The inputs (work) of the people towards the output (profit) for an organisation, is an achievement of process. People and process define profits which reflect in the profit & loss statement. And in between lies the use of various ingredients such as skills, domain knowledge and other resources. This interplay may vary in degree by industry type, but the core remains the same in any business organisation.
Yes, we do know them all; there is no rocket science to this. Just a balanced interplay of sensitivities, skills and desired outcomes. I am talking of people, process and profit & loss statements — the three Ps of performance. The first P does it in a manner of the second P and the third P is the result of the first two.
I was tickled into penning down this article after an interesting exchange with a few experts who evaluate managerial skills of professionals based on the mathematical concoction of a profit & loss statement. This is an effort to try and throw some light on the making of the mathematical concoction. This understanding comes through not the managerial degrees and courses one went through, but an output of the tango of roles one played through the years to make profits happen on ground, be they for start-ups or established entities.
The 3 Ps is an amalgamation of on-the-job training, learning through mistakes and of course guidance from various stakeholders including bosses, peers, juniors, and professional outsiders. After all what is a P&L. Yes many would know the definition and the formulae and the layout and the (we all learn this in business school). However, in the creation of a P&L on ground, how do we make the mathematics work, who does what part of the work and who ensures it gets done?
While business schools teach us what a P&L is, it is the experience of being on the job that teaches us how to create profits that impress, profits that sustain, month after month, year after year. And the biggest learning that comes from all of these is that it is the people that make it happen, and not just a grand strategy on paper.
Strategy creation is, again, an outcome of the experience, understanding of the landscape and innovative ideas on navigating the market. The success of this strategy is in the implementation, again defined by who does it and how well it gets done. And thus, the process gains importance as well as depth. The process of people management needs to ensure that the various elements and dynamics of a business are taken together within an organisation during any strategy rollout.
People are complex beings — yes all of us! Each one comes with a different perspective, different background, different learning. And each also has a different takeaway from the very same session each would have attended. The stitch up together of each of these perspectives to make it all work towards profitability of the organisation is the key role of a profit & loss manager. Who does it is equally important as what is it to be done as it dictates how it is finally done! A tongue twister but a more interesting mind twister!
Many feel that an organisation structure is simply a way of a reporting structure. As part of those structures, I ask, how many have felt the constrictions of policy, methodology, and even people? We often hear the words ‘bureaucratic’ and ‘red tape’. Have we wondered what the P&L statement of an organisation lost or gained through these and how and why? An organisation structure needs to be designed to ensure that the people work together for to ensure a coherent interplay of various business activities. And this work together has to be designed to deliver. And this simply is the process.
All strategy, all people management skills come to a nought without a methodology towards performance. And this methodology can be tweaked to enhance profits. In fact, given the dynamism of business, it is necessary to tweak it.
Incidentally, products and the services are also an output of people and process. We often hear ‘customer satisfaction’ and deftly follow the net promoter score (NPS) and customer satisfaction indexes. But do we follow an ‘employee satisfaction index’? If so, at what level do we measure it, if at all?
In my experience, if we look at achieving both factors together (customer satisfaction and employee satisfaction) and keep an eye on the performance of each process, the effects on the profits can be quite immense. I don’t just go by the adage that a happy employee ensures happy customers. Rather, I am pointing to the fact that if each small process in any organisation is tempered with aspects of employee safety, employee satisfaction and ease of performance, a lot of wastage of efforts is negated, bettering throughput and resource usage. The performance of each process can be measured numerically through various methodologies.
A simple theory of ensuring that the tasks allocated to any employee can be performed with the least of obstacles, ergonomically or otherwise, simply speeds up the time taken, leaving room for more work to be done. Also, because the task was done hassle-free, it leaves the employees with better energy levels. Do we not find ourselves tired out after even a short time of enduring a task that has many hassles?
This ease of performance comes through design, through practice and through a keen eye on every minute performance metrics and the employees. The old adage — keeping an ear to the ground —serves very well for process
design as well! Thus, every manager should deign to have a numerical value as an output for every small process. This finally adds up to the profits in a P&L statement at the end of each period.
Summing up, a profit & loss statement is the simple outcome of the performance of people resulting from the use of various resources, how efficiently these have been used and how well the task was performed. Each of these is measurable and we can create those measurable structures. Thus, it is the process of people management that leads to the delivery of a good P&L. I rest my case!!