March 14, 2011 08:52 AM
Am I the only one who sits in meetings and calculates the cost of the meeting? Hmm, 12 people for two hours at $50 per hour. That sure was an expensive discussion. Did we get $1,200 of value from that time together?
I think, more often than not, that employees don't have a good understanding of how the company makes money. And I believe they also don't see how they fit into the company's financial equation. Are they contributing to revenue? Adding expense? Doing some of both?
As a leader, department head, training and performance professional, or all-star individual contributor, you'll want to make sure you and your colleagues have a good sense of how the numbers work. This understanding will enable people to:
- Make better decisions
- Spend their time more wisely
- Prioritize their tasks more optimally
- Ask the right questions
Here are a few questions to start with:
- What do we sell that generates revenue?
- What do we sell the most of? What do we sell very little of?
- What are our biggest expenses?
- Who touches our product or service before it goes out the door and what does this cost?
- What other people are essential to keeping the organization running and what do they cost?
You'll also want people to be able to answer simple questions related to scenarios typical to your business. Below are a few examples:
- If staff gets a project done faster than expected but have no other paying work, what happens to profit?
- If freelancers complete a client project while the internal staff works on an internal special project, what happens to profit?
- If staff works 12 hours per day going over budget, what happens to profit?
You don't need everyone to get an MBA or attend a four-week business acumen course, but you'll want to have some targeted discussions with your staff to make sure you can say "yes" when asked, "Do your employees know how you make money?"
How do you make sure those around you know how the organization makes money?