Purpose, Productivity, and Profitability – The Confluence of Company Sustainability.
In my previous article, “Rethinking the Purpose of a Corporation,” I wrote about how a business that lacks purpose experiences low productivity and remains vulnerable due to negative mechanisms and that, how in contrast, purpose-driven corporations achieve longevity through the implementation of positive mechanisms.
The conventional approach of workforce reduction (i.e., laying off large numbers of workers) to drive profitability resulted in disengaged and unmotivated employees. Central to a more constructive, forward-looking approach is the engaging, developing, and guiding of employees by to remove the obstacles to productivity. And central to achieving this positive goal is the effective and decisive performance of a company’s leadership.
The direct influence of a workforce in determining an organization’s purpose can be as much, and, sometimes even more of a reason for an individual to enthusiastically and wholeheartedly work at a company as the financial compensation they receive. Some might submit that it has become a matter of morality over money. But I would suggest that their point is both narrow and short sighted. Rethinking purpose and once established, embedding it in a company’s culture to create an economically sustainable entity still involves the necessary foundational elements of income generation and capital accumulation, and it incorporates new and profound aspects that generate significant impact on a company’s productivity.
Purpose is an organization’s aspirational reason for being, beyond profits alone. It’s why an organization matters to people. With an established purpose in mind, people can be the drivers of change and improvement in the both the macro and the micro.
To illustrate this point, let’s take a brief look at Patagonia, one of the top-tier outdoor apparel brands. The company epitomizes the phrase “purpose-driven.” While they’ve always been environmentally conscious, Patagonia continues to increase its efforts on environmental activism. About three years ago, they evolved their brand’s mission from a purpose/product hybrid of “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis” to a more singular, purpose-driven mission: “Patagonia is in business to save our home planet.”
Patagonia was founded by Yvon Chouinard so that he and like-minded people could explore wild places and it led him to the realization that the company should also be in the business of protecting those wild places. As the company grew, so did its commitment to protecting the environment. The company’s purpose is now more straightforward than ever before, and these days people become part of the company because of their commitment to Patagonia’s mission statement.
On a concentrated level, performance and productivity are inextricably linked when the objective is value creation. In optimizing the former to positively influence the latter, there exist a variety of viable options. Those that I’ve experienced as being operationally effective and predictably successful employ a well-structured, holistic evaluation and implementation system. One that I particularly favor, and that delivers sustainable results, forms the foundation of the Tight Lines Performance Accelerator, our patent-pending system that’s designed to help companies increase and maintain holistic, end-to-end productivity.
The simplest way to measure value creation is through revenue. If someone is willing to pay for goods or services, this measure ensures that the process of value undertaken has great worth. So, revenue is a core measure of value creation — along with profit. A company may create value without creating a profit, and many currently do. Without generating a profit, however, they don’t do it for very long, nor are they able to accomplish any of the other things that the organization’s mission and purpose hope to achieve.
In the industrial business sector, Nucor Steel, one of North America’s most diversified steel and steel products company, is another example of a purpose-driven, revenue generating company. It’s mission: “… to become the world’s safest steel company. We live each day with gratitude for the families, customers and partners that make our work possible.”
This defined purpose has empowered Nucor to remove its obstacles to productivity. As a result, it has been able to remain highly competitive, with some of the lowest on average prices and highest gross margins, while paying its employees some of the highest wages in its industry. With “…a team forged around a vision for leading our industry by providing unparalleled customer care, building trusted partnerships, and creating sustained value” Nucor takes a balanced approach that focuses on people, business and, like Patagonia, the environment.
The goal for today’s purpose-driven company and its people is sustainable profitability. What initiates this is an agile system of analysis and evaluation that identifies roadblocks and uncovers accelerators of productivity (i.e.: Consistently getting more and more consistent units of output, for less units of input.). What maintains it is the implementation of corrective actions and a holistic approach to the company vision and it mission.
