Is your business flying blind?

by | Oct 27, 2013 | Business Help

Peter Schutz, the former CEO of Porsche, the German car manufacturer, told this story to me and a group of CEO’s a number of years ago.

The allies were flying supplies into war torn German airports immediately after the war. The weather was abysmal, near zero visibility. The ground crew was able to guide the pilots onto the runway through the crude radar equipment. It required constant communication from the tower to the pilots. Coincidentally they were part of a study and were being monitored for heart rates. As long as the ground crew kept constant and steady contact about the plane’s coordinates, every 10 seconds or so, the pilots remained calm.

However, if the radio went silent for even the smallest extra delay, the heart rates rose rapidly to extreme levels; a clear indication that when communication stops, or is ineffective and sporadic, trust plummets and stress increases.

How effective are you at communicating the company coordinates to your staff so they can safely land your plane, while remaining calm and under control?

For many CEO’s , the relentless challenge of communicating effectively with employees, business partners, and financial investors is high on their list of stress factors.

How can you improve the communication and trust in your company without spending unproductive time in meetings?

A good place to start is your business plan.

Your narrative business plan is the foundation for effective communication. It provides context and a reference point that allows you to be clear and consistent so others understand your business and how they can contribute to its success.

When your business plan is fully written down and shared, it touches all parts of the organization- marketing, sales, customer service, and finance and helps all employees understand where they fit in and how they can contribute

Revenue without profit is a dangerous thing

What about sharing financial information? Many business owners are concerned about sharing their financial goals with their employees. A common refrain we hear – “If my employees know how much money the company makes they will expect more. I’ll have a line up at my door of staff looking for a raise.”

Withholding relevant parts of a business plan from employees blocks the communication, and adds to the mistrust.

Lower trust affects the company culture in a negative way, which can be seen in employee behaviour such as absenteeism, higher turnover, dissatisfaction with compensation, and overall lower performance.

Employees want to work for a profitable company. Companies that consistently make money offer job security. Employees can plan their future, buy a house, a car, save for children’s education.

So employees like to know how the company is doing, and equally importantly, they want to know how they can contribute to that success, and therefore, their own future success.

Sharing financial information with employees brings with it a responsibility to educate employees about business fundamentals. For example, employees may not understand what happens to company profits – the need to pay down debt, for capital investment in growth, dividends for shareholder investors, and increased benefits for them. (If we do really well bonus money for the employees.)

This isn’t difficult to do.

Trust in a company can be a very powerful force. When I think of trust, I am reminded of a high school physics lesson. Newton’s — Law of Motion: “For every action there is an equal and opposite reaction” . This holds true for trust. In order to get trust we need to give trust, to be trusting.

If you find that sharing financial information with employees is well out of your comfort zone, and preventing you from openly sharing your business plans, you can present your company goals in other terms, such as, increasing our market share from x to y, or expanding our customer base, number of units sold, or any other metric that reflects financial success in your business

The challenge with this approach is that it can be more difficult to connect the relationship between the top line revenue goal and bottom line profit goals. Employees who are striving to reach the revenue goals without the counterbalance of profitability will not have as strong a commitment to cost control

If revenue and profits are clearly connected in their minds, their contribution to creative, cost effective, action plans and other day- to-day problem solving goes way up.

I encourage you to see your business plan as your most important and useful communication tool in engaging your employees and your business partners. Update it regularly and share it frequently and openly with anyone who has a stake in your company’s success.

You will sleep better.