Top Management Story

Writen by Gerry McRae

Would you like to have your employees walk a few miles in your shoes? Looking for a simple way to explain the flow of the revenue and expenses for your business? Want to change the perspective on the gap between wages and amounts charged to customers? Adapt this exercise to your small business situation.

George's Auto Service

Every person entering the management ranks of a large communications company were required to attend a management orientation workshop.

During one workshop the facilitator handed out a little case study and displayed the statement of income and expenses for "George's Auto Service" on the wall. He gave a brief explanation of the expense items for those who had not taken a course in accounting. The case outlined information on the shop's operations and the local conditions.

The attendees were split into small groups to consider such questions as, "Does George have a viable business operation?" and, "How could George better manage his business?"

After the situation was reviewed from several different perspectives and a dozen options were explored, the group members were almost unanimous in concluding that George's Auto Service was not generating enough profit to justify his investment of money, time and energy. Their recommendation to close the business was considered more prudent than any of their other recommended changes.

Typical comments were, "George should stop beating his head against the wall because he's not making enough money for all his troubles." and "He should try a more profitable business."

The facilitator pressed the groups to examine the various expense items for specific reductions that would allow George's Auto Service to make more profit.

Many cost cutting schemes were suggested. The most common solution was that George should ask his mechanic to accept less pay. The facilitator obtained a consensus that a reduction of wages was a prime solution. Then, with a little smile he said, "Let's see how this would work."

The members of the group appeared puzzled as he began adding three zeros to each item on the display of the Income and Expense Statement. With the flair of a magician he finished by replacing "George's Auto Service" with the name of their own company.

"There," exclaimed the smiling facilitator, "is the Income and Expense Statement for our very own company. The same company you suggested isn't worth operating because it isn't making enough profit. The same company each of you are planning to help manage" Then, with a larger grin he asked, "Do you still want to ask the employees to take a cut in pay?"

The initial shock was followed by much laughter. Some members praised the facilitator for the clever way he had tricked them. Others laughed about how three little zeros can make such a big change in one's perspective. Laughter continued as one group member seemed to express everyone's newfound insight with, "I didn't realize wages and salaries are only one of many essential operating expenses." The group's joker got a burst of laughter and a few groans by quipping, "Yeah! Three little nothings suddenly became three big somethings!"

One member asked the facilitator how many company employees have been exposed to this little case study. The facilitator said, "Only management groups. It's up to you managers to monitor and to influence perspectives about the expenses, other than wages, that are required to keep our company operating. By the way, I'd appreciate it if you would not disclose this exercise to others assigned to take this workshop."

Try this little exercise for your small business operation

Persons unfamiliar with ownership and management are unaware of all the factors required to operate a business. Even workers familiar with an income and expense statements often perceive the payment for their services to be inadequate and unfair. Properly presented, such a case could foster a healthy discussion of common objectives and contributions. If not a lively discussion, perhaps the exercise could result in a greater appreciation of your management decisions and your distribution of your operation's revenues.

If there is an indication your employees do, indeed, perceive you are getting rich from their hard work, proceed cautiously with your timing and presentation. You could be worsening a very sensitive situation.

The facilitator in our story used humor to alleviate any embarrassment caused by the trickery for the surprising disclosure. If you are not skillful with humor, get someone who is or use another defusing tactic.

Allow the lessons learned from the exercise speak for themselves and avoid excessively dwelling on them too much. Let the participant draw their own conclusions.

About The Author
Gerry McRae is the creator and principal author of the small business management website UncleMaxSays.com. Gerry is also the author of "Time Management for Entrepreneurs - What to do, When & Why" available at http://www.unclemaxsays.com/timemanagement.php