The Profit Goal
by Miki Saxon
I think Harvard’s Jim Heskett poses some of the most thought provoking questions in his “What Do You Think” forum of anyone on the web and his readers generate some of the best commentary.
In the current forum he asks, Is Profit as a “Direct Goal” Overrated?
In his experience, the most profitable companies are run by people who don’t focus on profit.
Almost to a person, they treat profit as a by-product of other things to which they devote most of their attention, things such as a focused strategy that delivers results to carefully-selected customers while pursuing policies and practices that leverage results over costs, hiring people with the right attitude (one that fits with the organization’s culture), and proper training and organization (often in teams).
Heskett cites Obliquity, a new book by British economist John Kay, who argues that business problems cannot be solved by drawing a straight line between cause and long-term effect because they are so complex, a manager’s information so incomplete, the competitive environment so complicated, analytic techniques so inadequate, and the number of things over which a manager has control so limited, that it is impossible to make the connection with any assurance.
Tony Hsieh is adamant about not focusing on profit, but that didn’t stop him from building a billion dollar company.
Take a few minutes and read both Heskett’s thoughts and his readers’ commentary. (The forum is open for comments until July 28.)
Not surprisingly, many of them disagreed and felt that profit is the right focus.
I think that it may have been true in the 20th Century, but it certainly isn’t in the 21st.
What do you think?
Flickr image credit: http://www.flickr.com/photos/hikingartist/3000884022/
July 23rd, 2010 at 3:51 pm
[…] This post was mentioned on Twitter by Kenexa HR Institute, Monster Employers. Monster Employers said: Is profit always the right goal? Why the bottom line sometimes isn't: http://mnstr.me/dr75LW #hr #od […]
July 26th, 2010 at 12:36 am
Profit is the only goal towards which you are working if you are in a private company.
There are many ways to make a profit. Having loyal and happy customers is one. Breaking the law is usually another. Cutting cost yet another.
Unfortunately most people go for the easy and direct ways rather than the less obvious ones. Especially when they work only over the long term and require some effort.
So when I read about focus on profit I usually translate it into focus on cost. It helps clarify things.
July 26th, 2010 at 11:03 am
It certainly does.
Anyone with a job knows the company needs to make a profit, so the focus should be how. How not just today, but next week, next month and next year.
Denis, Thanks for adding so much this visit, you must have spent the whole weekend reading.