Economic engagement gives your company what Training magazine once called “lightning in a bottle.” Once the system is up and running, employees throughout the organization see the connection between what they do every day and the company’s business results. And they begin figuring out how to improve those results.
Economic Engagement Implementation
We have found that both the destination and the steps you take to get there make a difference. So we recommend a time-tested implementation process that involves both your employees and your customers. It consists of five simple steps:
Step 1: We help you diagnose your company’s needs
It always amazes us when consulting or coaching firms want you to plunge into their program without first diagnosing what your company needs. We don’t make that mistake. Our first step is always to gather information about your business from six different sources:
- An online confidential employee survey
- An online confidential questionnaire for your management team
- Financial statements for the past five years, plus budget vs. actual for current year-to-date
- Existing management reports
- An analysis of the market, and your competitive position in it
- Input from your customers, as captured by our customer outreach script, which is also a great way of boosting your repeat and referral business. Learn More
Result: Issues surface rapidly
The problem areas show up pretty quickly once you have all this data in hand. Sometimes the internal surveys reveal difficulties you didn’t know you had. Sometimes the financials are screaming about a particular problem—a consistent decline in gross-profit margin, say, or an increase in SG&A not matched by revenue growth. Wherever the trouble lies, we’ll report it to you.
This part of the process usually takes no more than two or three weeks. If you already have this information collected and available, we will use that and move on to define your team’s key performance measure.
Step 2: Determine your team’s key performance measure
Data in hand, we’ll meet with your team to review the information and develop a group consensus on the critical issues your company faces in the next three-to-six months. Most teams quickly agree on a single measure where improvement would make a big difference. One of our clients, an engineering firm, hit on revenue per paid hour. Another—a car dealer—focused on return on assets.
Everyone on your team needs to be involved in developing this measure, and everyone needs to understand it. If the number makes sense from a business point of view, it’s usually not too hard to explain what it is and how it’s calculated.
Result: Understanding leads to engagement
The key measure always links directly to the financials. That’s no accident. Everyone knows that a business has to make money to survive. The more money it makes, the more opportunities everyone has—job security, bonuses, and chances for advancement. If it’s obvious how improving the key performance measure will boost financial results, you won’t have to convince anybody on the team why it is important. They’ll engage on their own, voluntarily. That’s the power of the open-book approach.
Of course, you don’t focus on the same number forever. Businesses change. The world changes. Maybe this year you need to get inventory under control, so you focus on that. Next year your problem might be boosting profitable sales, and you’ll concentrate on that.
This step in the process doesn’t take long, either—maybe another two weeks.
Step 3: Create a scoreboard
What good does it do to establish a key performance measure if people can’t tell whether they’re winning or losing? It’s as if you covered up the scoreboard at a basketball game. Most fans would lose interest pretty quickly.
So as soon as we have the results from the previous step, we’ll help you design a business scoreboard—something that will create hard-to-miss visibility for everyone on the team. Some companies put a big whiteboard showing the key numbers up on the wall. Others use dashboard software for employees’ computers. The format doesn’t matter, so long as the numbers are right there where people can’t help noticing them.
Result: Real visibility with scoreboards
The best scoreboards don’t just report a single number. They also report budget vs. actual, and they report the numbers that affect your key performance measure. Very quickly, we’ll help your team members begin to forecast numbers on the scoreboard. That helps them think proactively about how to improve results.
Setting up a scoreboard is typically an iterative process lasting between one and three weeks. We’ll review ideas, exchange examples, and build on your existing management reports.
Step 4: Create a team-based incentive program
Most companies find that a great way to bring the economics of the business alive is to create a team-based incentive program, usually at the same time the scoreboard is developed. We’ll gather information on existing incentive plans, if you have any, and on your overall compensation plan. Then we’ll help you design a custom open-book incentive plan that is self-funded, meaning that it is paid for entirely out of your improved performance.
Result: The economics of your business come alive
We’ll also integrate the incentive plan with the scoreboard, so that every forecast of results is also a forecast of how much additional money people can expect to make in bonus. That’s when the economics of the business really come alive: people can see how better performance translates into more money in their own pockets. Suddenly nobody is asking, “What’s in this for me?”—because they can tell exactly what’s in it for them.
Step 5: Tracking and forecasting
Now comes the fun part, when people start watching the numbers and learn how to move the needle. Your key performance measure is up on the scoreboard. People begin to ask how they can affect it. They start tracking what happens from week to week, because they know it affects their pocketbook. They learn to forecast next week’s or next month’s results. We’ve even seen a company where employees began a small office pool on whether they would hit a given target by the end of the following month.
Result: Smart company, better results
This may be when you want to use other management tools, such as lean or continuous improvement. Economic engagement shows employees the why. Other tools can often aid them in seeing the how. We’ll help you monitor your results and adapt your system for as long as you would like us to.
A unique compensation structure
If you engage us, we will tie half of our compensation directly to the same self-funded incentive plan that we have helped you install. For example, imagine that the level of the support you were looking for equates to $2,000 per month. We will ask for payments of only $1,000 per month, with the other $1,000 going into performance compensation. If results are right on plan, we get paid the cumulative $1,000 per month. If the incentive results are 10% above budget, we receive 10% more, or $1,100 per month. And so on. if no bonus is earned, we receive no performance compensation. We thus have “skin in the game,” as frankly we think should be the case for any coach or consultant. We will be part of your team, joined at the hip, or more precisely, the wallet.