Too many businesses launch new initiatives to improve their business results without taking the time to diagnose what the root issue is. To get the best results, you have to make changes where it will have an impact. You have to spend time and money on the specific activities, issues, and systems that contribute to success.

Profitability Equation

Often clients call to say “We aren’t making enough money!” Well, that statement is a symptom, not the problem. What do they mean? Are sales down, costs up, or both? In business, we have one equation Profit = Revenue – Expenses. That one equation though as many variables that result from:

  1. Leadership: Vision, Mission, and Goals
  2. Leadership Execution: Right People, Roles, and Metrics
  3. Products (Services, and Technology): Benefits, Positioning, Packaging, and Pricing
  4. Marketing: Target Customer, Message, Brand, Market Channels, and Promotion
  5. Operations: Production, Customer Service, Sales, Purchasing, etc.
  6. Support: Accounting, Finance, Funding, etc.

When the Profit equation isn’t adding up to the desired numbers, we have to look for the root cause. What is and isn’t working? This diagnostic includes examining internal and external variables. It requires an honest look at financials and what they are telling us is and isn’t happening.

We examine the skills, abilities, and resources needed to get to goals and fulfill the vision and compare those needs to the existing team. [Note: I often find that client companies don’t even know the full set of skills, education, and experience their existing team has. They have either forgotten or failed to keep up-to-date on changes in the team that take place over time.

Impact the Equation, Impact the Bottom-line

Most organizations are impatient when it comes to change. They want immediate actions to take.  They want to do something, anything! There is one immediate action that every organization can and should take when performance is off. The best action to take is to start the diagnostic process to determine what is going wrong.

While that diagnostic process is underway, the organization can also begin identification of internal resources that may currently be underutilized or poorly deployed. For instance, one client had policies and procedures that kept the majority of their sales force tied up doing paperwork and not out selling. For every hour the salesperson was in the field, they spent three hours documenting what happened.  That issue was easily found by asking the sales team what one thing they felt was a roadblock to more sales.

The Root Cause

Every organization can identify the symptoms of things gone wrong (TGWs).  What the organization may lack is the fortitude to ask the tough questions and hear the true answers.  It takes courage to empower employees to speak the truth without repercussions.

I have worked for and with many organizations whose employees had the answer to poor performance. Those organizations were incapable of getting to the answer because employees feared the consequences of speaking up and honestly about what was and wasn’t happening.

No one knows your organization better than your employees. The role of an external change consultant is to guide the organization’s leaders and workers through the profit equation to identify the causes of poor performance.  The change management consultant uses a process to:

  • gather information,
  • foster honest and open communication,
  • identify cultural and systemic obstacles to change,
  • assist in the development of a change strategy, and
  • monitor the process and results at all levels of the organization during the change.

If your organization needs to improve financial performance, the profitability equation shows you where to begin to ask the tough questions and diagnose what needs to change.

 

Copyright ©2018 Lea A. Strickland/F.O.C.U.S. Resource, Inc.

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