As an executive coach, I hear from my clients on a host of issues they experience. Sometimes those issues are external, while others are internal within the company. For example, one of my clients, a 3PL owner, found it difficult to get his employees to care about the company’s profitability. They pay their people well and have a nice, friendly company culture. However, he struggled to get the employees to care more about the bottom line.

It is smart to focus on profitability, rather than just revenue. At TSP, our philosophy is “revenue is vanity and margin is sanity.” After all, it’s not what you make, it’s what goes to the bottom line.
Focusing on revenue AND MARGIN is smart, but getting your employees aligned to your profitability goals is even smarter.

As the owner, your job is to set the goals (financial and others) and get the right people and resources necessary to reach the goal. In my experience, the owners of 3PLs and freight brokerage businesses try to do all the work themselves, which leads to burnout and frustration. Learn to delegate and hold your team responsible for meeting business goals including profitability.

You have created a nice place to work, which is very important. Now, you want to add ownership of business results to the culture.

To reach your profitability goal, you will need to enlist the help of your team. The following four-step plan will help you and your team set and reach your profitability goals:

1. Share your profitability goals. Once you have set your profitability goals, meet with your team to communicate your goals. As the leader, you must make it clear where you want to take the company. Be very specific and use SMART goals so there is no ambiguity about your profitability targets. Your people can’t reach the profitability goal if they don’t know what it is.

2. Communicate your expectations. Once you have set your profitability goals, communicate exactly what you need each team member to do to reach the goal. Be very specific about each team member’s roles and responsibilities in regards to the goal. The sales manager is tasked with getting higher margin business, the operations manager is going after cost savings opportunities, while the head of finance investigates refinancing equipment and provides progress reports to the team. By documenting your expectations for each employee, you are communicating that the profitability goal is important to you.

3. Measure progress. If you have set a significant goal, you will not reach it overnight, therefore it is important to measure progress to the goal. Provide your people with regular updates. Also, help your team develop plans and strategies that will enable the company to reach the profitability goal. As the boss, encourage, teach, but avoid taking responsibility for the work. When you do the work instead of the employee, you send a mixed message.

4. Reward and recognize. As your team meets your expectations on the profitability goal, you should acknowledge and encourage them for exhibiting the desired behavior and getting positive results. At TSP, we recommend the following three levels of acknowledgement: 1.) Review (lowest level) is non-formal, verbal praise for delivering on expectations. 2.) Recognize (second highest) is a formal recognition for meeting expectations. The praise could be part of a meeting or recognition presentation. 3.) Reward (highest level) is praise reinforced with a gift, bonus or a plaque. Be careful and consistent in your use of review, recognition and rewards for meeting expectations. Going overboard or being stingy with your praise can lead to negative consequences.