Greenville Business Magazine 2010 March issue : Page 12
››columns Pinpointing Responsibility In Your Organization BY BILL LEE “ W here does the buck stop in your company? If the answer to that question is with the owner, your company is more the rule than the exception. We know that the buck must ultimately stop with the owner or general manager; however, the situation I often observe on consulting assignments is that the owner fails to pinpoint responsibility down the line. This practice usually results in an organization that “passes the buck” on a routine basis. One question I ask owners that helps me sense how well responsibility is being delegated within a company is, “Who in this organization suffers financially when the company fails to meet its financial goals?” More often than not the answer is, “No one but the stockholders and perhaps the sales force.” (Assuming sales compensation is commission-based). “But what about the department heads, the credit manager, the buyer(s) or the administrative personnel?” “No, those employees are salaried. They may be fussed at from time to time, but they don’t suffer financially.” My experience has taught me that combining sound management practices with incentive pay encourages more acceptance of responsibility and accountability. 12 GREENVILLEBUSINESSMAG.COM | MARCH 2010 Combining sound management practices with incentive pay encourages more acceptance of responsibility and accountability. In most businesses there are five key areas that must be ” controlled: Sales, gross margin, operating expenses, inventory and accounts receivable. In a manufacturing business, you might add quality or cost of production to these key areas. Obviously, the owner or GM cannot possibly control each of these areas personally, so it just makes sense for the owner or GM to have people in place who are willing to accept both responsibility and accountability. The first step toward the effective delegation of responsibil- ity is the development of an organizational chart. The chart doesn’t have to be fancy, but it does need to identify each manager and his or her respective areas of responsibility. Job descriptions are also quite helpful. Job descriptions should be a great deal more specific than the organizational chart. Job descriptions describe each employee’s responsibility, each specific area for which the employee is held accountable and how each employee’s performance is measured. Just as important as written job descriptions is to create a clear understanding between management and staff as to what each individual’s responsibility includes. The only way to be sure the members of your organization clearly understands their areas of responsibility is to regularly review both the job description and the job performance with each employee and encourage questions to clear up any areas that are unclear or overlapping. If you’ve never tried this approach to management, you won’t believe how many of your employees are shocked to learn some of the responsibilities you have been assuming that they had been fulfilling all along. The process itself will open up communication beyond belief. There’s an underlying feeling within most of us that says, “If they base my pay on it, it must be important.” This is one of the best reasons to use an incentive or bonus plan to reinforce your written job descriptions and organizational chart. When practical, I recommend kicking off an incentive or bonus plan in lieu of a raise in pay. In other words, “We
>>columns - Pinpointing Responsibility In Your Organization
Bill Lee
Where does the buck stop in your company? If the answer to that question is with the owner, your company is more the rule than the exception.
We know that the buck must ultimately stop with the owner or general manager; however, the situation I often observe on consulting assignments is that the owner fails to pinpoint responsibility down the line. This practice usually results in an organization that “passes the buck” on a routine basis.
One question I ask owners that helps me sense how well responsibility is being delegated within a company is, “Who in this organization suffers financially when the company fails to meet its financial goals?” More often than not the answer is, “No one but the stockholders and perhaps the sales force.” (Assuming sales compensation is commission-based).
“But what about the department heads, the credit manager, the buyer(s) or the administrative personnel?”
“No, those employees are salaried. They may be fussed at from time to time, but they don’t suffer financially.”
My experience has taught me that combining sound management practices with incentive pay encourages more acceptance of responsibility and accountability.
In most businesses there are five key areas that must be controlled: Sales, gross margin, operating expenses, inventory and accounts receivable. In a manufacturing business, you might add quality or cost of production to these key areas. Obviously, the owner or GM cannot possibly control each of these areas personally, so it just makes sense for the owner or GM to have people in place who are willing to accept both responsibility and accountability.
The first step toward the effective delegation of responsibility is the development of an organizational chart. The chart doesn’t have to be fancy, but it does need to identify each manager and his or her respective areas of responsibility.
Job descriptions are also quite helpful. Job descriptions should be a great deal more specific than the organizational chart. Job descriptions describe each employee’s responsibility, each specific area for which the employee is held accountable and how each employee’s performance is measured.
Just as important as written job descriptions is to create a clear understanding between management and staff as to what each individual’s responsibility includes. The only way to be sure the members of your organization clearly understands their areas of responsibility is to regularly review both the job description and the job performance with each employee and encourage questions to clear up any areas that are unclear or overlapping.
If you’ve never tried this approach to management, you won’t believe how many of your employees are shocked to learn some of the responsibilities you have been assuming that they had been fulfilling all along. The process itself will open up communication beyond belief.
There’s an underlying feeling within most of us that says, “If they base my pay on it, it must be important.” This is one of the best reasons to use an incentive or bonus plan to reinforce your written job descriptions and organizational chart.
When practical, I recommend kicking off an incentive or bonus plan in lieu of a raise in pay. In other words, “We are not going to give you a raise in pay this year, but we are going to give you a way to earn more money.” This will not only save you money, but it will make the point among your people that their raise becomes effective when they do. Money usually has a way of getting people’s attention.
To make your incentive plan more effective, consider structuring it on a schedule. (see chart on right)
It usually a good idea to pay the bonus as close as possible to actual performance, say, monthly. But some goals such as inventory turnover, return on assets, etc., can only be calculated on an annual basis.
*** Please note that the numbers I am using on the chart are examples only. You may use any goal or any bonus amount that you wish.
Bill Lee is president of Lee Resources, Inc., a Greenville-based consulting and training organization and author of Gross Margin: 26 Factors Affecting Your Bottom Line and 30 Ways Managers Shoot Themselves in the Foot. For more information, call 864-248-4048 or e-mail: Bill@BillLeeOnLine.com
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