Understanding Profitability

This client showed us a profitability problem. Revenue was good, people were working hard, but margins were poor, and so was profit at the end of the year.

Everyone seemed, in the words of one member of staff, “busy fools”. Various initiatives seem to have been tried from the top down – from Board-level – but none had stuck.

Telling people to work harder didn’t seem to be working, and neither was simply pointing out how important profitability is. There seemed to be a ‘blind-spot’ around profitability – and perhaps even a lack of will to face the facts – that every business needs and thrives on profit, if only to reinvest.

We designed a 6 month series of action learning-based workshops with small groups of customer-facing staff. These gave each individual the chance to talk about their part in producing profitability and how they could individually make a difference.

Several new initiatives arose that could be implemented company-wide. But much more importantly there seemed to be some significant changes in attitudes as people realised that what they did (or didn’t) do directly influenced profitability.

The stories that were being told about profit changed too. Months later our research showed that people who participated in the programme had internalised a different, more realistic idea of the value of profit, and how to create it.

Profit still goes up and down – and that is how it should be, as the company continues to explore new markets. But the people who make the difference, those at the front-line, seem to be more aware of the extent to which they control their, and the company’s, destiny.

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