Profit Building

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Profit Building

  1. 2. Profit Building Cutting Costs Without Cutting People AUTHOR: Perry J. Ludy PUBLISHER: Berrett-Koehler Publications Inc. DATE OF PUBLICATION: 2000 NUMBER OF PAGES: 162 pages Book pic
  2. 3. <ul><li>How to organize teams with the specific purpose of improving profit. </li></ul><ul><li>Involve employees in the cost reduction strategy and let them actively seek creative ways to cut costs and keep their jobs. </li></ul><ul><li>The real bottom line – everyone builds profit. </li></ul>THE BIG IDEA
  3. 4. What Managers Should Know About Cutting Costs and Improving Profit <ul><li>First, there must be a Profit-Building Team composed of people from different departments. </li></ul><ul><li>Second, a framework for asking all pertinent questions. </li></ul><ul><li>Third, Brainstorming for appropriate solutions. </li></ul><ul><li>Fourth, Action steps must be taken. </li></ul><ul><li>Fifth, Review and follow-up. </li></ul>Cutting jobs must be seen as the last resort in any enterprise.
  4. 5. The Profit Building Process <ul><li>Picking the team. </li></ul><ul><li>Preparing the team and the organization. </li></ul><ul><li>Brainstorming all questions. </li></ul><ul><li>Taking action and documenting results. </li></ul><ul><li>Review and follow up .   </li></ul>The Profit Building Process is a 5-step process for improving profitability and reducing costs.
  5. 6. The Profit Building Process <ul><li>The size of the team </li></ul><ul><li>The need for diverse skills </li></ul><ul><li>The team purpose </li></ul><ul><li>The team goals </li></ul>The basic principles that guide the building of the Profit Building Team
  6. 7. Build a Profit Building Team <ul><li>The size of the team </li></ul><ul><li>The need for diverse skills </li></ul><ul><li>The team purpose </li></ul><ul><li>The team goals </li></ul>The basic principles that guide the building of the Profit Building Team
  7. 8. Choosing and Managing the Profit Building Team <ul><li>Team members must be committed to reducing costs within each line of the Profit and Loss statement. </li></ul><ul><li>Team members must set performance goals that will be easy to track and measure directly from future P& L statements. </li></ul><ul><li>Team members must hold themselves accountable for the reduction of cost and the profit improvement directly associated with the team action steps. </li></ul>The Profit building team is a group of no fewer than 5 and no more than 8 people who have been selected because of their ability to think “out of the box”.
  8. 9. Preparing Your Team and the Organization <ul><li>Direct confrontation. </li></ul><ul><li>Audit the entire process. </li></ul><ul><li>Conduct regular surveys. </li></ul><ul><li>Listen to customers, suppliers and vendors. </li></ul><ul><li>Outside consultants, freelancers, hiring </li></ul><ul><li>Special communication improvements. </li></ul><ul><li>Training. </li></ul><ul><li>Process Review </li></ul><ul><li>Incentives and contests. </li></ul>The Organizational Complexity Predictor is a tool for measuring the level of resistance to change present within an organization.
  9. 10. Taking Action and Documenting Results <ul><li>Ranking Profit building process questions </li></ul><ul><li>Formulating action steps </li></ul><ul><li>Assigning responsibility </li></ul><ul><li>Setting target dates </li></ul><ul><li>Measuring progress </li></ul><ul><li>Developing a contingency plan </li></ul><ul><li>Initiating review and follow-up </li></ul><ul><li>Choosing the next PBP question to address </li></ul>Taking action and documenting is the catalyst for profit building, leading to review and follow up.
  10. 11. Reviewing Progress and Following Up <ul><li>Review each action step to determine whether the cost-saving idea or solution has merit. </li></ul><ul><li>Follow up on the person responsible for taking steps to complete the assignments. </li></ul><ul><li>Ignite the process after recording results, moving on to address the next question. </li></ul><ul><li>Learn from your mistakes. </li></ul><ul><li>Post successes in every corner, including amount of dollars saved. </li></ul><ul><li>Celebrate. </li></ul>Taking action and documenting is the catalyst for profit building, leading to review and follow up.
  11. 12. Some Cost-Saving / Profit Building Ideas <ul><li>Rent out antenna space to cellular phone companies. </li></ul><ul><li>Sell your customer database! </li></ul><ul><li>Explore an Internet strategy to increase profit and reduce costs. </li></ul><ul><li>Review salary increase guidelines and administration programs. </li></ul><ul><li>Encourage employees to take direct deposits to reduce the cost of generating paychecks. </li></ul><ul><li>Develop an incentive to reduce absenteeism. </li></ul><ul><li>Offer higher salaries in lieu of benefits </li></ul><ul><li>Install a choose your own benefits program </li></ul><ul><li>Sell excess property or lease it out. </li></ul><ul><li>Purchase regular instead of premium gasoline. </li></ul><ul><li>Your ultimate last resort: Lay off some employees. </li></ul>
  12. 13. BusinessSummaries.com is a business book Summaries service. Every week, it sends out to subscribers a 9- to 12-page summary of a best-selling business book chosen from among the hundreds of books printed out in the United States every week. For more information, please go to http://www.bizsum.com. ABOUT BUSINESSSUMMARIES

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