Even if you were in Russia as the manager of farm or industrial plant, you’d be measured by profit – however they wouldn’t probably describe it in such capitalistic terms.
You can’t exist without it
Until the recent resurgence of entrepreneurial studies, I believe profit had become dirty word, essentially because of the liberal non capitalistic notions around. Those who never shoulder the responsibilities of making the decisions necessary to provide for the continuation of business or institution miss one of life’s great experiences.
They have never made payroll. Until someone has, he or she can’t imagine the true depths of anxiety or total fulfilment or relief. You haven’t lived until you’ve lived through it – it’s like white-water rafting.
No business or institution can keep going without generating more than the cost of its operation. Even churches and not-for-profit institutions must maintain this discipline.
A friend of mine resigned from his position as vice-president of marketing for successful software company to become executive director of Straight Inc, not-for-profit service organisation involved in helping teenagers in dealing with and eliminating drug problems.
We had dinner to celebrate his first year in the new position.
I asked what had been his greatest challenge. He said “to get everyone in our organisation to understand that we can’t help anyone unless we operate our non-profit organisation with the same disciplines as any successful business”.
He added: “We have great staff of people who have dedicated their lives to helping youngsters with problems. But their service orientation, unless kept in perspective with good business principles, would become their greatest weakness rather than their greatest strength.
“Consequently, since its inception, Straight Inc, has refused to accept government grants – not for political reasons, but to avoid creating false sense of security for its management.”
It operates on the premise that as long as it meets the needs of the community, money will always be available from the private sector. If it manages by the principles my friend feels are so important, the continuation of the business will happen automatically.
What contributes to the bottom line?
I can’t think of single managerial position that doesn’t tie into the profit picture of company.
If your one responsibility entails doling out charity for large organisation, you’re still tied to profit. Even managers of the most speculative research and development projects must accept their tie with the profits of company – even if it’s on the understanding that funds invested in research and development constitute risk capital – that may lead to future profits.
It’s always been that way. When Queen Isabella hocked her jewels and footed Columbus’ bills you can bet she wasn’t doing it just to prove the earth isn’t flat. She expected profitable trade with the east.
Few managers see their activities show instant profit or loss. This doesn’t excuse any of us from accountability. Investments should always be made with time factor in mind.
Many managers can’t see time limits and shrug off their responsibility to generate profit. They fail to see how they couldn’t be of more service to the competition if they crossed the lines and loaded their guns.
Not surprisingly, those quick to dismiss their ties with profit frequently see their budgets trimmed first when times get rough.
Things like training, new product development, advertising are all targets. It happens because they fail to understand their direct connection with financial gains.
Keeping the red ball in the air
One day the head of company was lunching at downtown restaurant. Halfway through he heard four familiar voices from the next booth. He realised they were his four managers, and he couldn’t help eavesdropping.
The chief product engineers said, “It’s no contest. The department that makes the most important contribution to the success of company is the product division. If you don’t have solid product, you have nothing.”
The sales manager jumped in. “Wrong. The best product in the world is useless unless you have dynamic sales effort to get it sold.”
The vice-president in charge of corporate and public relations had another opinion. “If you don’t have the proper image inside and outside the company, failure is certain. No one buys product from company it doesn’t trust.”
“I think you’re all taking too narrow point of view,” countered the director of human relations. “We all know that the strength of company lies with its people. Minus strong, personally motivated people, company grinds to halt.”
Each continued to debate in favour of their area of primary interest.
When he’d finished lunch, the company head stopped by the booth and said, “Gentlemen, I couldn’t help overhearing your discussion and feel delighted with the pride each of you takes in your department, but I must say none of you is correct.
“No one department of any company is responsible for company’s success. When you get to the heart of the matter, you find that managing successful company is like being juggler trying to keep five balls in the air.
“Four of these balls are white. On one is written ?product’. On another it says ?sales’. The third is labelled ?public relations’, and the fourth says ?people’.
“In addition to the four white balls there’s red one. On it is the word ?profit’.
“At all times the juggler must remember no matter what happens, never drop the red ball! Without profit, the company with the finest product, highest image, most dedicated people, and the most impressive financial reserves soon gets in trouble, the kind of trouble that can quickly make Fortune 500 company only memory.”