Transparency and Financial Literacy
Central values within these organizations are transparency and financial literacy. Being transparent means openly sharing information and embracing the feedback of others. With the right systems in place, companies can capture enough useful ideas to achieve a compound effect. Being transparent is one thing, but not providing the necessary skills to understand the open flow of data and communication is counterproductive. This would be akin to providing access to a swimming pool, but not providing swimming lessons. That’s why it’s critically important to train all levels of employees in financial literacy.
Before a company can embrace transparency, the shareholders must overcome their fears of the concept. At a high level, transparency means that every employee has access to the same revenue, cost, and profitability numbers as the executives. Plain and simple. The top fear that owners share about adopting an open- book management model is that employees are more likely to ask for a raise. However, we’ve found that most employees are underwhelmed at the true profitability of a traditional truckload carrier.
Want to test this? We have conducted numerous surveys for our clients to gauge their employees’ estimate of average profitability. As part of another scheduled employee feedback survey, we included this question:
Please provide your best estimate for the following:
• For every $1 of revenue generated by the company, how much is left after paying all expenses (i.e., wages, fuel, truck and trailer payments, insurance, etc.)?
Without fail, every client that has asked this question has experienced a similar distribution of responses. These responses range from $0.01 to $0.65, with a heavy distribution toward the $0.01 to $0.06 range.
Gauging employees’ estimation of true profitability does not equal organization transparency. This exercise is
only meant to highlight an employee’s understanding of the company’s profitability thus helping to address the owner and shareholder’s unfounded fears.
Sharing Data Responsibly
The next step is to establish a controlled cadence of meetings to disseminate key financial and operating statistics of the business which include the true unmodified profit number. It’s very important that the communications are “controlled.” Simply distributing the information can leave lots of room for misinterpretation. Do this in a group setting to promote open discussion and provide instruction on what the numbers actually mean. It’s best to ask a finance team member to explain how the numbers are derived, and an operations team member to describe the methods and tactics being taken for improvements. This education can be paired with an endless number of online courses available for all levels of employees.
Over time, this continued practice of dissemination and discussion will instill transparency and financial literacy as core values, which will ultimately enhance the alignment between the company and its people. Additionally, it will generate new and unique ideas to build or enhance processes and systems to improve the business. This is the compound effect mentioned above. The values of transparency and financial literacy create empowerment as an adjacent value.
Once the foundational values of transparency, financial literacy, and empowerment are established, the next step will be understanding the levers for continuous organizational improvement. One of the most proven levers is incentive compensation, which can be used to drive higher margins and employee retention if implemented the proper way.
To learn more or discuss any of the ideas shared above, please contact a KSMTA advisor.
By Chris Henry, Chief Operating Officer for KSMTA Canada
® 13
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44
