Posts Tagged ‘Lean cost structure’

How Knowledgeable are Your Employees?

Thursday, June 7th, 2012

Small and mid-size business leaders typically know how money is made. The business provides a product or service at a competitive price, and maintains a lean cost structure to deliver profits. With these profits come opportunities for expansion, hiring, and sharing profits.

Do you think your employees understand the basic model? My guess is that they do. However, do they realize and comprehend how dollars flow in your business? Where do you spend money? Where do you make money? Where do you need more investment?

Sure, some leaders don’t want to share too much information. They believe they will lose control or their competitive advantage. In my many years of leading a business or function, I can tell you those fears are unfounded.

Take the approach of sharing more information. This may sound like blasphemy, but I would encourage you to help them become financially savvy. They should be able to read an income statement, a cash flow, and a balance sheet. They don’t need to perform ratio analysis, but they do need to know financial conditions.

The understanding serves as a driver to develop ways to increase revenue, deliver new products, and identify cost reduction opportunities. Engaged employees always deliver better results.