If I can paraphrase Bill Clinton’s successful presidential campaign slogan of 1992 “It’s the economy, stupid,” we can focus more on profit when asked about how to measure and improve business value.
HHMC writes and talks a lot about the drivers of business value. We talk about factors that make your recruitment agency more attractive, such as sectors, productivity and clean accounts; factors that will result in a discount such as lack of temps, poor branding, or poor technology; and the benefits of business longevity. There are also factors that add value to a business including size, corporate capability, performance, and management strength.
But at the end of the day, you are going to be rewarded on a multiple of the profit you make.
I’ve become a recent reader of Scott Adams blogs and books. He is well known for the Dilbert cartoon series and carries these sharp observations on the workplace to discussions on life, business and politics in an interesting and thoughtful manner. From his book “How to Fail at Almost Everything and Still Win Big”:
Related: Know Your Real Profit
“I am a professional simplifier… The best example of the power of simplicity is capitalism. The central genius of capitalism is that all of its complexities, all of the differences across companies, all of the challenges, decisions, successes, and failures can be boiled down into one number: profits. That simplicity allows capitalism to work. The underlying complexity still exists in business, but creating a clear and simple measure of progress makes capitalism work. No smart investor would buy stock in a company without knowing its past and projected profits. Profits tell management when they are doing something right and when they need to do something different. That one simplification – the idea of profit – sits atop the engine of capitalism and largely steers it, albeit sometimes in the wrong direction. You can debate the morality of viewing profits as the top priority in business, but you can’t argue that it doesn’t work. At most, you can argue that some companies take it too far.”
Sometime it seems business owners need to simplify their approach to business so there is an overarching objective that allows clear and unambiguous decisions to be made. Is concentrating on profit that simplification?
When a staff member pushes you for additional benefits or greater commission, when a client pushes you on margin or payment terms, when a staff member fails performance targets again, when you review your marketing spend – how clear and objective is your decision making.
Getting back to basics and just concentrating on profit might be the answer.