Preparing a Budget… Part Two: Owning It, Selling It

Friday, March 4, 2016

O.K. In Part One, “Preparing an Accurate Budget,” we've done the initial hard work. We've met with all our Profit Center Managers to produce a "realistic" budget--one that should be attainable, and has input from all parties involved. Something that should be doable, and not a "Pie in the Sky." So, do we just put it to rest at this point and hope that a year down the road, it all "sort of comes true"? Of course not.

I think at this stage, with a good-to-go budget, selling it to the total team is all important. Starts with the Profit Center Manager. Now that he/she has the budget, at this stage they kind of "own it" to do everything they can to make it come true. Since Kimal is a very transparent company, the Profit Center Managers share with their team what the goals are. We have a monthly "Leadership Meeting" (it used to be called a "Division Managers Meeting.”) In the meeting we share the actual vs. budget results for the prior month with all Managers and Key folks. Nothing is left out. Whether the actual results were outstanding, or less, everyone knows where they stand. Then we share ideas to "make things better," "increase margins," "save on expenses," "combine common purchases,” and so on, all of it shared between us. We celebrate and "sell" what happened to each other. And from that point the Profit Center Manager now passes on this information (performance) to their total team.

Why do we at Kimal have such a commitment to the “transparency” within our company? It’s because we have a "Profit Sharing" program...and we deem it as such. It is not the same as an end-of-the-year "Bonus" program. This is very important. That this budget that has been so carefully prepared must be revisited and "sold" to the team all through the year. There is a full and total understanding that if the company makes money (attains the profit objective) our Associates share in the profits...If we underperform or lose money, there will be no "Extra money" at the end of the year. Open sharing of information... constant "selling".... “transparency"...all make for a program that everyone understands. I've heard many times over the years, through folks in the industry, that "Profit Sharing or Bonuses given doesn't work"!! That once you give an Associate something extra, it is "expected" from that point on. But through our transparency, and open dialog...there is always that understanding that..."If the company makes money, we get something extra." If it goes the other way, "nothing back"...and it tends to work for us.

Enough said. Next month, I'll mention some of the Metrics we use to measure our performance every month so there is always a clear grading process in place.

Al E. Bavry, CEO, Kimal Lumber & Hardware 3/4/2016

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