So, where does the dollar go
I have this massive archive of business articles that I've collected
through the years because I think the material they cover is
instructive and correct. I think I'll get rid of my archive and
instead post my comments on each topic.
The first one I came accross was about conducting an exercise to show employees where does a dollar go in a company (or any organization for that matter). The idea falls under my overall belief that too many organizations keep their employees in the dark about how the place works from a financial perspective. Some do it because they are afraid (control issues), some becuase they don't think their employees can understand the finances (so hire smarter employees if that's the case), or they just don't think about it. However, humans have the need to feel they are an important part of the places and activities they participate in.
The basic idea is to take a $1 of income and subtract from it all of
the expenses of the organization. Frequently employees will not
understand the concept of "profit" and may believe that revenue
equals profit (I've seen it first hand). So, understading Gross
and Net profit can be very helpful for people. Showing
people the true costs of salaries, benefits, raw materials, taxes,
utilities, etc. can be a real eye opener. The idea of collecting
all those dollars usually for a few pennies in the end really shocks a
lot of people.
The biggest mistake I've seen is companies will embrace this idea,
partially. They'll hold one meeeting and run people through this
(usually in some boring "I tell you" format) and then they're surprised
when the world doesn't change. The way to get this idea to really
take hold in your organization requires that you really embrace
it. It must become part of your organizational culture.
People need to be taught how the financial structure works and then
they need to review that, with real results, on a regular basis.
Publish financial statements for everyone...get them involved.
It's the first step in getting people to care about some of those
things like "Cost Savings". The 2nd step is to make sure that
they have a reason to care...do they have a "Stake in the
outcome". We'll talk about that latter.
One of the leading proponents of these ideas is Jack Stack. His ideas have been published as The Great Game of Business