Originally published by Carpedia.com
Written by Andrew Rush, Vice-President of Carpedia and TEC Canada Speaker
When I ask business leaders if their people know what the plan of the business is and how they contribute, most of them say “yes.” When I ask them, “can each of your people tell me how doing 1% better than they are doing today contributes to the profitability of the company?” the answer is most often “no.”
Ask yourself that question. Better yet, ask your employees. If you want to align and engage your employees to the plan of the business, you need to figure this out. It will also guide you on where you should focus your efforts.
The rule of 1 is the rule that small changes can lead to big impacts, as long as you choose the right two or three areas of the business.
Here is an example to illustrate my point, from my own career. I was operating a powder coating business and I was trying to make everything better once. Make the line go faster, use less powder, do more sales calls.
My employees thought that I was being a typical, demanding boss. I recognized their compliant nods when I spoke, but they were not engaged in thinking about how we could be better. My attempts to motivate them only made me tired and frustrated.
One day I wondered, “if we could reduce the thickness of the powder that we were using by one millimeter and not sacrifice quality, what would that mean to the business?” I figured out how much powder we were using each year and the average price per pound that we paid. Then I verified with my people and my supplier that we could use one millimeter less of powder thickness without compromising the quality of our work.
How The Rule of 1 Can Have a Huge Impact
The answer blew me away. We would save $300,000. We were a $2M business.
I did the same exercise for saving one percent of labor costs, collecting our receivables one day earlier, doing one more sales call per day and a host of other scenarios. It was immediately obvious to me that reducing our powder usage and increasing our sales efforts were the two most important things to our business.
I had a meeting with all of my employees and explained the logic behind each of these two areas of focus. I got them to understand that one millimeter less of powder was worth $300,000. When they realized this, I didn’t need to be out telling them to use “less.” They understood why and how it related to the financial results of the business.
Businesses big and small need to do this same exercise. Before trying to make everything better, figure out which parts of your business you could improve. Apply the “Rule of 1” and then choose two or three areas of focus. Make sure you communicate to your team how the improvement that you are going after is related to the financial performance of the business.
