The Cost of Confusion
Make no mistake; confusion contributes to several of the profitability killers we've looked at already, so much so that I believe it's critical we take a focused look at it individually as well! Whether it's through the lack of clear expectations that we touched on when we worked through the High-Risk Areas early on, the importance of maintaining high expectations that I covered when addressing how It All Starts at the Top, or how misunderstandings eat away at our bottom line as we looked at The Cost of Poor Communication, a lack of clarity in any aspect of our business is sure to impact our margins! Quite frankly, I'm convinced that confusion contributes to each of the other profitability killers we've worked through as well.
Think of the performance reviews you've received (or delivered). Have you ever been told you were doing great without getting specific feedback on what that meant? I sure have! Have you ever gotten one of those dreaded "needs improvement" marks on a review but no details about what you could or should be doing to produce different results? Ugh! That's even worse than the random "great job!" pat on the back...
Now, put yourself in a scenario where you've been tasked with the painfully vague goal of "improving performance" over a previous period. I may be going out on a limb here, but I'm assuming you're like me and strive to do your best every day. If that's not the case, I can't imagine you'd be investing your time with me here. The only thing I can picture making such a broad request any worse would be working with team members who weren't interested in that same level of achievement and were allowed to drift through each day with no ramifications.
And just for good measure, think about that boss who barks a few quick commands and expects everyone around to know exactly what should be done-and how soon. How much time, effort, and profitability are wasted trying to figure out what's expected of us in a situation like that?
In hopes of keeping you from slipping into complete depression, I won't ask you to consider how each of those things impacts our desire to stick with an organization, how hard they make it to attract great talent, or what happens to our willingness to give it all we have when we deal with any of those things on a routine basis. What I would like to work through with you now, though, is how much it costs us and our entire team when we're not diligent about removing every bit of unnecessary confusion. We can do that IF we're intentional about setting (and maintaining) extremely clear expectations-and we'll look at exactly how we can do it.
What We're Leaving on the Table...
Missing expectations can be a significant profitability killer! Don't take my word for it; ask anyone who's ever worked for a publicly traded organization. On May 25, 2023, an interview on Yahoo Finance detailed a 14 percent drop in the value of Dollar Tree stock after the company missed its profit expectation in the previous quarter. When The Home Depot reported earnings of only two cents less per share than expected for Q4 of 2022, the first time the company missed Wall Street's expectations since November '19, its stock closed down 7 percent according to a CNBC article at that time.
I have very clear memories (or nightmares) from working in that world for nearly two decades. Being in an aftermarket production facility that was far less restricted than our sister facilities, which produced solely original equipment parts that went straight to the Fords, GMs, and Toyotas, our spending (on ANYTHING) was scrutinized heavily all the time since local margins would often be the difference maker in where we stacked up against those Wall Street expectations. All too frequently, we saw capital spending budgets capped just a few weeks into a new quarter-and we nearly always brushed it off as being the most important quarter in the history of the world... If you missed my sarcasm with that, read it once more! That same message every quarter, year after year, fell in line with Dash Parr (from The Incredibles movie) saying that "when everyone's special, no one is..."
Don't get me wrong; I understand how critical an organization's quarterly performance is to overall profitability, especially regarding whether investors are willing to back those organizations. That said, I've seen playing these quarterly games have a penny-wise/pound-foolish effect more than a few times! As leaders, though, I'm convinced that this is where we can play a crucial role in capturing profitability that's often missed altogether.
As we looked at the cost of poor communication previously, I shared a stat from an SIS International Research study showing "that a business with 100 employees spends an average downtime of 17 hours a week clarifying communications." Let's be honest: this is far from the total amount of time used for communicating what needs to be done; this is just the time wasted circling back to share the message again (and again) when it wasn't received the first time! If we're going to have any hope of addressing the confusion that kills so much profitability, we must become experts at being abundantly clear in sharing expectations with our teams.
Regardless of whether we're leading one of those publicly traded companies with such close ties to Wall Street, we're part of a small, closely held business that's been run by one family for generations, or anywhere in between, what we do daily to ensure our team members have complete clarity around not just WHAT is expected of them but also WHY every detail matters can have much more immediate impact on the bottom line than keeping a tight hold on the purse strings at the moment only to push a necessary expense into a different budget cycle. This eliminates many of the corporate games that make for alarming headlines. Still, it also eliminates something else that directly impacts the profitability we leave on the table!
Clear Expectations Remove Excuses & Increase Profit
If we want to stop leaving all that profit on the table, we've got to take action. The hard part, though, as I just shared, often boils down to what we can or cannot dedicate our resources to-or at least that's what I hear from folks in leadership roles quite frequently. If we only had money in our budget for XYZ, then our people and processes would be more productive...
When we get right down to it, all that additional downtime we looked at before that stems from confusion has very little to do with having better equipment or more pay and a lot to do with a clear understanding of what's expected. One of the first rules I learned as a carpenter that helped improve profitability for countless construction companies over the years was "measure twice, cut once." Think of the simplicity tied to that statement. It's all about behavior and requires no additional expensive equipment! And it's a way to remove confusion from the building process.
As leaders, "measuring twice and cutting once" ensures we've set clear expectations for our team and delivered the message so that they understand precisely what needs to be accomplished. Removing confusion helps eliminate additional downtime. Still, it also helps minimize the profitability killed when errors are made!
In an article on LinkedIn called "The 10 Best Ways Managers Can Impact Profitability Through People," Nicki Rankin opened by detailing the pressures often felt by those of us in leadership roles by saying:
Managers are tasked with productivity and numbers for their department or division. This requires figuring out how to get maximum performance from your employees to impact company bottom line results. On the other hand, we want people to be happy. Can you have both? The answer is a resounding "Yes!"
Rankin went on to share this, describing how much having clear expectations matters in achieving profitability through the teams we lead:
Employees need to know what's expected of them, both what they need to accomplish and how to behave. Meeting with new employees to go over expectations and having regular staff meetings can help you accomplish this and will allow you and the team to hold everyone accountable. Tie them into company strategy and core values. Don't forget to tell them you expect honest feedback and for them to constructively disagree with you when necessary.
As we looked at employee engagement, I shared how I've always been far less interested in making people happy than I've been in giving them a reason to buy into a purpose. Since I've seen so many people use those ideas synonymously, I have to fight the urge to go down that rabbit hole here and ask you to consider whether you've ever been actively engaged (or even happy, for that matter) when you were given a vague task with almost no understanding of what you would need to do to accomplish it.
If you're anything like me, you not only weren't engaged or happy, but you were probably pretty frustrated! I'd also guess your performance was far less productive (or profitable) than it would have been had you been provided with all the information necessary to successfully complete the task. When we put our team members in a situation like that, the results we get are likely packed full of excuses for subpar performance. In reality, clear expectations for what we need them to achieve and how they should do it nearly always remove those excuses and increase our profitability chances! With that in mind, we must consider the difference between meeting and exceeding expectations. Then we can nail down a few simple steps for making this part of everything we do as we lead our teams.
