Scaling the Profit Mentality

As the size of the company increases so does the level of resources made available for developing extensive complex systems and procedures used to “manage” all areas of the business.  In large companies there are operating divisions which have multiple departments and many functional areas within departments.  There are often teams with cross-functional members to address nearly every issue that arises.  And there are a lot of people to do the things that need to be done.  This is all good and, in most cases, completely necessary.

However, the larger the company, the more levels of management there are and the further the operating staff is removed from the development of the financial model that will determine the company’s future.  There is distance between the direct detailed knowledge of the requirements and the ultimate execution of the activities that most often impact the outcome to the greatest degree.  This distance dilutes the message which then blurs the intent of the directive.  The basic assumptions are that there is a certain dilution that occurs as a message is communicated through the various levels of the organization and additional dilution that occurs as it is translated across non-finance functional lines.  There are an infinite number of factors that may determine the degree to which the dilution actually takes place from person to person.

Without a fundamental understanding of the overall objective (which should be making a profit) and an instinctive ability to make the right financial decision at the right time in order to hit the targets, the actual outcome can quite often be very different from the desired outcome.  The development of a “Profit Mentality” across the entire organization will ensure that every decision is undertaken with a common purpose in mind: the true profitability of the company.

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