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Eighty-eight percent of companies that actively manage their terminology reported a 74% increase in product quality (per a 2016 survey by the Local Industry Standards Association).

Consider an American eating at a restaurant in the UK. They order chips, but are surprised to receive french fries instead. Like nations, companies—and even departments within companies—have unique terminology that can cause confusion. Employees who move to a new company or department deal with inconsistent or poorly defined terms and often end up frustrated. The intracompany “dialects” can be confusing and counterproductive. How can companies clearly define their terminology to increase productivity and save money? Consistent and well-defined terminology is especially important in three major areas:

Performance Metrics

Companies create measurements and define standards of success. To accurately track performance, performance measures must be understood across the company. In one instance, division managers were told that performance would be judged based on lease operating costs per barrel of oil produced. Each manager was responsible for pulling together his own report. Here’s the catch: the term “lease operating cost” was not clearly defined across the company. Some managers included property tax while others excluded property tax, considering them to be a corporate expense rather than a local one. Divisions that didn’t include property taxes showed lower operating costs and better (but misleading) results. A lack of clear and consistent definition of “lease operating cost” directly impacted not only performance results, but the company’s perceived financial state, as well. Having a consistent definition of performance metrics and the associated components is crucial.

Policies and Procedures

Companies outline policies and procedures for daily operations of the company, often using corporate language. Employees are expected to comply with these policies, so understanding matters. For example, Management of Change (MOC) is the process by which companies ensure that health, safety, and environmental risks are controlled when the company makes major changes in facilities, operations, or personnel. MOC involves a multitude of forms and activities, all carefully coordinated among all divisions and departments. When every step in that process has a different name or meaning in every division, it causes all kinds of overlap, rework, and duplication. Clearly defined and consistent vocabulary for all the forms, activities, and divisions involved can streamline the process and save time and money spent on all projects.

Strategy, Culture, and Operations

Specific language is used to describe the corporate mission, vision, and values.  The mission should be universal for the company, yet many individuals are focused on their own performance and that of their division. Accounting doesn’t need to understand anything but debits and credits, right? Wrong. An accountant who lacks understanding of the core of the business cannot provide value-added analysis. The accountants should be able to help operations understand how their decisions impact financial results. A mission statement claiming that a deepwater drilling company is “top-drive focused” is meaningless if most employees don’t know what a top-drive is. Operations and corporate functional areas should be strategically and culturally aligned behind the core business. Clarity on what the core business truly is has an impact on motivation and bottom line results.

If company-wide confusion exists in performance metrics, strategic communications, or policies, it’s probably time to consider evaluating terminology. The solution can be as simple as providing resources and training materials that unify corporate and industry language. Many companies have put their company terminology on company intranet blogs, allowing employees to post comments and answer questions about the terminology. For example, a services company assigned departmental owners for each term. Employees in other departments could use the blog to ask questions about the term. Having a forum for employees to ask, “What is a top-drive,” or “Are property taxes included in lease operating expenses?” allows a company to become aligned across departments and divisions. For more on this topic, check out our book “Jar(gone),” which describes commonly misunderstood business terminology.

Trenegy is a non-traditional consulting firm dedicated to helping companies achieve success. Find out more: info@trenegy.com.

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