When are Bad Profits Good for Interiorscape Businesses?

Much has been written in recent years about corporate profits.

Apparently, there is a debate about whether profits are good or bad. As a business school graduate, business owner, and manager with over 30 years of experience, I can reassure you that profits are indeed good – mostly. Some profits are bad. But sometimes these bad profits are actually good. Please let me explain.

The virtues of good profits are well known. Profits allow an organization to continue to exist, to employee people, to provide necessary services, and more. Even non-profit organizations must be profitable or they will eventually cease to exist. Profits that are generated by providing value, and are used to support the long-term viability of the organization, are good – very good. Not all profits fall into this category.

Profits that are generated by destroying value, or are used for short-term gain, are bad profits. Every organization I’ve worked for took bad profits from time to time, sometimes intentionally, but mostly without malice.

An example of taking bad profits is intentionally short-changing a customer. There is a fine line between being smart and taking advantage of a situation. Installing plants that are undersized without the customer’s knowledge is an example of intentionally short-changing a customer – taking advantage. However, the purchase of a slightly smaller size plant at a significant discount with the customer’s involvement and shared savings is being smart – a customer advocate.

Bad profits are easy. They’re a drug. They should be avoided – mostly. Not all bad profits are the result of short-changing a customer. And sometimes, bad profits are the best option.

For those of you on salary, you know that when you’re given extra tasks simply to limit payroll costs, it feels like someone added a massive weight onto your back, especially if the extra tasks must be completed over a beautiful, sunny weekend. It feels borderline abusive. Profits are generated, but at what cost to morale? These are bad profits.

On the other hand, there are legitimate times when salaried folks need to step up and go all in. They are the core of the organization and should be able to be counted on to jump into action when the call goes out.

In my previous life as a contractor, we once had a huge opportunity fall into our lap. We had a very short window to get our proposal together. The only way possible was for all of our managers to suck it up and give up their weekend to work on the bid – all hands on deck.

We came together as a team and made it happen. We made the best of it and actually had some fun along the way. The reason why we were able to take these bad profits was because we rarely did so. We used the drug sparingly. We were not drug addicts.

Good profits are always good. Bad profits are usually bad. However, sometimes bad profits are good.

Do your managers know the difference and when to use bad profits for good? It’s an interesting concept to ponder.

Now go forth.

 

Featured image by 401(k) 2012

Phil Harwood is a Managing Partner with Pro-Motion Consulting (http://www.mypmcteam.com/). He is a green industry veteran with over 30 years of managerial experience. He graduated with honors from the Executive MBA Program at Michigan State University and was recently nominated “Alumnus of the Decade” by his peers.

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  • windummie

    A nice treatment of a sticky topic

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