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What Comes First… Production Or Profit?

What comes first… Production or Profit?

Most people are familiar with the age-old question of “What came first, the chicken or the egg?” It is an interesting question to think about because without the chicken how would the egg exist? And, without an egg, you can’t have a chicken? This is a similar question that executives have to ponder today. Many say, “I can’t invest in my organization unless we have profit,” while others say, “I can’t have profit without investing in my organization.”

Executives are trained to analyze things like “Earnings Before Interest, Taxes, Depreciation, and Amortization” (EBITDA) to manage business expenses and optimize profits, but what if they are looking at the chicken and not considering the egg? EBITDA is the Profit (or lack of profit) that results from the Production of the organization. So, what are some of the key pieces that consist of the Production (if that is the egg)?

Depending on the type of industry, executives would argue that Intellectual Property, manufacturing equipment, or internal processes may be the most important factor driving their production, while many others would argue that their people are the most important asset any organization has.

Some executives might think, “people are replaceable” so they are not as important as other aspects of the business; however, I would argue they are the most critical aspect of any business. When you think about it:

• Your people innovate your products or services
• Your people sell your products or services
• Your people make sure the product gets out the door
• Your people provide the customer experience that creates loyalty
• Your people help bring the brand to life

There have been many great companies with great products that have gone out of business over the years. Look at the fortune 1000 companies from 2011 and compare it to today to see how many have fallen off the list over the last 10 years. These are companies at the top of their industries that are no longer there. Often, it is either because management did not tap into their people to keep innovating and growing the company, or the culture of the company was not conducive to retaining its people. Executives that want to grow and sustain success need to invest in what keeps production high, otherwise, their short-sightedness may cause both production and profits to fall in the end.

Executives today need to recognize their people are what produce a profit for their organizations. When they truly understand the value people produce, they know without a doubt, people are the “Golden Egg” of production that drives profits! Is your company investing in your people or just looking at profits?

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