Every employee impacts profit margin

 

Recently I was teaching a class on business financial intelligence to a group of mid-level leaders within a global company that is publicly traded on the stock market. I was teaching the concept of profit margin and we were working through the different calculations behind gross, operational and net profit margin. During the break one of the leaders asked me privately why an understanding of profit margin was useful in the work this person did everyday….

I asked this leader if they directly or indirectly impacted sales (“Yes”) and whether they directly or impacted costs (“Yes”). The light bulb seemed to go on and they then spurted out at least ten things they could do to impact profit margin. I explained there are three ways to impact profit margin – it’s either sales price or sales volume UP or costs DOWN – preferably both.

I believe this is the concern for most employees – they get so entrenched in the work they do everyday that they lose sight of the proverbial big picture. Their entity (public or private, corporate or not) exists to serve its customers profitably. Every employee impacts profit margin. Can you imagine an organization where everyone looked at the entity’s income and expenses as if it were their own business? Imagine what that would do to the health of the business. Imagine what that would do to employee engagement.

I have found that great organizations invest in their people and specifically they try to create an environment and mindset where they tap into the “intreprenurial” spirit of employees meaning they encourage them to think like business owners and partners. I have witnessed this first-hand within excellent publicly traded corporations through to educational organizations (private as well as public) and even within some outstanding city municipalities.

Every entity is a business. Every entity needs its income to be bigger than its expenses and every employee should clearly understand how their work on a daily basis impacts the money-making model of their business as if it were their own.

Newleaf Training and Development specialize in teaching Business Financial Intelligence to management within a variety of organizations.

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