I wanted to take a break from talking about finance and the collision industry and spend a bit of time discussing the importance of employee alignment and engagement.
Normally we talk about growth and how to finance and account for that growth. But what gets lost in that narrative is that growth is impossible without a group of people working towards a common goal.
In corporate management speak, that is called “employee alignment”.
What is employee alignment? In its shortest form, alignment is about getting employees to think like owners.
I often heard owners lament “if only my employees would think like me”.
Having a team of people who act and think just like you is called “groupthink”. It doesn’t work (Google the term if you disagree).
But it is essential that your employees are motivated to think like an owner. The best way to do that it to reward your employees like owners.
I’m a firm believer that what gets rewarded gets done. Another way of saying that is what gets measured gets managed.
Often in business (not just collision repair) we say one thing then reward another.
Take a painter for example.
There is a lot of talk about material profitability. I’ve seen owners jump up and down and scream and yell about how material profitability is so important. (I’m guilty too).
We then pay the painter a commission on how many hours/jobs said painter produces.
We tell him what paint to spray, when to paint, what materials to use, and how to apply those materials.
Production, time efficiency and following instructions are the behaviors rewarded. Managing materials in a cost effective way…not so much.
To align your painter to “think like an owner”, the painter must “benefit like an owner”. A painter once told me, “I don’t mind that you make a lot of money. I just don’t want you to make all the money.”
A painter (and any other employee) needs to experience the same type of upside that ownership experiences when things go well. And they also have to have some value at risk too, where if things don’t go well there is some downside.
But they don’t experience all of risk nor all of the upside. Just the same type of risk and reward.
For a painter, they must participate financially and proportionately, in the benefits of effective paint material usage.
If you complain that you can’t find qualified techs then reward your techs for building talent in house.
If you complain that there are too many comebacks, then reward your techs for quality work.
If you complain your estimators overlook too many operations, then reward your estimators for completeness.
These are examples pulled at random – there are many challenges in business that can be fixed by appropriate alignment.
But remember employees must be allowed to experience the same upside you would experience.
This isn’t foo foo feel good theory. The largest most successful players in the industry do this every day.
The people they put in key positions. They give them the authority to make decisions, to participate in the upside of good decisions and the downside of bad decisions.
In short, their employees have a vested interest to see their company succeed not because they work for XYZ company, but because XYZ pays them extra to do well.
How many key people do you have in your shop? I imagine more than you realize.What do you need them to do? What benefit do you derive when they do something correct?
Identify those benefits. Quantify the financial benefits. Make it measurable. Make it systemic.
And don’t make it trite. Remember, people don’t mind if you make money. They just don’t want you to make all the money.
What does this have to do with finance? An organization with aligned employees is worth more (has a higher enterprise value) than one without. It is more profitable. It grows faster. It is less risky. It is more valuable to existing ownership and more valuable to potential acquirers.
But more on that in future letters.
And, as always, if you need help with specifics, feel free to reach out to me directly on the About page. I would love to help.