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Beware of Profitability

Here’s a dynamic I have witnessed lately in several companies: As profits rise, the owner’s attention to long-term, vital issues declines. So a strong bottom line today serves as a distraction from concerns that imperil tomorrow, e.g.: two departments at war, an underperforming key executive, the need for leadership and/or ownership succession planning. Today’s profit becomes an elixir, a drug that fuels denial or numbs one to uncomfortable truths.

There is a corollary: Given the choice between tackling the issue of a disconnected team or pushing to increase current profit, an owner opts to push for increased profit. She/he pushes a ragtag band of individual egos to the limit. The owner becomes exhausted and the lack of teamwork among the egos becomes entrenched. The owner fails to achieve increased profit and inadvertently worsens the disconnection within the team.

Profit itself is hardly the culprit. The danger is the lure of profit to the exclusion of other vital foundations of the business. Profit (or the pursuit of it) may mask fundamental issues or questions that have implications for the long-term health of the business and its owners and employees.

Immediate profit is so alluring, so intoxicating that we’ll risk the future to secure it. It’s the same as the parent who will give a whining child whatever he wants in order to buy some momentary peace. It’s temporary relief, with a price to pay in the future.

Why would a leader succumb to the temptation? I wonder if it has to do with the apparent ease of dealing with tangible, measurable goals like: cost reduction, a targeted percentage of increase in sales, a new discount policy, etc.? These seem more concrete, more familiar, safer, in a sense, than the other issues. Addressing strong egos, for example, means probable conflict, tension, discomfort, and all the other messiness of human interaction. Addressing leadership or ownership succession raises questions of competence, competition, performance, and willingness to let go, as well as dreams, fears and all the other emotions. When faced with the prospect of stirring up that kind of “stuff”, so many of us would rather just concentrate on what appears more practical, more mechanical, and (one might rationalize), more “businesslike”. So work harder, focus on the numbers, and maybe all those messy issues will just go away!

What issues might you be masking with current profit or the pursuit of it? What are the questions, issues or opportunities that are being skirted or finessed? How is the long-term survival of your company threatened by denial about urgent issues? In what ways might you be inadvertently trapping yourself with a focus on profit?

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