rad Hams, Ownership Thinking llC
Do you remember how you felt when your company earned its first dollar? Amazing, right? Being actively involved in the success of your company is both motivating and satisfying. But business owners often take this feeling for granted when it comes to their employees, and don't know there is a problem until it's too late.
Brad Hams, founder of Lakewood, Colo.- based consultancy and training firm Ownership Thinking, has helped hundreds of companies battle a mindset that is crippling companies: employee entitlement. He contends that when workers believe they should be paid just for showing up, they will be unproductive and, ultimately, unhappy. Those two things are bad for business. And the attitude itself can drive an entrepreneur mad.
But Hams offered this good news to those assembled at the 2012 PROFIT 200 CEO Summit: you can make your employees think and act like owners, at little or no cost. In his opening keynote presentation, he prescribed a system that allows employees to participate in the financial side of the business and see how their involvement impacts the company— like when you earned your first dollar. It requires companies to set and rigorously apply targets, and for employees to take responsibility for reaching those goals. As soon as employees start hitting their targets (and receiving the attendant financial rewards), their attitude changes. Rather than griping about working harder, they want to work harder—and smarter. It boils down to achievement: by their nature, humans thrive on it. Entitlement has the opposite effect.
Business owners know this intuitively. But, Hams warns, most employers assume falsely that their employees already have the tools to take responsibility and adopt ownership thinking.
Hams, whose epiphany on the subject came during his tenure as an executive with Mrs. Field's Cookies in Mexico, recommends that entrepreneurs take these key steps to move employees from "me" thinking to "we" thinking.
- Teach employees about the business. Everyone should know how the company makes money. Most employees have no clue how thin your margins are; they assume the company is rolling in dough. "What your employees don't know can hurt you," says Hams.
- Create a method for keeping score. Traditionally, this is done with income statements, but Hams feels that isn't effective for a couple of reasons: financials are given to CEOs after the fact, so you are measuring the past, not gearing for the future; and most employees lack the financial acumen to understand the statements.Hams advises you look instead at key performance indicators, which are ways the employee can directly impact the financial direction of your company. This gives employees something to strive for. Then, says Hams, you need to create accountability. When your results come in for the month, compare those actuals against the targets to identify the gaps. Were the projections too ambitious, or did the employee's performance fall off the rails? Find ways to make corrections. This creates high visibility, which creates high accountability—which, in turn, creates an environment of learning and development. Business owners love this because it spreads accountability around the organization.
- Implement an incentive plan for all employees that's tied to company wide profits. The key, Hams notes, is that employees must meet their performance-based objectives to share in your company's profits. Otherwise, it's welfare—and welfare breeds entitlement. It's also important to make the plan easy to understand; the more complicated it is, the more employees will distrust it."As you transition from your old model to this new model of transparency and accountability, you must encourage people to come forward with their mistakes," Hams stresses. "Opting for finger-pointing and blame isn't going to create the results you want."
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