Increasing Profits By Doing Less
by Dr. William T. Lybarger, Ph.D., Healthcare and Business Management Consultant
What is the fastest way to increase profits? Stop doing things that don't make a profit! Could increased net profit, increased return on investment and improved cash flow be that easy? The answer is yes. The real trick is to know what parts of your business have become irrelevant and are no longer aligned with organizational success. I believe this illumination can be achieved through the implementation of three concepts; Less Is More, Value-Based Alignment Analysis and Right To Left Management.
We will start with Less Is More. Less Is More is about operating a lean organization. My position is that Less Is More in every situation except customer satisfaction, employee satisfaction, productivity and profit. Let me explain the "employee" part quickly. I believe we should have the least number of employees possible while paying them the most possible. Operating a Less Is More organization suggests that we have the least number of paper clips, computers, lawn mowers and buildings possible. In reality, we manipulate four resources in our quest for competitive advantage; human, financial, physical and information. In each of these resources we should search for and dispose of non-aligned activities, procedures and people. Disposing of those redundancies lowers fixed-costs, allows the use of money saved for more productive activities and achieves profitability more quickly.
My version of the "Value-Based Alignment Analysis" has to do with deciding what resources have become redundant or out-of-alignment. You start with this question "what do we value most?" In other words what is our most valuable success? If you were required to select one "success" as most important to the survival of your organization, what would it be? What is the one best indicator of success?
For Gordon Bethune at Continental airlines "macro success" was on-time-arrival. For Michael Dell it was return on investment capital. The "macro success" decision must be made before the alignment analysis can begin. The actual analysis requires that you look at all components of your organization with the following question in mind "what are we doing that does not increase the probability of achieving our macro success?" Then stop doing them!
It has been my experience that the people who can best tell you what to stop doing are the people who do the work rather than the people with whom you spend most of your time. I suggest that you put together a group of employees, a stratified random sample is good, and ask them to identify irrelevant work activities to be discontinued. Then, if you want the people who do the work to trust you, empower them to stop doing irrelevant work. Identifying redundant employees is a more sensitive process. You might consider asking area managers to rate supervisors and employees on a scale of one to four based on their ability to exhibit "preferred work behaviors." Those receiving a one or two four should be put on a plan of correction for 180 days and then released or retained based on performance. This value-based alignment analysis, done appropriately, is the beginning of a process that increases morale, profitability and competitive advantage.
Right To Left Management is the implementation component that incorporates Less Is More and Value-Based Alignment Analysis. At this point, your organization's macro success and redundant resources have been identified. Now it is time for organizational alteration or realignment. This is the way I like to do Right To Left Management.  Select your macro success (right side of operations),  identify ten preferred employee behaviors (six behavioral and four technical) that, exhibited consistently, increase the probability of achieving your macro success and  then move left-to-right through the operations process (recruitment, selection, training, compensation, performance management and employee relations) looking for situations where organizational practice is not in alignment with organizational success. For example, does your recruitment process result in a pool of applicants that have the ability and desire to exhibit preferred work behaviors consistently? For selection, does your process guarantee 90 percent accuracy in hiring those individuals who can exhibit success behaviors? Does your training process result in increased exhibition of preferred behaviors? Many organizations spend 60 percent of their budget on compensation. Are you paying people to exhibit work behaviors not in the best interest of the organization? In other words, are you paying people to help you fail? Does your performance management process ensure that good employees get good things and bad employees get bad things? Finally, are you creating a "people first work culture?"
I have drawn my perspective from reading books by Jack Welch, Gordon Bethune, Michael Dell, Ken Iverson, Larry Bossidy, Jim Collins and 30 years of management experience. Finally, it is more important to do than think! Get busy!