PART I
GETTING READY
STEP 1
WHO SHOULD READ THIS BOOK?
Anyone who cares about the profits of his or her business should read this book.
That, by the way, excludes a surprisingly large percentage of the managers in this country. Most mid-level managers, and many senior executives and even CEOs of Fortune 500 companies, are motivated by something other than profits: They want their businesses to grow, or harmonious employee relations and morale, or the ability to travel to interesting places and meet interesting people, or whatever else. Some owners of small businesses are more excited about the details of running an operation than they are about ensuring the financial health (i.e., the profitability) of their enterprise. To these audiences I say: Read the book if youâd like, and perhaps youâll better understand the importance of profitability and how to achieve it.
To those managers of large and small enterprises who truly do care about profits but are not fully pleased with their businesses bottom-line results, I say: You must read this book. If you read it and take it seriously, you cannot avoid doubling, and probably tripling, the profitability of your business.
You can do so in either of two ways. Many of you will read the book, adopt those portions that are most relevant to your organization, and quickly see a dramatic rise in profits. Others will buy into the bookâs philosophy but decide that for a variety of reasons itâs better to have an outsider implement the bookâs recommendations. The latter group should call me at the number included in the âAbout the Authorâ section at the back of the book. I run a company that specializes in coming into your business and doubling your profits. For our services we charge a very small fraction of the increased annual profits we will generate for you. (Thatâs one of the few plugs for my companyâs services that youâll see in this book, but if I practice what I preach, I have to include at least a few.)
STEP 2
YOUR OWN COMMITMENT TO PROFITS
The perceptions and recommendations in this book are culled from two sets of experiences. During the last fifteen years, I have been a consultant to more than twenty percent of the Fortune 500, as well as numerous mid-sized and smaller companies throughout the Western world. Iâve seen every management tool, management style, fad, type of business, and strategy and have the objective outside perspective to separate the good from the bad. Most striking has been the inappropriate focus on the fads and processes themselves, rather than on bottom-line results, but more about that later. During the last eleven of those fifteen years, I have also led my own company, Kaiser Associates, and have made it the most profitable company in its industry, by far. Having to meet a payroll and bring in the customers has been an experience that all of my consulting could never match. The combination of these two perspectivesâthe successful profit maximization of my own company and exposure to many less successful approaches in Corporate America and beyondâhas driven me to write this book. If you do what Iâve done, youâll enjoy the same results that I have.
There is obviously a lot more to running a company than profits. You have to lead, motivate, and train employees, creatively define products and marketing strategies, ensure the efficient and high-quality production of your products or service, and so on. Kaiser Associates and I consult in all of these areas, and we can talk specifically about any of them if you would like. However, this book is focused on profits because thatâs where it all starts and ends. Profitable companies have the money to reward employees, build exciting career paths, and invest in new products, businesses and technologies. Less profitable companies inevitably sink into mediocrity in all waysâmorale, product distinctiveness, and so onâbecause they wind up funding each part of the business half-heartedly and inadequately. Learn how to be very profitable and all else will follow. Try to do it all with mediocre or worse levels of profit, and youâll always be frustrated.
One important note: Doubling and even tripling profits is often conservative. Most of the businesses Iâve seen can have their profits multiplied by four, five, or even ten times if the steps outlined in this book are adhered to rigorously.
The specific steps to cut costs quickly are outlined in Part III of this book. The impact of these cost reductions will be a dramatic and permanent increase in your businessâs profits within two to six months. Steps to raise revenue and therefore further grow your bottom line are included in Part IV. Before I get to these topics, Part II describes the company cultureâor more to the point, the leadership styleânecessary to implement the cost-cutting steps of Part III and the revenue-raising steps of Part IV. This leadership style is at the same time both easy and hard to adopt. Itâs easy in that it requires no advanced degree in business, accounting, technology, or any other endeavor, and no in-depth knowledge of any particular model or system. Most of the action steps required are common sense, pure and simple.
Then why do so few businesses practice them and achieve impressive levels of profitability? For one, because many managers donât truly care about profits, as discussed above. However, even many managers who do care about profits fail a second test: They lack the absolute commitment to profits, the tough, determined resolve to lead their organizations in a way consistent with the recommendations in this book. Doubling your profits (or more) requires a leader who is focused, consistent, tough, and fair, and who is willing to stretch himself or herself and others in the organization to be different and better than the status quo or the average manager of this world. That determined resolve, plus the step-by-step road map outlined in this book, are all that stands between you and doubled profits. To say it another way, if you truly want much greater profits, and youâre willing to make the tough decisions, then doubled profits are easy to achieve.
So settle back and enjoy: Itâs a quick read, and the profits are waiting for you just around the corner!
PART II
CREATING THE CULTURE
STEP 3
SETTING THE STANDARD
Every organization needs a clear, single, over-riding goal. Some companies call this their âmission.â The problem is that these goals or mission statements are off base nine times in ten.
