Profit is the score card for Business

Deepak Choprah says that business should not be about profit only - well, duh! 
To be fair, it was a simple question posted by Diane Nice on the Globe and Mail's LinkedIn Group. 
I find this type of comment irritating for business owners who are fallible human beings. They have enormous pressure from their family and also their employees which is rarely recognized or appreciated, it seems. Naturally, they need to be about profit. Why mortgage your house? Why work long hours? Sure, they enjoy their product but there also has to be a pay off. 
Owning a business and trying to mobilize others to achieve a vision is very, very hard. People like Steve Jobs and the heroes running small companies, are rarely for the profit only. It just will not sustain the business going forward if your only goal is profit.


Where Profit fits into Strategy


Profit is the blood to keep the body going, but every strong business also has a purpose which - to continue the image of the body - is about what you are going to do with that body, where you will take it and how to make an impact on the world. Darn right your vision must have a defined financial hurdle to meet. Without profit, you are out of business. Dead. Kaput.
When I worked as a corporate strategist to a growing bank, part of the Vision was  the ROI of 21%, high for today. Some employees mentioned they did not like the financial benchmark being part of the vision as it seemed to give a whiff od money and greed. Yet this target stated so boldly did drive growth and the bank became the fastest growing company and is now international and still doing well. 
Likewise, Entrepreneurs who are creating a product, and having to meet a payroll, experience pressure cooker pressure to keep their business afloat, never mind growing. This level of effort required too often goes without comment by the anti-business groups. If these businesses do not have a profit, bam - their bank manager will close them down. Game over. The consequences are huge because the business owner is very aware of their responsibility to employees and their families.
We have been seeing the American Government trying to step into the entrepreneur space and actually participate. The US government officials giving the push for loans to green companies like the disastrous Solyndra start-up, are finding out that failure is more often the result than success with business. Since Solyndra was green though, does it justify not checking that profits would be in the cards before the half a billion dollars got spent? The goal of being environmentally green is a better goal to putting profits at the top of the list?
The US Government is finding out how hard it is to make a product, find the market and sell it for a profit, not a loss. The case of Solyndra certainly screams what happens if the profit goal is not at the top of the strategy. This was a green solar panel manufacturer given half a billion dollars as start-up capital by the American government. To put this in context, our Canadian government does not have that much in any, probably in all funds to help Canadian business owners. 
Second, Private Equity would not loan that amount to any start-up. If Private Equity did partner with Solyndra, it would give money in tranches of ten to fifty million, not the whole cash bonanza in one payout period. It is truly shocking to US Private Equity to hear about this story. It smacks of Crony Capitalism and how the system is getting rigged. The Government does not have skin in the game; they are playing with other people's money (tax payers) and the sheer size of their loans boogles the mind. Who was making the decisions? Who made money? Who would be financially driven to make the solar business find paying customers?
Business owners put their blood into their companies. Pundits, like Deepak Choprah, need to recognize the challenge to get things done and to make any change. Business that is out for profit will not keep going. 


Profit is the score card. The Government is finding out that the score card does not get improved by throwing wads of cash at a beginner business, no matter how much you loan to them or how noble the goal. The Private Equity investors will want to know about profit goals first and foremest. They will ask"

Can you make a profit, how soon and when can I get my money back with how much profit?

Deepak may find these mean questions to ask but without the profits, there is no business. No blood, no body to move around.
As a quick aside, I enjoyed this insight from an anonymous comment on the topic of private versus public ability to achieve innovation. Business must focus on profits, even if the US government does not have that pressure:

The somewhat free market produced innovation of the electronic book reader that reduces the energy and waste in the production process of paper books and articles is superior in "Greeness" to just about any innovation in the subsidized electric car programs of the Government-Selected Business consortium.

Run your company as if you are preparing to sell it

When I worked as a strategist for a bank and wrote the speeches for the CEO, who was also the founder, he would confuse me with his insistence on always bringing up complacency. As a young MBA with my career before me, I could not see wasting time on such a mundane topic which seemed more of a downer and something your mother would say. 

As I look back, I realize he was wise with his observation that success brings complacency and complacency brings failure.

Lesson from the recession: Run your company during boom times as if times were lean.

We have heard many leaders bemoaning that their companies would be far more successful if they had run them during the boom period as they are running them now. Without question, success can bring complacency. However, the best leaders we know resist this tendency. Their companies’ cultures foster continuous improvement and cost-reduction regardless of great performance.

Similarly, the advice we often give entrepreneurial and family business owners is, “Run your company as if you are preparing to sell it in three years.” This means eliminating underperforming employees (which can be difficult, even when done with great care and consideration, but is critical), and building cost-cutting and improvement initiatives. These efforts will grow EBITDA and result in a more successful, resilient and valuable company.

As for my old boss, his bank is still in business, having survived the derivatives madness, and has achieved its vision to be global. Complacency is indeed the key word to put in all your leadership speeches.

Jacoline Loewen is a Director of Loewen & Partners Inc., an Exempt Market Dealer, specializing in finance for owner operators and family businesses, specifically acquisitions, restructurings, sales, successions, strategy and private equity financing.

