Purpose and the P&L
Ask a CEO if they’d like
To be clear, cost reductions really means:
• Pummel suppliers and partners for lower pricing (because they’re the problem!)
• Freeze everything, including budgets, salaries, and the like (now that took a lot of critical thinking and brainpower to figure out)
Of course, as I learned early in my career, you can’t expense your way to profitability.
Continuing with our story, here’s where most senior leaders miss the boat. The greatest root cause of poor profitability is ever increasing organizational variation. To make matters worse, it is a “hidden cost,” the silent killer that plays no favorites. There is no line item on the P&L for this profit assassin. It lurks in the shadows, taking many forms as you’ll see below.
Yes, I can see your furrowed brow and hear your skepticism laced with confusion. To provide clarity and understanding, here are four key areas that cause company-wide variation to skyrocket, sabotaging every important KPI, including revenue, margins, cost control, customer and employee satisfaction, and overall profitability to name just a few:
4. No understanding of a system. To be more specific, businesses often have no idea how their entire ecosystem interacts – the key components therein that impact one another – to produce healthy profits. As Mufasa said to young Simba in the Disney hit The Lion King, “Everything you see exists together in a delicate balance.
3. Identity crisis. Not only do companies not know who they are, they don’t know who they are not. It’s a Jekyll and Hyde sort of thing. If there’s no clear organizational identity, then people show up one day thinking and behaving one
2. Sameness is rampant. I’ll write a separate post for this one,
1. Lack of true north. Similar to
The remedy? Organizational fitness, beginning with becoming purpose-driven, reduces variation like nothing else. It’s the hardest thing senior leadership will ever design, yet it can yield the greatest rewards for all stakeholders.
NOTE: If you found this post helpful, please refer to Chapters 3, 11 and 14 in Clean Slate for more beneficial information.
Why leadership should trash their current business model, reject popular sales advice, operate like a startup, and leverage the new rules for prosperity to achieve explosive profitable revenue growth (PRG).