Excerpt
from...
13
Fatal Errors Managers Make And How You Can Avoid Them
At
many companies, this book about developing management skills
is required reading for managers. It has remained in print
since 1985 and has been translated into Japanese, French,
Spanish, and German. The source materials consisted of tapes
of Steven Brown's lectures, tapes of discussions with Brown,
and life lessons learned the hard way during Josey's years
in management.
FATAL
ERROR 6 - Forget the Importance of Profit
Earlier
I asserted that management has a major purpose: to provide
for the continuation of the business. Of course, but in what
particular way? The following story holds the answer.
One
day the president of a company was having lunch at a downtown
restaurant. Halfway through lunch, he realized that four familiar
voices came from the next booth. Their discussion was intense
enough that he could not resist eavesdropping. He heard each
of his managers talking proudly about his department. The
chief product engineer said, "It's no contest. The department
that makes the most important contribution to the success
of a company is the product division. If you don't have a
solid product, you have nothing."
The
sales manager jumped in. "Wrong! The best product in the world
is useless unless you have a dynamic sales effort to get it
sold."
The
vice-president in charge of corporate and public relations
had another opinion. "If you don't have the proper image inside
and outside the company, failure is certain. No one buys a
product from a company it doesn't trust."
"I
think all of you are taking too narrow a point of view," countered
the vice-president in charge of human relations. "We all know
that the strength of a company lies within its people. Minus
strong, personally motivated employees, a company grinds to
a halt."
Each
of the four ambitious young men continued to debate in favor
of his area of primary interest. The discussion continued
until the president finished lunch. He stopped by the booth
on his way out of the restaurant. "Gentlemen," he said, "I
couldn't help overhearing your discussion and feel delighted
with the pride each of you takes in your department, but I
must say that experience has sown me that none of you is correct.
No one department of any company is responsible for a company's
success. When you get to the heart of the matter, you find
that managing a successful company is like being a juggler,
trying to keep five balls in the air. Four of these balls
are white. On one is written product. On another it says sales.
The third is labeled corporate and public relations, and the
fourth says people. In addition to the four white balls, there's
one red one. On it is the word profit. At all times, the juggler
must remember: No matter what happens, never drop the red
ball!"
He
is absolutely right. Without a profit, the company with the
finest product, highest image, most dedicated people, and
the most impressive financial reserves soon gets in trouble,
the kind of trouble that can quickly turn a Fortune 500 company
into only a memory.
The
Profit Incentive
Go
anywhere in the world and you will find that the paramount
way by which anyone evaluates management is its ability to
produce a profit. Even if you were in China as the manager
of a farm or industrial plant, those above you would measure
your success by the yardstick of profit - however, they would
not describe it with so capitalistic a term. They would call
it an "economic efficiency index that determines that amount
of surplus left after expenses." In plainer words, they would
still judge you on your ability to produce a profit.
You Can't Exist
without Profit
Until
the recent resurgence of entrepreneurial studies, I believe
that profit has become a dirty word, essentially because
of the many liberal non-capitalistic notions popular in our
society. Quite simply, those who support such ideas have a
difficult time relating profit to service. They would give
the store away. Primarily because they have lived in a cocoon
all of their lives, they have developed a myopic, shortsighted
opinion. Those who never shoulder the responsibilities of
making the decisions necessary to provide for the continuation
of a business or a payroll miss one of life's great experiences.
They have never made a payroll. Until someone has, he or she
cannot imagine the true depths of anxiety or total fulfillment
of relief. You haven't lived until you've lived through it
- it's like white-water rafting.
No
business or institution can continue without generating a
surplus over and above its cost of operation. Even churches
and not-for-profit institutions must maintain this discipline.
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