A PROCESS BASED SOLUTION
Taking a pragmatic approach to productivity-based profitability, I advocate for a phased approach that follows the Tight Lines patent pending Performance Accelerator process. This principled, strategic operating program employs a focus/action/results structure at each stage.
The initial phase is one of assessment in which the focus is placed on defining and examining problems. While these analytical activities can frequently be centered on a specific area of the company, such as manufacturing operations, the most beneficial approach tends to be one where there is an overarching review of all business operations and departments, along with an appraisal of inter-department synergy.
The actions of this process work to develop a baseline valuation of company in the macro, and the operations of each department in the micro. With this data collected and analyzed the company can establish projected improvement on gross margin and consideration of its impact on generating revenue, and most importantly, realizing healthy profitability. The bottom line for this phase is the establishment of a forward-looking performance path.
- LAUNCHING A BOTTOM-TO-TOP REVIEW
The second stage operates on a granular level and assesses each area of the company. The overarching objective is to clearly identify and begin the process of resolving key productivity obstacles by impact, type, and department. In establishing the corrective actions for each, stakeholders at all levels of the organization should be identified. Those who will be directly responsible as participants in the process and the actions taken are key to the success of this phase.
Additionally, process drivers need to be clearly defined and the corrective actions established. Integrating the participants as valued contributors to these activities. Whether it’s a department head, a manager, an equipment operator, a technician, or whoever, their involvement and consensus are motivating factors in achieving systematic corrections starting at the most basic levels of operations and extending throughout the company. Fundamentally addressing the operational and productivity issues at the most elemental levels sets the stage for the next phase.
- DIRECTING A TOP-TO-BOTTOM REASSESSMENT
The focus at this stage is on resolving the next series of operational challenges. For instance, in a manufacturing company, they may be intra-departmental, involving material storage and handling or inter-departmental concerned with issues of a logistical nature. Whatever the case may be, all impediments to productivity, regardless of size or nature, require timely evaluation and action based on a priority ranking of the key performance drivers.
As with the previous phase, teams will be established to accomplish these tasks and leadership roles and duties should be clearly set forth. Each group should be action-oriented in their approach and unified with a continuous improvement mindset. The improvements sought may be incremental over a brief period or accomplished immediately in a breakthrough moment. Delivery of those processes is in constant evaluation and change, so additional improvements may be developed and implemented. In re-examining these actions, the yardstick to measure the effectiveness these operational modifications are the efficiency, effectiveness, and flexibility of these processes.
A key outcome in all of this is the establishment of a collaborative environment in which team members and organizational stakeholders contribute to an improved outcome, achieving elevated skill sets and capabilities on individual and organizational levels. Additionally, this affords management the opportunity to support, collaborate with, and empower the organization with the necessary tools and systems to achieve objectives and the projected outcome. (Most notably, ultimately, but not limited to, sustainable productivity and profitability improvement, and enhanced competitive position.)
- SET THE COURSE. STAYING THE COURSE
With organizational roadblocks to productivity and profitability identified and addressed the next phase in a busines achieving purpose-driven company sustainability lies in its ability to continually innovate, differentiate, and improve across all departments.
Of the numerous methods that have been developed to successfully pinpoint opportunities to help improve a business, I advocate for those that are lean and lend themselves to data-driven outcomes. The success of this approach lies in a continuous improvement business strategy that’s built on three main points:
- EFFICIENCY: Identifying, reducing, and/or eliminating whatever roadblocks inhibit the process and productivity.
- EVOLUTION: Dependent on incremental, constant development instead of one great leap forward.
- FEEDBACK: Core principles of the process that involve self-reflection and assessment.
When changes and ideas are coming from the bottom and rising to the top, from the workers, then those ideas are more aligned to the objectives and values of the purpose-driven organization and implemented much more easily. Consequently, every employee should be encouraged and empowered to look for ways to improve performance. By affording employees input and ownership of the process, they’re more invested and motivated.
The continuous improvement process works effectively through dialogue, feedback and open communications between workers and management. Improvements made can then be measured and repeated so determinations can be made as to their performance and based on their effectiveness and relevance, applied to other aspects of the company.
