5 Ways to Extend Profit Responsibility Down the Management Chain

By 1996, Michelin Worldwide was facing an unfamiliar challenge.

To better serve the Customer, Michelin needed to align its organization into product lines, something that had been absent up to that point. Previously, critical management decisions were made at corporate offices in France.

Now in the North American plants, the individual product lines (passenger tires, truck tires, and specialty products) would each have their own management team, and the teams would be accountable for their own financial results.

The challenge, then, was to take a group of managers and teach them to run their own business.

How do you teach someone to see individual divisions when they’re accustomed to seeing the whole? How do you cascade profit responsibility to every area of the company?

The North American Learning and Development Team was enlisted to answer those questions. The group was asked to uncover the most effective financial training for the transition. And this is where we came in.

The NA L&D Team found what it needed in the Income|Outcome simulation: experiential training, something people could see and touch. Something that brought the emotion back to each person’s impact on the business.

Michelin managers learned they had a new responsibility for the success of the business. In fact, everyone had responsibility. Workers learned to see their role in the entire company’s flourishing.

Recently, we asked Fred Bolivar, who is retired but still delivers Income|Outcome sessions, to draw lessons from that experience back in 1996 that could help a business achieve similar success today.

We came away from that conversation with five concepts for extending profit responsibility down the management chain.

1) Teach Employees the “Why”

Fred knows employees don’t always get the opportunity to apply new knowledge right away. A lot depends on the environment of the individual.

But the challenge, he told us, is to help them see that what they do on a day-to-day basis really does affect profitability, and to articulate that in a way they understand. That way, you create a marriage between the folks on the floor and the financial state of the company at large.

So rather than radically changing anyone’s work habits, you teach employees the “why” and let that knowledge do its natural work.

2) Teach a common language

As a result of putting so many people through Income|Outcome workshops,  a common language was developed across the entire Michelin system: from the executives, to the employees on the floor, and even to its distributors.

Soon, they weren’t just talking about the Michelin business---they were talking about the businesses in the dealer network.

That kind of uniformity is extremely positive for a company. Without it, you’re speaking to your allies in foreign languages and the result is confusion, at best, and disaster, at worst.

“And yes,” Fred says, “this does relate to profitability. It may be a convoluted way to the bottom line, but it’s absolutely there.”

3) Accountability at Operational Level

Fred insists that if you plant seeds in good employees, they draw upon that knowledge when they need it. This, more than anything else, leads to employees going far beyond where they could have gone otherwise.

Accountability can be the well that draws that excellence out of employees. If nothing else, it sets a high, clear standard.However, accountability without education is a doomed model. If you’re being held accountable today, and your manager throws data at you that you don’t understand, you’re lost.

And that leads into #4, which is a partner to #3.

4) Educate Instead of Train

Training teaches people to do something they couldn’t before.‍

Education teaches them to file away knowledge for later use. That way, their eyes are opened to opportunities to apply the concepts they learned.

You can train someone to move A to B, attach something to C, then move it back to A again. But that’s just muscle memory. They won’t understand why it matters to your business.

‍Or, you can educate someone on how to read a balance sheet or financial statement, and have them read it back to you. They may not go out hunting for income statements to read, but they’re going to be much more aware of what makes an impact on the balance sheet.

That type of thinking is a product of education, not just training.

5) Empower Employees to Make Decisions

Every decision an employee makes is ultimately a business decision. Even the choice to get out of bed in the morning has business implications, but most people don’t see that in dollars and cents.

The great triumph in the Michelin story is that their management now generally know what good business decisions are.

But that’s not all: they’re able to push that good decision-making down. And you better believe that deeply affects profitability.

When machine operators are responsible for their own equipment, that encourages participation in the company’s well-being and focuses accountability on a specific person. And if good decision-making has been transmitted to those operators, they’re going to hold up under the microscope.

For Michelin, there’s now less of a need for management to make decisions. As a result, they operate with fewer management levels.

This evolution has allowed Michelin to reduce management levels from 5-6 to 2-3.

‍The bottom line: when you give people the freedom to make decisions at their level, you reduce organizational layers that get in the way of decision-making.

Conclusion

Almost 20 years later, Michelin is still using Income|Outcome to help employees see their impact on the business. The current program has seen roughly 35,000 employees go through it, and Michelin has translated it into more than a handful of languages for worldwide training.

Why the enduring success? Because the program engages every link on the management chain.

Fred says the business acumen workshop is not like anything else you can do for that long. “It’s different every time I run it, because I leave the decision-making up to the players, for good or bad.”He adds, “Changing the decision-making process is a great way to observe behavioral changes. You always try to pin learning (or training) to results.

”We believe the Income|Outcome simulation is one extremely helpful tool for achieving that result, and the Michelin story backs that up.

Pair the simulation with the five methods above, and you have a formula for substantial financial improvement in your company.

‍If you’re interested in bringing Income|Outcome to your organization, we'd love to hear from you. Click here to contact us today.