When correctly put into practice, teams advance a company’s strategy beyond that which any individual can accomplish.
For example: when our client sought to cut $2.5 million during tough economic times, the firm’s employees, who had been trained in financially-grounded teamwork essentials, were able to cut $4 million instead. Action teams were trained to recommend a structure for the new Human Resource Department, document the workflow of all departments’ activities, and recommend a systematic approach for opening future branches.
However, when the economy turned and payroll cuts were required, teamwork-trained members of this company quickly understood all dimensions of the financial crisis and found 60 percent more in cost reductions than were needed.
The additional savings helped launch the manufacturing/distribution company back into the black after only eight months. These savings were discovered because they all understood the consequences and were clear on the existence of redundant personnel and operational expenses within their individual departments.
For some, teams are about people expending additional, sometimes needless, effort trying to reach agreement on a topic that could have easily been handled in a more autocratic manner. For others, teamwork is a magical concept, frequently touted as the panacea for all that ails a business.
Perhaps the difference between these two perspectives can be attributed to employee experience with teams or the outcomes witnessed as the result of teams’ recommendations. In many cases, the crossroads in the team experience is its allotment of dollars to the project at hand.
The makeup of a team
In general, teamwork functions by bringing together a combination of people whose strengths and skill sets are not embodied by any one particular individual. Ideally, a team is comprised of the following:
- Members (3-12 individuals): the collective group of individuals who work together on a specific, defined initiative.
- Leader (1 individual): the person who is selected to lead the team, schedule and facilitate meetings, and keep the team on track.
- Sponsor (1 individual): a member of senior management who is NOT directly impacted by the team’s work. This objective person does not attend every meeting, but is available to grease wheels and bring issues up to the top level, if and when required: i.e., VP of marketing serving as the sponsor for a team tasked with creating a more pro-active budgeting process.
- Expert (1-2 individuals): Sometimes it is helpful to bring someone in who is an expert (internal or external) in the area under discussion. This person can attend all or some meetings, as desired.
Before a team can begin its assignment, all members should share a foundation in the areas of communication, teamwork, and accounting. At a minimum, the team should understand the fundamental techniques of having difficult conversations, decision-making and consensus-building.
Unfortunately, the most overlooked component in a team’s proposal is oftentimes the financial aspect. There may be various reasons for this oversight, such as accounting might not have sufficient personnel to hold a membership position on every team. Team members could also not be aware of the difference between a project’s price and the associated costs/revenues. In addition, teams do not presume to include vital pieces of financial evidence as part of their recommendations if they are not specifically assigned to do so.
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Ability to read a P&L statement is essential
This makes the ability to read and write a profit and loss statement essential for every member of a team. Understanding the essentials of reading and writing a profit and loss statement allows team members to gain control of their numbers and look more broadly at their project, viewing it within the framework of the company as a whole.
By presenting the dollar impact as a part of every solution option, it is much easier for senior management to respond “yes” to a team’s recommendation. Additionally, empowering employees with an understanding of “the numbers” will improve decision-making in all aspects of their work.
For example: A team is created to determine the machine “of best fit” in order to update the shop floor. Upon completion of the research, a presentation to senior management that includes the pros and cons of acquiring the new machine is expected. The pivotal piece of this recommendation is “the numbers.”
The team must be able to attribute a cost to the new machine. More than just the price tag, the cost provided to management should include expenses associated with removing the old machine, training employees, time devoted to reworking the line process (if needed), maintenance costs, and an analysis of the expected additional return.
The intimate knowledge of the company that team members gain through understanding their recommendations’ financial ramifications is a transferable skill. Through an applied knowledge of basic accounting principles and their function areas, managers can create high-functioning teams that will directly enhance the company’s bottom line.