Let’s look at a very simple business - hourly-billed services (basic labour or top-end professional services):
- You pay people for 52 weeks of 5 days = 260 days a year. At 8 hours per day, that’s 2080 hours of costs.
- Let’s allow for, say, 20 days annual leave, 10 days public holidays, 5 days technical training, 2 days on company process training and 3 days off sick. That’s 40 days your people are not on the job.
- That leaves 220 days or 1760 hours to do the job.
- Assuming good productivity at say 80% (allowing for time on internal non-client stuff, proposals, waiting for new jobs to start, etc.) that’s ~1400 hours of billable work a year.
- Spread over the 220 days, that’s ~6.5 hours billable every day.
Some business leaders don’t share their business metrics with their staff, perhaps because of unnecessary embarrassment about the profit motive or a concern that staff won’t understand. My experience is that people respond well to knowing these things. I once explained the company’s cost of capital to a group of electricity network construction workers, Simple examples, relevant to the team's work and personal lives, got across the idea of relating risk and return. That, together with an explanation of depreciation, maintenance and operating costs, saw them volunteering many suggestions for simpler line maintenance vehicles - the most dramatic being a change from the ubiquitous standard $250k line truck with HIAB (onboard hydraulic lifting arm) to more $30k utility vehicles!
Everyone who works for you needs at least a rudimentary understanding of:
- Your business purpose, market offer, ethos and modus operandi
- Your business processes
- Your revenue model
- Your cost structure (operating and capital)
- The rationale behind them
- Your people’s individual roles and responsibilities in making the business work.
First published 25 May 2009