Page 21 - Arkansas 811 Magazine 2021 Issue 2

in any organization. Translated that means you are perhaps losing 25% of profitability every hour. Calculate the cost of operating your company per hour. I’ve worked with many companies that told me their operating cost per hour is $3,000 or more. Let’s use $3,000. With a 25% loss of efficiency that translates into $750 per hour.
Now here comes the belly punch. I’ve worked with a financial guru who uses a formula that divides the cost by the net profit to identify the dollars that must occur the next hour to make up the previous hour’s lost revenue. Thus, $750 ÷ 4% (assuming your average
net profit) = $18,750. You must sell something or improve delivery to create an additional $18,750 the next hour
to make up for the previous hour’s
loss. And, if you don’t, the numbers become sickening when you consider the potential dollars lost in a day, week, month or year.
Let me explain the challenge. Yes, companies place additional pressure on improving processes, profit margins etc. to increase profitability. And, rightly so, but at the same time, companies continue allowing money to walk out
the door because of people issues. There are many factors contributing to this dollar loss. First the people issues have become a habitual way of doing business so people become blinded
by their own comfort zone. I can’t tell you the number of times I’ve heard about the normal conflicts between departments. When I ask what is being done about that? The typical answer is nothing because it is normal. It may be normal for your company, but you are allowing it to be -- that’s another story.
Second is the willingness to accept
the bitter truth that your company is actually losing 25% of your efficiency attributed to people issues. Okay, maybe it’s 15% so let’s play the numbers game: $3,000 X 15% = $450; $450 ÷ 4% = $11,250. This loss is certainly better than the $18,750 loss but....do you like the numbers?
Whenever any of us is confronted
with information we always have three options. One is to deny it. Believe me I’ve been told many times that isn’t true in our company. And, some of you may believe your company fits into this category. Two are those who may seem to agree with the information but
haven’t or are not willing to make the decision that remaining as is, is not an option. Of course, I’ve heard that many times as well.
Three are those leaders who will agree with the facts and make the decision, remaining as is, is not an option and decide to do something about it. Doing so takes a concerted effort to identify and resolve the people issues. I’m sure many reading this article may have done so.
Obviously, I want you to do everything that you can to improve the efficiency of your technical processes to increase your profitability. As you know
doing so is a win for everyone who is depending upon the financial success of your company.
The overriding objective of this
article is to help open your eyes that
a major opportunity to increase your profitability may be looking you right in the eyes!
Larry Cole, Ph.D., is founder of TeamMax a consulting company that helps people work together. Please send questions and/or comments to Larry at teammax100@gmail.com.
QUALITY PROTECTS.
2021, Issue 2 Arkansas 811 Magazine • 19