Profit Building

PROFIT BUILDING This page intentionally left blank PROFIT BUILDING Cutting Costs Without Cutting People Perry J. Ludy Berrett-Koehler Publishers, Inc. San Francisco Profit Building Copyright © 2000 by Perry J. Ludy All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator,” at the address below. Berrett-Koehler Publishers, Inc. 235 Montgomery Street, Suite 650 San Francisco, California 94104-2916 Tel: (415) 288-0260, Fax: (415) 362-2512 www.bkconnection.com Ordering information for print editions Quantity sales. 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First Edition Hardcover print edition ISBN 978-1-57675-108-4 PDF e-book ISBN 978-1-60509-463-2 2009-1 Interior production: Michael Bass Associates. Cover design: Richard Adelson. To my wife, Lynda, who played a major role in the development of this book. This page intentionally left blank Contents Preface xi 1 What Managers Need to Know About Cutting Costs and Improving Profits The Profit Improvement Paradox 3 Profit Improvement Paradox Test 4 Development of the Profit Building Process 1 5 2 Improving Profits: Better Ways Than 9 Layoffs The Downsizing Dilemma 11 Perpetuating the Profit Improvement Paradox Summary 17 14 3 The Profit Building Process Just What Is PBP? Summary 25 21 19 4 Choosing and Managing the Profit Building Team 27 Picking Your Team 29 PBT in Action 36 Tips for Choosing and Managing Your Team Summary 39 38 viii Contents 5 Preparing Your Team and the Organization 41 The Organizational Complexity Predictor PBT Preparation 49 Managing Change 56 Basic Innovation and Adoption 57 Summary 65 44 6 Generating Creative Solutions by Asking the Questions 67 From Questions to More Questions . . . To Solutions Questions Brainstorming in Action 73 Start Asking Questions 75 Questions Brainstorming Jump-Start List 75 Answering the Questions 82 Facilitating Questions Brainstorming 83 Summary 84 70 7 Taking Action and Documenting Results 86 The Components 87 Ranking the Questions 88 Developing a Performance Improvement Plan Why Document It? 94 Managing the Process 95 Summary 96 90 8 Reviewing Progress and Following-Up My Learning Experience 98 A Thorough Inspection 99 Timely Follow-up 100 Igniting the Process 102 Asking the Next PBP Question 104 The Manager’s Role in Implementing the Innovation 106 Summary 106 97 9 Fifty Action Steps for Immediate Profit Improvement 108 How to Use the List 111 Ideas to Reduce Costs and Build Profits 112 Contents ix Revenue 112 Other Personnel Costs Summary 126 123 10 Sixty Further Steps to Cut Costs in All Areas of Your Business 127 Communications 129 Utilities 131 Professional Fees 132 Marketing 134 Public Relations 135 Insurance 136 Travel and Entertainment 137 Equipment Rental and Maintenance Facilities Cost 139 Vehicles 139 Other Supplies and Services 140 Other Expenses 141 138 11 How and Where to Get Started Appendix Profit Building Process Forms Footnotes Bibliography 154 156 157 143 146 Author Biography Index 159 ix This page intentionally left blank Preface Improving profits is one of the main objectives of business, yet based on my 25 years of experience as a senior executive with direct profit and loss accountability, I have observed that most managers do not truly understand how to move beyond the basics of cost reduction and profit improvement. Rapid changes in technology and the world market exacerbate this problem, making profit improvement harder to achieve than ever before. Increasingly, organizations across the country and throughout the world face the difficult tasks of developing and then executing an e-strategy, meeting the challenge of globalization, and keeping up with fierce competition. Innovation and change have become the centerpiece of our business environment. Business leaders, entrepreneurs, small business owners, and managers are struggling to find the tools they need to achieve success and avoid the pitfalls of inappropriate strategies. Yet it is interesting to note that even though the business environment is changing and the challenges are becoming more difficult, profit improvement continues to be a key part of the solution. Could there be a more effective way to focus our daily business activities? If profit improvement is one of the essential elements of our business strategies and challenges, why don’t we develop the ability to focus continuously on profit xi xii Preface improvement the same way we focus on marketing, operations, and human resources? Why don’t cost reduction and the resources and leadership necessary for its success rece