A Profit-Bias Only Leads To Less Profit

‘Profit, profit, more profit, I want it now, in fact, I wanted it yesterday’.

Many businesses that chase the profit-first mantra end up with less profit than their business could otherwise earn. If they understood the catalysts of profits, they would recognise why.

Active Knowledge Question:

How would you describe your focus on profits as a business leader?

I have sat in management meetings where leaders have banged the table and demanded, ‘Profit, profit, more profit, I want it now, in fact, I wanted it yesterday’. I’m not sure whether they believed their effort would deliver more profits or whether they were trying to get everyone’s attention.

However, it is fair to say that many business leaders have an insatiable appetite for profits. Whatever is achieved in one period has to be increased in the next period, no excuses accepted. Moreover, this continues year-on-year.

We also all understand that when you place people in a corner, whatever role or position they may in, with no escape from the profit demands, that the outcomes are often less than desirable. Many businesses around the world have been impacted by ‘lapses in culture, safety and quality’ that have materially reduced their profits and market value. I would suggest that a closer look at these ‘lapses’ may well reveal that the insatiable appetite of the profit-first motive was the culprit.

But the real disappointment is that there are leaders who believe that focusing on profit-first is the best answer in delivering more profits. This focus causes a bias in all their decisions and actions.

So what is wrong with a bias that is focused on profit? The simple answer — challenge — is that profit does not create itself. It is an outcome, not a catalyst, well not a catalyst in a good way — see my comment above on ‘lapses’.

A profit-bias leads you to look at all the wrong things in a business. What you need to look at are all the elements that generate the profit, not the profit itself.

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All the best in the success of your business,

Richard Shrapnel