Five Roadblocks to Increased Profitability
Following a prolonged recession, business owners want to increase profitability but have exhausted the relatively easy methods of trimming employees, product lines or inventory. We suggest a necessary next step is to examine the key roadblocks to profitability that are found in so many companies, even after the cost-cutting has happened. These roadblocks can be summed up in 5 words. Owners and managers/employees don’t (1) know; (2) see; (3) hear; (4) trust; or (5) care.
Change 1: Setting Up the Systems to “Know”
On a weekly or even a monthly basis, do you know where your company is and what got you there? We can state categorically in every troubled company or company that has flat-lined, the answer is invariably “NO”. The key to “knowing” is improvement is filtering the information already in your system so that time and energy is focused on correcting problems as they arise.
Owners and managers/employees don’t know, see, hear, trust, care.
Change 2: “Seeing” Where You Want To Go and Finding Out How To Get There
“Seeing” where you want to go requires more effort, but is equally as important. Business owners hear about the vision thing and mission statements, and immediately think of consultant speak and pointless gibberish. However, the question of “why” you do what you do in business really is as important as “what” you do or “how” you do it. If we ask a business owner the “why” question or the key purpose of their business and he/she doesn’t have an answer, we immediately know that business will not prosper. For example, if a company operates in a space of needing highly specialized employees in short supply, a purpose of creating a great work environment will have a huge impact on profitability.
Change 3: Start “Hearing” What Your Customers, Vendors, and Employees Have To Say
The “hearing” roadblock is another one of those roadblocks that sounds simple, but it trips up many businesses and their leadership. As management consultants, we are often accurately told that “you can’t help us because you don’t know our business or business sector.” However, as outsiders, we have a huge advantage over them: we are willing to listen. By listening, the playbook on how to immediately enhance profitability can be told to you by your customers, vendors, lenders, and employees.
Change 4: Develop An Atmosphere of Mutual “Trust”
To mine the knowledge within a company requires more than just listening; just because management claims to be listening doesn’t mean the employees trust they can speak the truth. To find the answers, management must create a culture of openness and receptivity to ideas and change. Employees must trust that they aren’t going to be ridiculed, demoted, or even terminated for letting the company know what a customer or vendor is saying and what approach isn’t working.
By listening, the playbook on how to immediately enhance profitability can be told to you by your customers, vendors, lenders, and employees.
Change 5: Find Out If Your Employees “Care” About Your Objectives
A final insidious characteristic of flat-lined or worse companies is that the objectives of owners, managers and employees – what they care about – do not align. This fracture in a company, regardless of level, or at the same level, is deadly to growth. The amount of energy expended on dealing with the turmoil caused by the fracture instead of on the business is one of the most pernicious roadblocks to profitability.
Too often, companies and/or consultants start at the micro level of process improvement such as time studies and technological systems, and miss the big picture issues of identifying and removing the key impediments to profitability. By removing these roadblocks, a business can most quickly increase its earnings and cash, and create sustainable, long-term value.
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