Direction Magazine - Ask Dave July 2012

The following was published in Direction Magazine.

Ask Dave

 By Dave Duryee

“Like a lot of movers, I have been struggling the last few years. Because I have had to freeze wages a lot of my employees are grumbling and I feel like I have to explain every upgrade or equipment purchase to them and why that money can’t go to their wages. What’s up with this? They should be happy to have a job!”

The Assumption

Like it or not, everything you do (or don’t do) or say (or don’t say) is under a 24/7 microscope from the people who work for you. If you drive a luxury car to work and take a two week cruise to the Mediterranean, the employees are going to assume that you are fabulously wealthy. In fact, to your employees you are rich. In the absence of any evidence or facts to the contrary, they will imagine that you are considerably wealthier than you are. Their underlying assumption is that your actions are motivated by your desire to become even wealthier, and at their expense. I’m sure they would be shocked if they learned all of the facts, and that you are struggling just to keep your head above water.

Trust

The problem in the scenario you have described is a lack of trust. Employees usually fear what owners will do to them, not what they will do for them. They don’t believe that you are doing what is best for the company or them, but only for you. There is no silver bullet fix for this, but the more open you are and the more you bring people into the decision making process the better it will be. It is very hard to gain your employees full trust, and it is incredibly easy to lose it. Having frank discussions with them about why you have needed to freeze wages and when or if they can expect a raise would be good. Explain why they have not had a raise and how much you appreciate everyone tightening their belt and helping you through this rough time. The more you disclose and take them into your confidence the better they will be able to understand what is happening and the more trust they will have in your actions.

Operate with integrity at all times. Make sure that all of your dealings with the company are strictly arms-length in nature. Do not, as an example, sort of have your company’s landscaper stop by your house for an afternoon of work and charge the company for it. That is dishonest. You are basically stealing from the company. You cannot escape them knowing what you have done and you will have lost the trust that you need to make all of this work well.

Secrecy vs. Disclosure

There are few things that we have learned from our predecessors with more certainty than the fact that employees should never be told in any detail how the company is doing. If you are very successful and making a lot of money they will most assuredly want a raise, and if you are doing poorly they will dust off their resumes and get another job before you have a chance to lay them off. The prior generation knew this principle well, and made sure it was handed down to their successors. When I talk to business owners about the benefits of sharing information with their employees this is mainly what I hear. The less the employees know the better. Keep them in the dark. No good can come from disclosing financial information. The problem is that this was not true in years past and it is not true now.

The more you share with your employees the more successful you will be because people want to work for a winner. They want you to prosper so that they can proper too. But if they perceive or believe that you are prospering at their expense, this is a problem. It drives a wedge between you and them and destroys a team concept. The more you disclose and the more you explain to them about the condition of the company the more they will see what you are trying to do and the more they will help you. This is the key. Getting your employees to think like owners and how they can help you make more money. Secrecy is your enemy and disclosure is your friend in this effort.

The Vision

Your employees may be happy and grateful that they have a job but that does not mean that they are happy. It is your job as the leader of the company to get them to see and buy into the vision that you have and that there is light at the end of the tunnel. They need to see it and believe in it. If they realize that you have a substantial amount of your own net worth at risk and are willing to do what is necessary to save the company (and their jobs) they would be very impressed. You could have pitched the whole thing and walked away and you did not. It shows courage, determination and dedication on your part.

Open Book Management

In the thirty plus years that I have been involved in business consulting it is my experience that the companies that disclose the most are the most successful, without exception. Your employees are not stupid. They understand concepts like “return on investment” and “risk versus reward”. They see this every day with their own personal investments and their 401k plans. They are capable of understanding that you need to make a reasonable return on your investment or you will not stay in business, and they want to help you do that. They more they know about how the company is doing the more they will be able to determine how best to help you. Tell them what is happening. Share the basics of your financial plan with them, and how you are doing with regard to the plan. Their eyes will be opened. They will get excited. Ask them specifically for their ideas about how to operate more efficiently and profitably. Show them how they will benefit. Create a team atmosphere where everyone is striving toward the same goals.

Conclusion

The last thing you want is a group of employees that think that you are making a huge amount of money at their expense. You want them to feel that they are fairly compensated and that if the company does really well so will they. Have the courage to trust them. Take the time to educate them about how you are doing. Ask for their ideas to do even better. Make it worth their while in year-end bonuses. Talk to them all the time. Never miss an opportunity to tell them how much you appreciate them. Remember the 24/7 rule. Successful, well run companies have great leaders, and great leaders have impeccable integrity and an open and trusting relationship with their employees. It’s as simple as that.