Why Making Money is Bad for Business

For as illogical as this title may at first appear, by the end of this article, I hope it will make sense to you.  In fact, I might even be able to summarize it in one sentence:

High profits hide operational deficiencies.

When a company is successful and cash flow is not a problem, there is normally very little incentive to conduct internal control investigations or implement corrective action plans in an effort to make a business run more efficiently.  Money is coming in so why fix something that isn’t broke, right?  False bravado is one of the biggest mistakes a company can make.  In other words, portraying the financial stability of your company much more confidently than it actually is as a defense mechanism.

Positive change comes from chaos, not comfort.  When a company is in dire straits, solutions must be devised and skillfully executed in order to avoid catastrophe.  When revenue is high and numbers are up, management tends to become complacent and bureaucracies begin to form.  Healthy profits will almost undoubtedly mask the fact that operational deficits exist and therefore, little or nothing will be done to correct them.

I’m not suggesting that the solution to a successful business is to not make money.  I’m rather suggesting that when a company is profitable, particularly close attention must be made to ensure the presence of healthy budgets don’t disguise wasteful processes from developing.  This happens more often than most companies would care to admit and it’s a natural product of human laziness. 

When money is not a problem, the illusion of procedural compliance is present. Protocol is developed by management as a roadmap for employees to follow throughout the course of their workday.  A guide to keep them from having to wonder what course of action to take when performing their daily duties.  When the pressure of money problems don’t exist, managers tend to not enforce these procedural guidelines as rigorously, leaving employees to their own devices.

Some companies are guilty of this happening but they don’t even realize it.  Some of the most profitable companies are the biggest offenders of this.  The point is that their profit margins could be even higher if they were operating like a well-oiled machine.  The best way to prevent this from happening is to merely be aware that it could happen.  Don’t just meticulously hyper-analyze your operational systems when money is tight.  Pay close attention to them when profits are up in order to perpetuate your success.

Sometimes, management or the business owner is too close to the situation to see these operational deficiencies.  Another way to avoid falling into this trap is to hire a business consultant to analyze your systems from a different perspective.  For more information about obtaining this type of business analysis, call Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.