Executive Excellence: Profitable Business...

Sustainable profitability is centered in a firm’s people wherever they resides in the chain of relationships for both products and services. People are connected on corporate Intranets and the Internet, providing an expansion of a firm’s global management system. Directly managing all human assets and relationships can be more profitable.

Centering your firm in your people means profiling a set of human issues that are not commonly considered in traditional “people management.” Instead of separating employee issues from customer issues, you take a complete view of your firm’s people, including employees and their family members, temporary staff, contract staff and consultants, customers, suppliers, service providers and partners.

With a profile of human assets, executives will see how much more leverage they have but rarely exercise. Simply treating everyone as a person, with care and respect, has a huge multiplier effect – enhancing revenues while reducing costs.

Applying Portfolio Management

When it comes to managing human assets, executives need the benefits of portfolio management – discarding flawed financially-based metrics such as FTE (full time equivalents) and headcount statistics and replacing them with a profile of all relevant assets and relationships.

The purpose of such analysis is to identify revenue-generating capabilities and full costs, built from core human assets. For example, key administrative and support staff that leverage top executives and revenue-generating sales and operational staff are core assets, as are well trained customer service operators and collections and payables clerks, who importantly control the relationships that determine the company’s cash flows.

Core assets are leveraged and process gaps eliminated through asset-based portfolio management. Often, reducing the use of overtime, temporary staffing, contractors, and service providers, while bringing key people and the relationships they possess back inside the firm, reduces costs and generates higher revenues.

This difference in perspective helps assess the full profitability potential of core human and other assets at defined asset-utilization levels rather than looking at revenues and cost incrementally based on product lines, service categories, departments, and expense categories.

The focus in fully utilizing human and other assets is on having the right people in place at the right time, highly motivated and trained, with the right incentives to do a good job. Broad-based improvement requires analysis of existing programs and processes in terms of how they provide information, education, training and supports to increase utilization in a qualitative as well as quantitative sense.

A More Profitable Business Model

Executive and managers must shift how they view their people. Assets, unlike resources, are not consumable. Building revenues and costs up from core assets means getting more out of them in terms of utilization, and extending their life-cycles through systematic actions as part of an overall asset-based business model.

Profitability in terms of operating margins can then be increased at every revenue level because revenue generation is emphasized and wasteful costs related to poor people management is eliminated; whether the people involved are customers, employees, contractors, consultants, consumers, or others having important relationships with the firm.

It is essential that firms discard management practices that degrade the value of core assets. This is best done by adopting a human-centered business model which is both humane as well as highly efficient. The goal is to employ fewer people, while keeping them in-place and highly motivated, treating them well and paying them well based on performance. When this is done right, firms have the best of both worlds – revenue growth and a more efficient cost structure that organically increases margins and profits.

First publication, copyrighted 2002 by System Change, Inc.:

Carlson, John G. “Profitable Business: Adapt more profitable business models.” Executive Excellence 19.7 (July 2002): 8.

John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.

		Profitable Business: Adapt more profitable business models by John G. Carlson, System Change, Inc. Sustainable profitability is centered in a firm’s people wherever they resides in the chain of relationships for both products and services. People are connected on corporate Intranets and the Internet, providing an expansion of a firm’s global management system. Directly managing all human assets and relationships can be more profitable. Centering your firm in your people means profiling a set of human issues that are not commonly considered in traditional “people management.” Instead of separating employee issues from customer issues, you take a complete view of your firm’s people, including employees and their family members, temporary staff, contract staff and consultants, customers, suppliers, service providers and partners. With a profile of human assets, executives will see how much more leverage they have but rarely exercise. Simply treating everyone as a person, with care and respect, has a huge multiplier effect – enhancing revenues while reducing costs. Applying Portfolio Management When it comes to managing human assets, executives need the benefits of portfolio management – discarding flawed financially-based metrics such as FTE (full time equivalents) and headcount statistics and replacing them with a profile of all relevant assets and relationships. The purpose of such analysis is to identify revenue-generating capabilities and full costs, built from core human assets. For example, key administrative and support staff that leverage top executives and revenue-generating sales and operational staff are core assets, as are well trained customer service operators and collections and payables clerks, who importantly control the relationships that determine the company’s cash flows. Core assets are leveraged and process gaps eliminated through asset-based portfolio management. Often, reducing the use of overtime, temporary staffing, contractors, and service providers, while bringing key people and the relationships they possess back inside the firm, reduces costs and generates higher revenues. This difference in perspective helps assess the full profitability potential of core human and other assets at defined asset-utilization levels rather than looking at revenues and cost incrementally based on product lines, service categories, departments, and expense categories. The focus in fully utilizing human and other assets is on having the right people in place at the right time, highly motivated and trained, with the right incentives to do a good job. Broad-based improvement requires analysis of existing programs and processes in terms of how they provide information, education, training and supports to increase utilization in a qualitative as well as quantitative sense. A More Profitable Business Model Executive and managers must shift how they view their people. Assets, unlike resources, are not consumable. Building revenues and costs up from core assets means getting more out of them in terms of utilization, and extending their life-cycles through systematic actions as part of an overall asset-based business model. Profitability in terms of operating margins can then be increased at every revenue level because revenue generation is emphasized and wasteful costs related to poor people management is eliminated; whether the people involved are customers, employees, contractors, consultants, consumers, or others having important relationships with the firm. It is essential that firms discard management practices that degrade the value of core assets. This is best done by adopting a human-centered business model which is both humane as well as highly efficient. The goal is to employ fewer people, while keeping them in-place and highly motivated, treating them well and paying them well based on performance. When this is done right, firms have the best of both worlds – revenue growth and a more efficient cost structure that organically increases margins and profits. First publication, copyrighted 2002 by System Change, Inc.: Carlson, John G. “Profitable Business: Adapt more profitable business models.” Executive Excellence 19.7 (July 2002): 8. John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.
		Copyright 2002 by John G. Carlson, System Change, Inc. All rights reserved.