LEADERSHIP: PROFIT'S NOT A DIRTY WORD

Published: 2007-04-10   please add a comment below

Without profit, cash dries up, investment stops and the business fails.  For CEOs, profitability and its supporting measures, such as cash flow and return on investment, are a constant focus.  They’re the business's vital signs: corporate blood count and heart rate.  And, particularly important for small businesses with thinner reserves.

There has been a trend recently to triple bottom line and similar analyses.  And there's merit in terms of social issues and sustainability.  However, financial probity assumes attention to these - and many other factors.  Because failure in any, over time, incurs cost.  So, for me it's simple: monitor and manage all factors (whether short or long term), but recognise there's only one bottom line.  Many factors; one bottom line.

Most companies (particularly those emphasising triple bottom line) gain from ever sharper focus on factors impacting financial performance.  And, from these, they're soon also reviewing social and environmental issues, identifying where they can perform better and making plans accordingly.

So, where can I look for early warning of changes to my bottom line?  In monthly reports on revenue, costs, profits and cash position.  In financial ratios of stock turn, operating margins, etc.  In share of market reports.  In the state of the business pipeline.  In product and service surveys.  In staff productivity and turnover.  There's no single list.  Write down what you monitor now - or would like to!

Sadly, many leaders get the relevant information, but fail to act.  Their dog barks but they do nothing.  Preferring to deflect and rationalise: "it's only a short-term problem" or "June's always bad" or "our competitors have been discounting".

My advice: face the facts and drive your bottom line harder!

Dr. Timothy Pascoe AM
PhD (Cambridge), MBA (Harvard), BE & BEc (Adelaide)
Creator, V|E|C|T|O|R Leadership^®