What are the positive aspects the employees could glean

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Reference no: EM131947242

Sean O'Neal decided he wanted to be his own boss after working for several years making mattresses with a small, custom mattress shop in Santa Fe, New Mexico. He knew that the retail market was dominated by several licensed brands such as Sealy, Serta, Restonic, and Simmons.

He also believed he could create products with clear customer value propositions at a profit for himself. When Sean started Gentle Rest Slumber with his meager savings, he promised himself to treat his employees differently from the way he had been treated in the custom shop. Part of this promise was to be honest with his team about the company's financial condition.

When he brought in employees, Sean took the time to help them understand the company's key performance indicators and to work with them on setting goals. His team consisted of sewers, warehouse staff, truck drivers, and other unskilled and semi-skilled workers. Sean didn't intend to make them all accountants, nor did he wish to become one. However, he was familiar with the critical financial statement ratios for his industry and saw clearly his vision for the company.

At first, the team was uncomfortable with the idea of reviewing financial performance and setting goals for the company. They understood piece-work programs, where they were paid according to the number of quality items they completed per shift, but they weren't so sure about being responsible for more than that. However, by the third year of this "open-book" system, employees were fully engaged and motivated to participate. Among the key financial data Sean presented to them was the following:

The employees were excited to see that revenues had increased, but they were concerned about the other results. This led to intense discussions about the concerns and how to best move forward.

	2014	2015	% Change	Industry 2014
Revenue	$2,200,000	$2,000,000	10%	-5%
Material	14%	10%	4%	11%
Labor	23%	20%	3%	18%
Gross Profit	63%	70%	-7%	72%
ROS	3%	10%	-7%	6%
ROI	6.60%	20%	-13.4%	22%
Current Ratio	0.9	1.1	-18.2%	1.2
Debt-to-Equity	1.5	1	50%	1.2
Collection Period	60 days	45 days	-33%	50 days

Case Study Analysis

8-25. What are the positive aspects the employees could glean from the financial data?

8-26. What concerns should they have?

8-27. What additional information would you want to know?

8-28. What would you recommend if you were an employee? Why?

Reference no: EM131947242

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