Regardless of the specific approach, it’s vital that a company employ one that focuses on improvement that’s holistic, inclusionary, and generates value creation for all stakeholders. The optimum productivity and strong category competitiveness that will result are key to maintaining economic sustainability.
- RESETTING THE VISION
Purpose-driven, sustainable organizations act in the present with an eye to the future. So, in this final phase, a company’s vision and long-term mission supporting achievements of newly developed capabilities are addressed.
As in the earlier phases, an oversight team would be assigned to identify future goals, assign responsibility for their implementation, and develop sustainable standards of operational performance that align with those objectives. The net effective of these actions results in greater efficiency, incremental growth, and improved profitability.
The true indicator of the success for all these efforts is a company’s bottom line. Productivity with profitability should always be regarded as “partners” and the top priority. Since value generation for all stake holders – including customers – is of paramount consideration, changes and improvements at all levels should be viewed in the context of revenue generation. To accurately establish how well the productivity-driven program is performing, we utilize our Profitability Calculator, a proprietary analytical tool to identify the true economic benefits of everyone efforts.
As the final stage is reached and with all productivity-related actions implemented for driving increased profitability, the company can now adjust its vision from a more tactical, survival one to a confident, more aggressive mindset. Questions that are top-of-mind at that point include, “How can we bring and apply this knowledge and experience to establishing businesses in new markets, new industries, and attracting new customer audiences”?
Executing a thoughtful, comprehensive process produces profitable results across a spectrum of operational and economic criteria. With the confidence and knowledge gained, it’s no longer a giant leap to make a move into a complementary industry or business, it becomes a smaller and much easier step.
What’s the cliché? Success begets success.
VIEWING CHALLENGES AS AN OPPORTUNITY
The confluence of a company’s purpose, productivity and profitability is a fluid one in today’s economic environment. The rapid fluctuations in market pressures placed upon businesses over the last 18 months have rarely been experienced, but they have brought into view, what for many companies are deficiencies in their organizations that might otherwise be allowed to persist and undermine their future and perhaps, their existence.
Some would say that desperate times call for desperate measures. I would respectfully disagree and suggest that a timely application of an agile system that results in greater productivity and profitability is the best way to survive and thrive.
My conversations with business executives about productivity and value creation give me the opportunity to share my knowledge, have a decisive influence on manufacturing productivity, and get together with some great people. It’s always rewarding and one of my greatest passions. Whether it’s purpose, productivity, or profitability, I look forward to hearing your thoughts and sharing mine with you.
In my next article, I will be writing about the “who, what, when and why” of an Employee Stock Ownership Plan (ESOP), how it plays a part in purpose-driven companies and if an ESOP is right for your organization.
And just in case you missed my most recent article, “Rethinking the Purpose of a Corporation,” you can check it out here.
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ABOUT JOHN ABLANALP
John Abplanalp has spent more than 35 years in manufacturing. He is an experienced, respected industry leader and innovator who has learned from the bottom up. John began as an assembly mechanic responsible for the setup and maintenance of the aerosol valve assembly lines, most recently serving as CEO and President of Precision Valve Corporation from 2003 to 2013 and Chairman of the Board from 2013 to 2015. John served on the Executive Board of the Consumer Specialty Products Association from 2002 to 2015, including positions as Chairman and Assistant Treasurer. Throughout his career, he has been a tireless advocate and ambassador for the aerosol products industry.
ABOUT TIGHT LINES ADVISORS
Founded by John Abplanalp, a longtime avid fly fisherman with a love of all things nautical, the Tight Lines Advisors LLC name accurately reflects his unique methodology. It refers to the success that’s realized when the dynamic strategy and process are effectively applied and everyone in the organization ‘pulls together’ creating the Tight Lines effect of synergy and efficiency.
Tight Lines methodology takes an “inside out” approach that focuses on working in close partnership. Clients implement sustainable process changes, drive greater productivity, and expand capabilities, all while reducing costs. This focus increases product performance and reliability, while establishing and improving customer relationships.
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