Jacoline began her career with Granduc Mines, Northern BC, and then Deloitte in their strategy unit. She developed a strategic planning model and published it in a book called "The Power of Strategy”. She also wrote "Business e-Volution" and “Money Magnet: How to Attract Investors to Your Business” (Wiley), which has been used by Ivey as a text book.

She is a Director on the Board of the Exempt Market Dealers Association (EMDA) responsible for brand and communications. She is on the advisory board of DCL International, Bilingo China and Flint Business Acceleration. She has been a Director for other Boards such as the Strategic Leadership Forum.

She is a regular panellist on BNN: The Pitch, a contributor to the Globe & Mail and National Post, serves as a judge for the UBC and the Richard Ivey School of Business’ Business Plan Competitions and is a guest lecturer at Ivey and Rotman Universities. Jacoline holds an arts degree in Industrial Relations from McGill University and a MBA from the University of the Witwatersrand.  Her MBA thesis was selected by Cambridge University and published by Cambridge’s Engineering faculty. 

Catch your employees doing something right and boost productivity

Kindness at work goes much further than the stick, although in these stressful times, the stick can be the quick option. Quick is not always the best option.

Just as in health care, the hidden impact of touch and care can speed up healing, so can attention at work improve motivation. I have been following the career of the CEO of Campbell Soup, Doug Conant, who has been an exceptional leader. When I read his quick snapshot on three rules for building appreciation I was reminded of my research findings from my Masters' thesis which was on Deming and his rules for building a total quality culture within a company. The managers I surveyed gave "opportunity to celebrate" as the most important step to build a quality mindset, yet it was the step they did not do.

Doug Conant mentions celebration as his second rule for building appreciation and it reminded me that most managers find this hard to do. Doug's success as a leader is obviously about paying attention to the high touch part of business. 


Doug Conant, Campbell Soup, and his 3 Rules for Building Appreciation:

Make a personal connection early on
"Your associates can tell when you are being direct, sincere and authentic. When you are, you establish trust. When you aren't, you don't. I have developed a practice that helps get things out in the open the moment a new hire meets me — I declare myself. I tell the person I'm meeting about my background, my values, my leadership philosophy, my expectations and even my favorite quotes. I then ask him or her to share something with me. My goal is to take the mystery out of our relationship as quickly as possible. This has proved to be a very powerful tool for relationship-building."
Look for opportunities to celebrate
Doug says, "My executive assistants and I spend a good 30 to 60 minutes a day scanning my mail and our internal website looking for news of people who have made a difference at Campbell's. For example, as of this writing I just learned about a woman named Patti who just got promoted in our customer service area, so I made a note to congratulate her."
Get out your pen
.Doug says, "Believe it or not, I have sent roughly 30,000 handwritten notes to employees like Patti over the last decade, from maintenance people to senior executives. I let them know that I am personally paying attention and celebrating their accomplishments. (I send handwritten notes too because well over half of our associates don't use a computer). I also jump on any opportunities to write to people who partner with our company any time I meet with them. It's the least you can do for people who do things to help your company and industry. On the face of it, writing handwritten notes may seem like a waste of time. But in my experience, they build goodwill and lead to higher productivity."

Andrew Bell helps me figure out my question for 2012 on BNN The Pitch

Throwing his usual curve ball while on live TV, Andrew Bell asked me if business in Canada was being buried by government regulation.
Since I am on the board of the Exempt Market Dealers which seeks to regulate Loewen and Partners role as corporate finance adviser to business owners, I do accept some government regulation from the Securities Commission.
What is the role of government though in helping our industries outside of the oil and mining circles?
The cost of government is nearly getting to where tax payhttp://www.bnn.ca/Shows/The-Pitch.aspxers must work until August. It is a great deal to tax in order to pay to keep our regulations and government systems running. That is where I question the removal of money from the people creating jobs and money for the communities around their business. What is the opportunity cost of that transfer of money?
What can government do to help business in Canada get stronger?
That will be my question for the year 2012.

The Pitch gives marketplace for businesses wanting growth

The marketplace of ideas is what gets our engines running, or my engine gets a rev from others. This year, for sheer engine power, my favourite TV show is BNN The Pitch.  Andrew Bell is the wonderfully curious host and for the past year I have been part of the pane that interviews the two company owners seeking capital.
Here are the details from today's The Pitch show.

Stephanie McLarty, President & CEO, REfficient

www.REfficient.com

Stephanie McLarty, President & CEO, REfficient, has a way for businesses to sell surplus technology equipment to others. Her large clients generate between $50,000-$200,000 net proceeds from the process and divert 30-50 tonnes from landfills.

Christopher Serrie, CEO & Managing Partner, Building Water Solutions

www.buildingwatersolutions.com

Christopher Serrie, CEO & Managing Partner, Building Water Solutions, has already signed a deal with Canada's largest home builder to provide a special water filtration system for high rise condo buildings and is looking to expand.

Panelists:

Rick McGraw – President and CEO of Greenrock Asset Management

Sarah Prevette – Founder, Sprouter.com

Jacoline Loewen - Loewen Partners, Private Equity, author of Money Magnet.