By Dan Kurth / June 13, 2016 / Uncategorized / 0 Comments
As I tell my small business clients, thankfully most of their employees do not want to be small business owners. Repeatedly training your future competitors can become very costly and ultimately prove to be fatal for a business. However, leveraging the entrepreneurial spirit that lies, at least in part, in each of us is a key component to everlasting business performance. The “Occupy Wall Street” movement, as misguided and failed as it was, had an underlying point that has largely been missed. Nobody wants to feel like they are working hard every day in order to make the life of someone else exponentially better than their own. Fair point, but the proposed solution of arbitrarily raising wages can result in disastrous consequences for businesses, their owners and their employees.
The point I want to make in this blog is not political. It goes to the very heart of individual human nature. The best way for any organization to succeed is to have each and every member of that organization fully in tune with the goals and direction of the organization, and a reason to pitch in and keep it heading that way. Small business in particular goes through a start-up phase where everyone seems to be working together for the common good. Typically during this period, the owner is taking an inordinate level of risk, and limited if any pay to keep the doors open and keep the business moving toward self sufficiency. Once a level of success is reached in terms of the business becoming profitable, the psychology of the employees and that of ownership transitions, creating a gap that is the beginning of a dangerous process for the business. As the employees see their wages go from $10/hour to $18/hour over time, their lifestyle gets more comfortable and they are in a generally better place than they were when the business started. But, when they see the owner transitioning from driving a car similar to their own in the beginning to pulling up in a Cadillac Escalade, the imbalance starts to register.
A business with a stark imbalance between the employees and the owners will not experience everlasting business performance. This is not to say that the owner needs to work for minimum wage, or that the employees need to get all of the perks of ownership without the risk and investment. In an ideal situation, if the business has hired the right people, placed them in the right positions and is rewarding them in a meaningful way, the business will unleash the entrepreneurial spirit within each and every employee. There are three things that create bad employees. 1.) They were hired or trained wrong. 2.) They are being managed and incented the wrong way. 3.) They are just bad employees. The first two fall on the shoulders of management/ownership and are almost always the reason for the bad employee.
A properly structured business financial plan identifies the goals and direction of the business, as well as the role and function of each person within the business. In that scenario, there are clear expectations set forth for everyone and a pay structure to reward employees for that level of performance. When those expectations are exceeded, then the business can afford to further enrich the lives of its employees. Bonus programs almost always fail for the same reason, they were improperly structured. When a business identifies its revenue and expense goals, there are financial certainties within those goals in terms of employee pay structures and employee expectations relative to their paycheck. That establishes the foundation or the benchmark signifying the point at which those expectations have been exceeded. Sharing dollars with employees beyond that point not only doesn’t damage the financial integrity of the organization, it strengthens it and makes it more likely that employees will be on board for bigger and better things going forward.
Properly hired, managed, informed and incented employees will provide better ideas and actions within a business than the best outside consultants ever could. The key to unlocking that entrepreneurial spirit within each of them is as simple as answering the question “what’s in it for them”?