Financial indicators like turnover and profit can feel like abstract ideas to employees, particularly if they work in roles which aren’t non-revenue generating. Yet every staff member has an impact on company performance.
Galvanising employee enthusiasm around company performance can be game-changing. Helping staff understand how their actions impact performance, being open about financial reporting and using incentives will help build staff interest in business turnover and profit.
Be the Business interviewed three very different business leaders about how they use these tactics to help drive company performance.
Creating a culture of transparency
Creating a culture of transparency is the first step in getting staff interested in turnover and profit. Turnover and profit, and the key metrics that drive them, need to be shared openly.
The founding directors of the Inn Cornwall met while working for a restaurant chain that went into administration. “We saw really good operators go to the wall. We knew we had to be on the ball as much as possible,” said director Mark Holden.
The Inn Cornwall team has grown from 12 to 60 staff since it launched eight years ago. Their background, and the tight margins offered by tenancy arrangements, led to a strong focus on profitability. It shares a profit and loss statement with staff every week, including year-on-year and week-on-week comparisons for spending, labour and gross profit.
Additional reporting is developed for key staff members. For example, purchasing is key to the profitability of Inn Cornwall’s food business and the company publishes twice-weekly reports for kitchen staff.
“This helps them understand the level of purchasing to sales and predicted gross profit levels,” explained Holden. “They can look at the stock levels on a regular basis. If they see the purchases are quite high they can respond.”
It’s useful to ask staff what metrics would help them understand the business better and regularly review what’s included in the reporting to increase engagement.
Including turnover or profitability in your company’s mission statement provides an opportunity to talk about it regularly and ensures that each subsequent goal has an impact on business performance.
Paul Bulpitt, co-founder of accountancy firm The Wow Company, said taking this approach helped create a common purpose staff could rally around. The business was launched in 2004 and has 40 employees.
“We try to equate revenue with happy clients on the basis that the happier the clients the longer they will stay with us and the more people they will recommend to us. So we talk about revenue, especially at team meetings, as a marker of success on our mission to help people build beautiful businesses,” he said.
Linking turnover and profit to staff actions
Transparency around company performance needs to be backed up with an understanding of how individual staff can have an impact. Failing to do this will impact motivation as staff look at the turnover numbers and think: “What does that have to do with me?”
Wastage can have a big impact on profitability in the pub business. Holden estimates a staff member miss-pouring pints regularly could cost £16,000 a year.
“For us, it’s about trying to get everybody to understand monetary value no matter what it is that they’re doing,” he said. “It’s easy to miss-pour a pint, so it’s about training our staff, giving them a visual and having that monetary value of everything they’re in control of.”
Developing strategies to meet turnover targets with staff helps increase buy-in. Not only will they understand how they have an impact, but the self-determination is empowering and motivating. Retail services provider Suresite takes this approach.
“Turnover targets are presented to our staff are and we talk about our strengths, opportunities, aspirations and external factors,” explained sales and marketing director Keith Bevan. “We then ask them to think about what they can contribute. It could be updating a computer system or automating administration tasks.”
These strategies are implemented in 90-day sprints. Individual employees’ plans and how they connect to Suresite’s overall goals are available to everyone, helping foster a spirit of camaraderie and improve staff knowledge.
The new system was implemented with support from Growth Accelerator, which has since ceased to exist. It helped the team grow from 13 to 48 staff in the last five years and the business is aiming for £16.5m turnover this year.
Incentivising staff based on turnover and profitability
Financial incentives are the most common way to get staff interested in company performance. Staff can be paid bonuses based on turnover or profit, particularly for revenue-generating roles.
Timely reporting helps improve this process. Inn Cornwall takes the time to run payroll weekly and bonuses are paid on the previous week’s performance. This helps connect employees’ day-to-day actions with their impact on the business and personal reward.
As discussed above, it’s crucial staff understand how they impact targets. The same goes for providing financial incentives.
“There’s a risk that you incentivise the wrong behaviour or disincentive people altogether,” said Wow Company’s Bulpitt. “For example, it can be demoralising to have a bonus tied to profit if you feel that there’s nothing in your role to impact this. An alternative would be to incentivise actions that drive profit, that people feel they can action.”
These could include customer service rankings, the growth of social marketing channels or training, which are metrics Inn Cornwall uses. Make sure the individual target’s contribution towards the company’s turnover and profit targets is communicated alongside these incentives.
The process of getting staff interest in turnover and profit starts by ensuring there’s a culture of transparency, providing staff with easy access to financial reporting. Explaining how they impact these metrics naturally follows and allowing them to develop the strategy for implementing their goal is really helpful too.
Goal setting plays a crucial role in company performance. Encouraging every member of staff to understand how they impact turnover and profitability will have a big impact on your company’s goals.
“At £1.2m gross profit to we thought that was it because we were flat out. But the team has constantly pushed it,” said Inn Cornwall director Holden, describing how small initiatives like aiming to sell an extra half pint of beer per table had culminated into big wins. When the team took over the business eight years ago it was turning over £8,000 to £10,000 a week. Last year turnover reached £1.7m.