The Virtuous Cycle of Profit

Happy Friday,

If you set out to design the best-performing organization you could from scratch, you’d think everything through and probably do some things differently. Unfortunately, when we take a job with a going concern there's a tendency to default to standard practices and accept the results they deliver, i.e., 12-15% of staff will quit this year, 12-15% profit is good enough, lawsuits are just part of doing business, 65% utilization is about all you can expect, and people must be constantly reminded to deliver the numbers.

It's all a false narrative you shouldn't accept. Case in point: Our firm (130 folks) had one person voluntarily quit us to join a competitor in 17 years. Profit was well into the 20s every year but one. We had zero lawsuits. Utilization was consistently in the high 70s to high 80s, and no one ever uttered the word ‘utilization’. Not once.

Because people are the organizations, there's a symbiosis, enabling each to provide what the other needs to maximize performance—a virtuous cycle. What people want most is meaning, purpose, and self-actualization, and organizations can be made to deliver all three. Isn't that what all of us want...ultimately?

In exchange for these three things, people will reward the organization with loyalty and sacrifice, reducing the organization's risk and expenses and increasing profit.

Take care of your people and they'll take care of you.

But for a cycle to virtuously compound, there can't be any short-circuits! This is where most companies come up short because they've already adopted flawed old practices and assumptions.

The Virtuous Cycle of Profit. Do these well to unleash your organization's full potential:

Invest in Exceptional People and Tools –> Enforce High Leadership Standards –> Facilitate Self-Actualization –> Align Incentives –>Reward Repeat Business –>Earn Above Average Profit –> Invest in Exceptional People and Tools

Invest in Exceptional People and Tools – Hire for character, communication, leadership aptitude, and technical excellence.

Enforce High Leadership Standards – Better no leader than a mediocre leader.

Facilitate Self-Actualization – Use Maslow’s Hierarchy of Needs, specifically self-actualization, as your organization's mantra for employing humans.

Align incentives – Incentivize, reward, and publicly praise the things that drive the organization forward, not things that don’t, e.g., project management excellence, not leadership promotions.

Reward Repeat Business – Nothing confirms excellence like repeat business. Risks go down and profits increase when you work for clients you like and don't spend a fortune trying to talk people into hiring you.

Earn Above Average Profit – Treat profit as a result, not a purpose. Like a butterfly, the harder you chase it, the more it flutters away.

Have a great weekend!

Dave

Feedback and blowback are always welcome: dave@goodnewsfriday.com

All 100+ past topics are available at @goodnewsfriday.com