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Business Growth Opening Up The Books How CompanyWide Profit Sharing Improved Our Bottom Line

Written by: Brian Scudamore

Article Overview: I believe that there are two things to take care of in building a business - your people and your bottom line. I’ve found an exciting strategy that considers both.

Business Growth Opening Up The Books How CompanyWide Profit Sharing Improved Our Bottom Line

I believe that there are two things to take care of in building a business - your people and your bottom line. I’ve found an exciting strategy that considers both.

Towards the end of 2003, I had tossed around the idea of creating a company-wide profit sharing program. My reasons were simple – I wanted to create a program that would both share the wealth amongst stakeholders and help retain the great people that we have worked so hard to develop. When I announced the program to the entire company, people were excited. I expected that. What I didn't expect however was just how much of a positive impact it would have on our bottom line.

I wanted the profit pool to be significant. I determined that we needed 75% of our profits to maintain our course of near 100% annual growth and I committed the remaining 25% of profits to a company wide profit pool that would be allocated to each member of the team based on their salary. When I first launched the program I expected that we'd get a slight lift in overall profits but I predicted that once the profit pool was paid out that we'd still end up with less profits than without a profit share program at all. Was I ever wrong! In 2004, the first year we implemented our profit sharing program, our bottom line increased by almost 800%.

How did we get such a huge increase in profits? We found that every employee in the company started to take a real ownership in everything they did for the business. We spent a tremendous amount of time educating our people on financials – what do they mean and how does each member of the team impact the bottom line. People became obsessed with driving revenue and saving money knowing that they could significantly increase their annual earnings. I remember one of my employees having taken the initiative to cancel our bottled water service and replace it with a more inexpensive filtered water system. Employees loved it – it cut our office water costs in a third and it inspired the rest of the team to find wins of their own. The team holds themselves tightly accountable to reducing waste. If someone prints too many photocopies for example, you might hear a friendly ‘GGOB’ reminder from one of their teammates. ‘GGOB’ is the acronym for our program we call The Great Game of Business - (a term borrowed from Jack Stack - one of the world's greatest proponents of Open Book Management) and a great game it is.

An additional benefit of GGOB is the impact it has had on our culture. The program has made the entire company a much tighter team. People are aligned by a common goal – a common profit pool that everyone gets to share in. Employees tell us how much they appreciate being involved in the financial management of the company and it has given everyone much greater confidence in the fact that the financial health of the company is fully open book. I think there is a huge opportunity awaiting any company who decides to make the leap to open their books. I believe that privacy in the workplace only limits growth and creativity. When employees are in the know the result is better alignment, communication and cooperation.

How does our process work? It’s simple. We gather the entire office (about 55 people) every month and we review each and every line on our income statement. A different person is SPA (single point accountable) for each line item and it's that person's job to report publicly to the team why they hit or missed on their revenue or expense item that they control. No one likes to miss a goal so we've found that the public forum that we use has a built in accountability mechanism. People work hard to make their numbers -- they don’t want to let the group down.

We share everything except salaries and the information we share prompts questions and leads to good healthy debate and for 2 years running has led to massive increases in both moral and bottom line profits. Now financials can be dry - so at every step in our Great Game Process we try to add an element of fun - for example - when it comes time for the semi-annual ‘Profit Pool Pay-Out Party; - the theme from the Apprentice is played as everyone applauds their fellow team members as they collect their cheques.

Are you currently sharing your profits, if not ask yourself 'What have I got to lose?' If you’re asking my opinion, I’d say 'lots'.

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