How do you overcome persistent profit challenges?
Anne Graham - Author, Profit in Plain Sight
Exchange rates, market meltdowns and oil price fluctuations can distract busy business leaders from focusing on the profit factors they can control rather than those that they can’t. Here are three ways that you can overcome these persisting profit challenges:
•Understand which customers are profitable and which ones aren’t. It’s not about having exact accounting numbers; it’s about understanding who’s costing you more than they’re worth, so that you can implement effective strategies. Are late-paying customers less profitable than those who pay on time? Yes! Identifiable? Yes! Actionable? Absolutely! Every business has five to seven unique drivers of profitability. Understand them and have the gentle-yet-tough conversations to shift behaviours.
•Plug your profit leaks. When you have great revenues but too little left on the bottom line, the culprit is profit leaks. Eighty per cent of them are self-inflicted wounds you can fix. Simply identify the half-dozen day-in, day-out customer issues your people deal with and fix them for good, instead of incurring the costs to soothe upset customers and the costs of wasted time, effort, materials and more.
•Inspire employees to behave like owners. I create “aha” moments with a powerful exercise derived from the “who’s profitable” exercise described above. Most companies have fewer than nine highly profitable/marginally profitable customers for every unprofitable one. You can hear a pin drop when employees immediately realize that 20-1, 50-1 or 100-1 is much better than 9-1. They effortlessly make small everyday shifts to decrease discounts or give less away to resolve a claim – subtle but critical actions that deliver significant effects on your bottom line.
Renée Safrata - Founder, VIVO Team
Challenge 1: Focusing on individuals vs. teams
Author Jim Collins says, “Great vision without great people is irrelevant.” People are an organization’s most valuable resource. Why? Because not only are people the prime resource businesses have for delivering services, but nearly every asset a business has is the result of a successful interaction between two or more individuals. And two or more individuals working together is a team. Effective teams mean more experience, creativity, ideas and solutions to draw upon, resulting in a bigger lift in overall productivity.
Challenge 2: Lack of investment in training
A highly trained workforce delivers the best results. The research backs this up: a global survey of more than 2,700 executives conducted by Oxford Economics found a strong correlation between workforce development and financial performance in key areas, including growth in profits and revenues. Indeed, the benefits of employee development are hard to ignore because, as a general rule, employees who develop new and evolving skills become those most promotable. Enhancing training programs produces bottom-line payoff.
Challenge 3: Not understanding the value of soft skills
Fact: Organizations that encourage and facilitate the development of employees’ soft skills experience a marked competitive advantage in the marketplace. Why are soft skills so crucial? Because while employees’ technical (hard) skills will get a business going, unless they also know how to collaborate and how to increase others’ competencies, an organization’s continued growth and success are at risk.
Diane Ross - Founder, Elephant Conversations
It’s a catastrophically expensive myth that office politics are an unavoidable part of life. Drama at work is the direct cause of three persistent profitability challenges. Here’s what they are and what you can do right now:
•Managers who avoid conflict. What I see time and again are new managers and supervisors who, in an effort to be well liked in their role, shy away from curtailing office gossip and asking the tough questions to make sure that employees are all rowing in the same (and, crucially, best) direction.
•Not keeping your star employees. Everyone knows that it’s more expensive to train a new employee than retain an existing one, but you may be shocked to learn that the actual cost of replacing your star players is between a hard-to-swallow 20% and a dizzying 213% of their salary. The top reason they leave is not necessarily compensation but often an overwhelming sense of under-appreciation and toxicity resulting from office politics.
•Employees who quit but stay. If you think losing employees is pricey, it will pay to bear in mind that keeping them can be exponentially pricier. That once-strong producer who is now apathetic, disgruntled and difficult spreads negativity like a cancer. Profitability erodes until you are doing little more than paying your team to complain about you.
The solution: My clients are always delighted to learn that plugging these profitability holes is simple: training managers and supervisors to step up to the plate and have difficult conversations before conflict spirals out of control. By doing so, you build capacity within your team, retain your best and brightest, and effortlessly inspire every manager’s dream: persistent, predictable and passionate productivity.