Back in March we wrote about giving a cost breakdown to disgruntled customers. Many companies face a similar dilemma with their own employees. Keeping your employees in the dark about the numbers that drive your business can lead to a number of outcomes, most of them bad, for the company, the customer, and the employees.
Most companies hire their field personnel based on their technical skills. Their ability to get the job done quickly and effectively is the paramount consideration. Unfortunately, technical skills are only part of what it takes to be a star technician. Before any work can be done, the tech has to sell the job to the customer. This is where the numbers come into play.
In order for most technicians to effectively sell your business services to a potential customer, they have to believe that you’re offering good value for the price. If the company has not shared at least a broad outline of what goes into setting your prices in your flat rate books, the techs are left to judge for themselves.
This often involves subtracting their hourly pay from what the price book says the job costs. The tech knows that there are overhead items involved, but probably has no idea of how large overhead can be in a service business. They often assume that the company’s profit rate is two or three times higher than it actually is.
This misunderstanding can make the tech feel that the prices he quotes from your flat rate price book are unreasonably high. This leads to a lack of confidence in the value that he is offering. The result can be a lower close rate, and limited up-selling to higher quality offerings. This hurts the company’s bottom line. It can also reduce the employee’s value to the business, and can reduce the tech’s job satisfaction.
Failure to share your numbers with your top employees can also increase your employee turnover. Your high potential employees can believe that they are not sharing in the benefits of the “high profits” that the business appears to be making. They often choose quit to start their own business so the “big” profits will go directly to them.
The company loses sales dollars and valuable employees. The employee feels unappreciated in the job. The customer may not have the opportunity to get the right product. It’s a lose-lose-lose situation.
Our experience with NSPG clients has shown that there is a range of how much the successful companies reveal to their employees. Some businesses are completely transparent with their employees. Their business numbers are an open book so their employees know why they charge what they do, and what the costs and profits are. This openness is used to foster the strong team spirit needed for a top level successful businesses.
Some businesses give their employees an executive summary of the company’s finances. They are clear about the actual costs of running the business without breaking out too many details. Their employees know enough to understand the value that goes into every price listed in their flat rate books. This makes it easier to sell every job because they are confident that they are offering good value for every job.
The natural tendency when running a business is to keep every internal financial detail a secret. Some types of information must remain confidential, but offering your employees a peak behind the curtain can benefit everyone involved. Once you’ve crunched your numbers and are confident that they make sense, you can decide how much to share with your team. The right level of openness with your employee team can make everyone involved more confident, productive, satisfied, and profitable.
“People Aren’t Against You; They Are for Themselves”