The Word Profit has Provoked a Wide Range of Issues and Emotions among Respondents & Businesses around The World. It also Launched Debates, and many readers Argued for Measures of Success other than Profit, writes Prof. Jim Heskett, Baker Foundation Professor, Emeritus, at Harvard Business School.
Why do managers choose to pursue profit so directly? The word “profit” has always provoked a wide range of issues and emotions among respondents. It sets-off several debates. They ranged from definitions of “acceptable” profit, to profit’s effect on decision-making and even to the future and viability of capitalism.
One debate concerned the primacy of profit as a goal. Deaver Brown (author of The Entreprenuer’s Guide) led this argument by saying, “Profit is the only legitimate goal of a corporation...,” pointing out that it serves many important functions for us as employees, citizens, and others. David Zemanek (Sales leader at Thomson Reuters) added, “Isn’t that why they call them ‘for profit’ companies?” Ann Brown (former Chairman of Consumer Product Safety Commission) said, “There’s nothing wrong with profit as a goal. What’s important is how you achieve it.” (Tony Hayward’s replacement at BP, announced on July 26, may be a timely illustration of that point; BP is very profitable, but there is official evidence that it continues to compromise safety.)
Gerald Nanninga (VP – Retail Ventures Inc.), on the other hand, argued that profit is a default measure, commenting that, “It is easier to measure and reward a goal of ‘producing a profit of x’ than it is to set goals around creating value faster than costs (his preferred goal).” Deepak Alse (a technology expert) reminded us that “the world of business... is an unbounded system! The ‘Corporation’ is in effect an acceptance of the idea that profit-seeking should happen through indirect approaches.” Mark Nadler (Partner at Oliver Wyman-Delta) commented, “Operationally, profit as a final goal is probably impossible because of principal/agent problems and lack of information and knowledge. This makes intermediate targets that affect profit important.” Steve Brogan (Managing Partner of Jones Day), meanwhile, offered an interesting analogy: “Anyone who has ever gotten involved in serious marksmanship understands that there is a difference... between the intended target and the aiming point.” In a pessimistic and somewhat lamenting tone, Tom Dolembo (Consultant, Disaster Planning Associates) ventured another reason: “I suspect profit, in the pure capitalist sense, is obsolete... we’re just not capitalists anymore. Profit is just another archival number to be doubted.”
One argument for measures other than profit as “direct” goals is the complexity of the corporation and the difficulty of drawing a direct line between any action and profit. Consultant Raymond Suarez said, “In a world characterised by increasing complexity... reconsidering profit as being the sole and superior criterion for business success, is the only rational approach to take.” On the other hand, Dan Wallace (co-founder of Hungry Fish Media) argued, “The presumption that problems are complex is a self-fulfilling prophecy... the most profitable and successful companies I know are rigorous... about driving simplicity and... driving out complexity...”
One debate concerned the primacy of profit as a goal. Deaver Brown (author of The Entreprenuer’s Guide) led this argument by saying, “Profit is the only legitimate goal of a corporation...,” pointing out that it serves many important functions for us as employees, citizens, and others. David Zemanek (Sales leader at Thomson Reuters) added, “Isn’t that why they call them ‘for profit’ companies?” Ann Brown (former Chairman of Consumer Product Safety Commission) said, “There’s nothing wrong with profit as a goal. What’s important is how you achieve it.” (Tony Hayward’s replacement at BP, announced on July 26, may be a timely illustration of that point; BP is very profitable, but there is official evidence that it continues to compromise safety.)
Gerald Nanninga (VP – Retail Ventures Inc.), on the other hand, argued that profit is a default measure, commenting that, “It is easier to measure and reward a goal of ‘producing a profit of x’ than it is to set goals around creating value faster than costs (his preferred goal).” Deepak Alse (a technology expert) reminded us that “the world of business... is an unbounded system! The ‘Corporation’ is in effect an acceptance of the idea that profit-seeking should happen through indirect approaches.” Mark Nadler (Partner at Oliver Wyman-Delta) commented, “Operationally, profit as a final goal is probably impossible because of principal/agent problems and lack of information and knowledge. This makes intermediate targets that affect profit important.” Steve Brogan (Managing Partner of Jones Day), meanwhile, offered an interesting analogy: “Anyone who has ever gotten involved in serious marksmanship understands that there is a difference... between the intended target and the aiming point.” In a pessimistic and somewhat lamenting tone, Tom Dolembo (Consultant, Disaster Planning Associates) ventured another reason: “I suspect profit, in the pure capitalist sense, is obsolete... we’re just not capitalists anymore. Profit is just another archival number to be doubted.”
One argument for measures other than profit as “direct” goals is the complexity of the corporation and the difficulty of drawing a direct line between any action and profit. Consultant Raymond Suarez said, “In a world characterised by increasing complexity... reconsidering profit as being the sole and superior criterion for business success, is the only rational approach to take.” On the other hand, Dan Wallace (co-founder of Hungry Fish Media) argued, “The presumption that problems are complex is a self-fulfilling prophecy... the most profitable and successful companies I know are rigorous... about driving simplicity and... driving out complexity...”
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
