Profitability Killers: High Risk Areas

An article I found from Management-Issues.com opened with this, “Listen up, I will say this only once. Misunderstandings between workers and managers cost firms $37bn a year, yet few firms trouble to do anything about it.” Another article from the Society for Human Resource Management cited Debra Hamilton as estimating the costs to “companies of 100 employees an average of $420,000 per year.” While the idea of “misunderstandings” lends itself to poor communication (and we’ll certainly be addressing that specifically soon), that’s definitely not the only way it’s killing our profitability!

While I had significant hiring responsibility in my full time roles, and even in the work we do today, it has been rare to see organizations have so many highly skilled individuals on staff that they aren’t at least passively looking for great talent. In the toughest scenarios, I’ve seen the high demand for talent push managers and business owners to do what resembled beginning to perform CPR (check to see if the candidate was breathing and look for just the faintest pulse even if they weren’t breathing) before extending a job offer. In fact, I remember a time where I was hiring for one particular skilled trade and the manager I was supporting said he needed no less than seven new employees for those positions in the next five days. I just happened to be holding all five applications we had gotten to that point. I explained that we may be better off serving a restraining order on two but he was welcome to pick any seven he wanted from those five. After glancing at what we had to work with right then, he decided his needs weren’t quite as urgent as he had let on!

While he and I didn’t see eye to eye on everything, that was one case where he chose not to sacrifice at least some level of quality for the need to fill his open spots. Unfortunately, a number of decisions the management team (that he was a part of) had made in the twelve months or so leading up to that conversation had drastically changed the approach we had to take to find candidates and to even maintain a decent culture with the folks who were already there. And that opens the door to one of the biggest misunderstandings I’ve seen organizations make: prioritizing an immediate need for a certain skill set over the importance of ensuring the person with those skills has similar values!

We can certainly plug a hole in the short term with someone who has a relevant set of skills but a mismatch on values, or even not making sure the company values are clearly understood from day one, can kill profitability for the duration of the working relationship! Having even the slightest focus on values from the start though can provide a foundation for everything else we do moving forward and can help us capture profit that can otherwise be lost completely. Once we’ve nailed that down, we can call attention to what’s likely hanging on the wall in our lobby (or somewhere prominent) but no one really considers on a routine basis - which makes it our next high risk area that’s actually pretty simple to address…

Can You See the Big Picture?

Even when we begin to recognize what’s killing our profitability, start to dial in on the right prescription for addressing it, and come up with some simple solutions that can have a strong impact, we’ll miss capturing a significant amount of our best potential results if we allow our team to remain confused around one thing that poses such a high risk! We have to make sure every single individual in our organization understands exactly how they contribute to the company’s mission and vision. Make no mistake though, this isn’t as simple as them knowing where it’s printed (or hanging in a frame), it’s critical that they connect the specific tasks they’re responsible for on a daily basis to achieving the mission and vision!

Before we dig into any statistics proving how important this really is, I’ll challenge you to consider how having that kind of clarity in the work you’re doing impacts your own performance… When it comes down to how even the most mundane tasks tie back to the perfectly crafted missions statement hanging in a fancy frame for all the visitors and clients to marvel at, the tagline vision statement printed on shirts and business cards, or the values we expect our team members to live up to, aren’t you more willing to go the extra mile when you have a clear understanding of why it matters? As Cindy and I discussed this recently, neither of us could point to a single company we had worked for that had ever provided us with anything resembling that kind of clarity! While I’d like to think we still performed well beyond what was expected of us in our respective roles, I can’t help but believe that having this kind of crystal clear understanding of how even the crappiest work we did made an impact on anyone else would have inspired even better performance.

Assuming you can relate to that (at least a little bit if you’re being completely honest) in a role where you have leadership responsibility, how much more important is it that we provide that clarity for the individuals who are counting on us to lead them? When we invest the time and energy into being intentional about connecting those dots for our team members, I guarantee you that we’ll soon see the results. This one simple, but not necessarily easy, step can have a direct impact on several of the things that are killing our profitability. We’ll work through engagement more specifically soon but just consider this statement I found in a Harvard Business Review article not so long ago, “organizations with a high level of engagement report 22% higher productivity.”

When we know why the work we’re doing matters, to the company as a whole as well as the people we serve, isn’t it easier to engage? If that’s true for us, it’s just as important to provide that kind of understanding for our teams to earn their engagement - and thereby drive productivity! And that’s exponentially easier when we’re speaking the right language so let’s address that before moving on to a change that we’ll likely need to make in our approach…

Speaking the Wrong Language

Once we’ve been intentional about providing each individual team member with that crystal clear understanding of how each specific task they’re responsible for ties back to our mission, vision, and even values, we should certainly be seeing them buy in at a higher level. But that’s not always as simple as reading from a script; the message we send will be received so much better when we’re able to make it personal…

Earlier I referenced an article from SHRM that shared a study showing poor communication costing a 100 person company over $400k per year. In lesson two of our Emerging Leader Development course, I share details from an SIS International Research study that said “the cumulative cost per year due to productivity losses resulting from communication barriers is more than $26,000 per employee. Not only that, the study found that a business with 100 employees spends an average downtime of 17 hours a week clarifying communications. Translated into dollars, that’s more than $530,000 a year.” Regardless of which one you look at, miscommunication is clearly a profitability killer that needs our attention!

But just like talking louder or repeating the same words again and again isn’t all that helpful when someone doesn’t have any frame of reference for what we’re saying - or when they speak a completely different language - making sure they are tracking with us is critical! And in case that’s not enough of a challenge to deal with, consider these stats that John Maxwell shared on the first page of his 2010 book, Everyone Communicates, Few Connect: “We’re bombarded with thirty-five thousand messages a day.” (which I can only imagine has increased substantially as technology continues to permeate every aspect of our lives) and “Most people speak about sixteen thousand words each day.” With all those factors in mind, It’s clear that repeating ourselves with more volume won’t be enough to overcome all the issues leading to miscommunication…

If we’re serious about helping the folks on our teams know how and why their jobs matter, I’m convinced our best shot lies in tailoring our communication so they can receive it; so our message really stands out from all the other noise around them. Nearly everyone I meet knows some version of The Golden Rule, “Do unto others as you would have them do unto you.” I don’t care what religion you subscribe to, that’s some solid advice - except when it comes to eliminating misunderstandings.

I tend to focus on the big picture and work through the details (as needed) along the way. When I take that approach in running ideas by Cindy though, I can overwhelm her in a hurry! She works to deliver precision in everything she does, thinking through all the possible scenarios upfront then plotting a very strategic path to follow. Assuring her that I’ll circle back to explain all the details once a task is complete does not give her what she needs to understand where I think we should be headed… Rather than communicating with her as I’d want her to communicate with me, I’ve learned that we can work together so much more effectively when I follow what I’ve come to know as The Platinum Rule and communicate with her as she’d want me to!

To make sure each member of our teams have a reasonable chance of seeing the big picture, there are some simple steps we can apply (which will work through in detail soon) to keep misunderstandings from killing our profitability. But we won’t achieve it by taking the wrong approach so we’ll address that next…