About four in ten fail because the mission statement is nothing more than a pleasant-sounding collection of platitudes and buzzwords like âWe will satisfy our customers with superior products and service, by bringing out the best in our people, while being a responsible corporate citizen with regard to the environment and the communities in which we operate.â
The other five of the ten contain more meaningful content, but fail because that content is not directed at the proper objective. These goals or mission statements assert that the primary purpose of the organization is to serve such-and-such markets, with the following products and services, and/or utilizing the following technologies. The problem is that markets, products, and technologies are all means to an end, not ends in themselves.
The end, the driving goal of any organization, should be one simple thing: to be the best. Nothing motivates employees, excites them about coming to work, and produces better bottom-line results, than to tell everyone in the organization that we as an organization and each of us as individuals will be the best, and will settle for nothing less.
STEP 4
WHAT DOES âTHE BESTâ MEAN?
The Best means three things:
1. We will never settle for the status quo. We will always drive as hard as humanly possible, in as many simultaneous directions as necessary, and as far as necessary, as long as we can identify things to achieve that we have not yet achieved.
This, by the way, does not mean âwork long hours.â My experiences have proven that there is little correlation between hours worked and results achieved, and I never drive my people to work long hours, or even measure or keep track of how many days or hours theyâre working. If you think about your day, week, or month, the truly worthwhile, truly value-creating things youâve done are usually achieved during a few minutes or seconds when you have a crucial insight, make a crucial sale, or motivate a crucial subordinate, and those things are more likely to happen when you are working in a balanced, and not in a manic, way. The same is true, at a different level, for most of your employees. The first critical ingredient to doubling your profits is creating a culture that says âThe Bestâ means always thinking, always striving, always re-making yourself to be better, never being satisfied as long as thereâs something out there which weâve not yet achieved.
2. Our organization will be a meritocracy. That means rewards â financial, career advancement, and psychic â will be allocated based on performance, not seniority, likability, or anything else. Furthermore, rewards will be allocated very differentially: There will be a very wide spread in rewards among different people â as wide as the differences in performance that inevitably exist in any organization.
This is the first place where Iâll lose some of my readers. Many managers are very uncomfortable with meritocracies. Most Fortune 500 companies wonât and donât do it. Meritocracies require managers to make tough decisions that affect people and then tell those people to their faces. None of us wants to be a mean or lousy person, and sometimes we mistakenly feel that we are being mean to that half of the population that we reward less than the other half.
This sense of guilt is truly misguided. Like it or not â and most of us do when we consider the alternative â we live in a capitalist society. What each of us owes our employees is the opportunity to reach the top and the training and support to help them get there. We do not owe them guarantees regardless of performance. Even more to the point, the manager who refuses to run a true meritocracy is being unfair to the better employees who are not being differentially rewarded for their superior performances.
If you are a relatively unsentimental, bottom-line-oriented manager, ask yourself, âWhom would I rather have resentful: the better-performing employees or the under-performers?â Youâll always achieve better results by keeping the top half happy. (That, by the way, is the quickest way to determine, without seeing anyoneâs salary, whether an organization is a meritocracy.
In a meritocracy, the bottom half complains. In a seniority or other system, the top-performing half complains.)
If youâre a more soft-hearted manager, then do what I do. Tell your new employees when you give them a job offer that your organization is a meritocracy. If they perform well, the rewards will be great. If they donât, they wonât be happy with the rewards, and theyâll leave the company sooner or later, one way or another. Then after employees are hired (as you run your business day-to-day), communicate, in many ways all the time, that your company is a meritocracy. Define the terms of the meritocracy clearly: How will performance be measured, and what rewards will accrue to what levels of performance? Then deliver results â good and bad â that are consistent with the terms you defined. In other words, keep your promises. If you do it this way, youâve been fair to all concerned, and you have nothing to feel guilty about. Even better, youâll find people of all sorts telling you over and over again that youâre the best manager theyâve ever worked for.
Creating a true meritocracy means going beyond a lip service meritocracy that says people will be rewarded for performance, but that then creates only a relatively small (say ten or twenty percent) salary difference between the better and the poorer-performing people. It means promoting people when theyâre ready to contribute more and go the next step, regardless of age, years of service, or who else may be offended by being leapfrogged or passed over.
If you donât create a true meritocracy, people will never believe youâre serious about performance, results, and profits. Your employees will think, âHe says he wants profits, yet Bill is adding to the bottom line and not getting rewarded much more than Steve, who isnât.â If you take dramatic and decisive actions obvious to all â promoting, paying, and firing people based on performance â youâll be amazed how fast people focus all their actions on improving the bottom line. Very few organizations have truly tried this, but it works every time. (Someone once said to me that the average time it takes an em...