How Transparent is Your Company?
Wouldn't it be great if everyone in your company knew what they were trying to achieve and how they intended to achieve it? Get to that point and you've got real transparency, meaning that it's easy for people to see how all the pieces of the business fit together. Get to that point and you've also got the capacity to handle breakthrough growth.
So how transparent is your company? Read the five statements below, and then score yourself according to the following scale:
- 5 - Definitely; I'd bet $50 on it.
- 4 - I think so (hope so, anyway!)
- 3 - Hmmm-not sure
- 2 - Probably not; maybe a few
- 1 - Ouch! No way
- 0 - Um, we don't really have anything along those lines
1) Most managers and employees understand our long-term objectives.
You might call this a measure of strategic literacy. Every company has basic long-term goals, whether or not they are explicit. Survival. Growth. Maybe an eventual sale or IPO. The best companies also have positioning goals, along with strategies to implement them. They want to be #1 in their marketplace, for example, or to be the quality leader, or to stay on the leading edge of technology. These goals locate the company in the marketplace and distinguish it from its competitors. Understanding the goals helps people understand the all-important why of key business decisions, such as the decision to invest in new equipment.
2) Most managers and employees could tell you our goals for this year.
Are the dollar figures for sales and revenue known by most employees? Are there other key goals that you've set but failed to communicate adequately? If it's in your plan to open up a new branch or add 20 new people, get the goal out on the table so that everybody can see it. It not only adds to people's understanding of the big picture, it generates a little excitement. Most of us like to be part of an organization that's doing something new and different.
3) We track financial and operational numbers. Most employees understand the relationship between them.
The numbers that reflect most employees' day-to-day performance aren't financial. People help keep a project on time and on budget. They make so many sales calls or help process so many square feet of material. Salespeople, retail clerks, and billable professionals can usually translate their time into revenue dollars without much difficulty. Others must depend on good information systems to show the link between job performance and financial results. The link might show up in variances in cost of goods sold or cost of sales, in SG&A expenses compared to budget, or in some other ratio entirely. But is it clear? To find out, ask employees where their own (or their department's) output is reflected on the financials. If they don't know, it's probably time for more training.
4) Everybody understands how they intend to improve operating results.
Goals-even operational goals-don't mean much unless people understand what they have to do to reach them. Sometimes a little brainstorming is all you need: a group puts its collective head together and comes up with process improvements or money-saving suggestions that make the numbers move in the right direction. Sometimes you need to spend money on new equipment or new hires. And sometimes you need a formal process-improvement program, along the lines of reengineering or TQM.
5) Everyone thinks they get fast-enough feedback.
"Fast" is a relative term. McMurry Publishing produces custom magazines for clients, mostly on a quarterly schedule. It generally gets paid in advance, and its production teams rarely have much trouble staying on budget. In this context, says CEO Chris McMurry, reviewing the financials with employees once every quarter is sufficient. Other companies track their data monthly, weekly, daily, even hourly.
You don't need to give people all the data all the time, but you do need quick information that lets you know if you're essentially on track. "We put up a chart by 8:30 a.m. every morning," says Mimi Taylor of Vectra. "It shows us what happened the day before in terms of whether we're making money or not." Vectra's chart is simplicity itself: it compares month-to-date gross margin with a month-to-date estimate for operating expenses. "People rally to make sure we get the volume we need to cover expenses for that month."
OK: how did you do? If you scored between 20 and 25, congratulate yourself: yours is a see-through company, capable of handling breakthrough growth. A score of 15 to 20 isn't bad, though maybe you picked up an item or two to work on. Below 15? Don't despair-but don't stop working on transparency improvements, either.
Copyright 1999 Open-Book Management Inc.