For-profit companies operate with a simple goal – make a profit. Profits are the essence of life and growth for all businesses. Investments in talent, innovation, and new markets are all dependent upon a company’s ability to generate profits with which they can invest back into its business. In the absence of profits, some businesses start on a path to leverage…borrowing today on a bet that tomorrow will be better. Many times this approach leads to disaster.
There are three (3) critical factors in driving profits for any business. And while there may be thousands of criteria that enter into a profit equation, just about all of them can be bucketed into these three categories.
- People. The first ingredient required to drive profit. People generate the ideas, relationships, and creative thinking that’s required to grow a company. Great leaders know how to identify the right people to introduce to their specific work culture. Many companies make the mistake of seeking only the “top performers” from their competitors. Unfortunately this approach often leads to failure and disappointment. Why? Because leaders often lose sight of the fact that beyond the person, they also need two other factors to succeed…a plan and process, and herein lies the problem. No two companies operate the same, have the same plan, or the same process/infrastructure to execute with. Therefore what makes someone successful in one environment does not equate to success in a different environment.
- Plan. As the saying goes, “failing to plan, is planning to fail”. Successful companies have a plan including a 12 month, 3 year and 5 year plan. They know that the further they look into the future, the more uncertainty the plan takes on – but that doesn’t stop them from the exercise of planning. The biggest benefit of having a plan is not always the plan itself but what was learned and gained from the act of planning. Deeper insights, critical understandings, and lessons learned, are all positive outputs from a detailed planning process. Once the plan is made it MUST be communicated or cascaded throughout the organization. Without clear line of sight, employees are left with an empty feeling that results in a numbing effect taking ahold of the business. This leads to morale issues, turnover, and a general decrease in quality of products produced or service delivered.
- Process. The process factor is one of the most overlooked factors in generating profits. Existing companies feel that they know what they do, and start-ups feel like they’ll figure it out along the way. Both are wrong. Processes must be documented, monitored, measured and improved. The Toyota Production System, otherwise known as TPS, pioneered the Kaizen – a philosophy that embraces continued improvement. All processes can be improved or enhanced. To drive improvements requires a deep understanding of your people (internal and external) and your plans. A great book that illustrates this philosophy is The Toyota Way by Jeffrey Liker.
Focus on these three factors and they will help you build a better road map to achieving stronger profits. But remember this…it all starts with having the right people. As Herb Brooks, the coach of the 1980 U.S. Men’s Hockey team said when putting his team together, “I’m not looking for the best players, I’m looking for the right players.” This quote validates the importance of knowing your culture, how it operates, what its strengths and weaknesses are, and what type of individual would thrive within it. It all comes down to people…and it starts with you.