profitable.

A study in the book Primal Leadership by Daniel Goleman shows that “In 75% of cases, climate alone accurately sorted companies into high vs. low profits and growth. And for every 1% improvement in service climate, there is a 2% improvement in revenues.” You can draw a direct financial equation between engaged employees and a company’s ability to improve profitability. This is why it’s critical that you engage each employee in their work. And that they understand how their job impacts the company. Your employees want to bring value to the company, make sure you show them that they are.

Employees work hard to prove that they are valuable.

There is nothing that makes an employee feel better than when they can look at something they have done and know that it brought in money. Or helped land a new client, or made a project successful, or increased profitability. It’s your job to make sure that the entire company can draw a direct line from their work to the company’s goals. Every employee needs to understand how what they do helps the company get better. That what they do makes a difference.

Start with small steps. Meet with your leaders and managers and commit to creating a culture of engagement. And make it happen. Do employees find meaning and purpose in their jobs? Do your managers and their teams have the power to shape their work and environment in ways that allow them to perform at their best? Are employees stretched and challenged in ways that result in personal and professional growth? Can people see positive and worthwhile results from their work? Do they feel a sense of belonging? Do they connect to the vision, mission, and values of the organization?

An easy way to work towards engagement is to start thinking of your people as stakeholders, and not just employees.

The concept of an “employee” was invented during the Industrial Age when the factory system required people to run the machines. In 1911, Fredrick Winslow Taylor (considered by many the Father of the Management Process) wrote his definitive Principles of Scientific Management in an early attempt to better engage these employees. But what if they’re not employees at all?

In his book, Why Employees Are Always a Bad Idea, Chuck Blakeman presents the concept of Stakeholders vs. Employees. A forward-thinking and well-thought-out idea. A Stakeholder requires leadership; an Employee requires adult supervision. A Stakeholder is concerned with finding meaning in their work; an Employee believes in making money by working longer hours. A Stakeholder figures out how to do more than asked, figures out what isn’t being done, and does it; an Employee waits to be told what to do. Which would you rather work with?

One reason there is such a huge sense of disengagement from employees is because so many organizations don’t ask for regular feedback from them. This causes employees to feel their opinions do not matter. It keeps them firmly in the employee camp and keeps them from becoming stakeholders. Stakeholders get a say in what goes on at a company. If you want to have stakeholders, you have to treat them as stakeholders. So you need to regularly ask how your stakeholders view different aspects of the company.

But make sure you act on that feedback. The only thing worse than not tapping into the intelligence of your company is to not utilize the input you receive. Your stakeholders are the ones who can help come up with ideas to make things better. Don’t ignore their ideas.

You can also engage your employees more effectively if you pull back the curtain on your financials.

As I mentioned before, employees want to provide value. They want to make a difference for the company and the easiest way for them to see that is through the financials. But you shouldn’t just limit it to sharing profit or revenue numbers. Educate your employees on all aspects of your financials. Give them an understanding of how your company makes and keeps money. Make sure employees understand the difference between revenues, profits, and cash flow.

In Robert Fleury’s book, The Small Business Survival Guide, he shares that sixty-five percent of businesses that fail are profitable. The problem isn’t profit, it’s cash flow. This disturbing statistic alone should push you to teach all of your employees what to pay attention to financially. Conversations around cash, cash flow, and cash flow cycles will help take the mystery out of how the company is performing. And will help your employees understand what it really takes for your company to succeed.

Once your employees understand the financial system of your company, they will be able to spot areas for improvement. They will also be better attuned to how their role is affecting each lever in that system. And they’ll naturally start finding ways to help decrease expenses and increase margins.

Great companies are made of great people.

The only difference between you and your competition is your people. They can be your competitive advantage or your competitor’s advantage. Only you have the power to create a company that effectively engages and excites your employees. Tapping into their genius and creativity. Ensuring that your company remains profitable despite any obstacles.

Take the time to create an organization that people want to work for. A place where every employee feels valued and challenged. Where everyone is connected to the bigger picture and can see how they provide value. Where each employee knows that their opinions matter and will serve to help the company improve. A company where there is no guesswork about how employees directly impact the financials. If you can do that, then you’ll have a business that no competitor can touch.