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MARKETING MATTERS CEO JOURNAL


matically improve the bottom line and that enlightened CEOs must “change the people or change the people” in order for their companies to achieve double-digit profitability. But what makes clever-sounding clichés like this so irritating is that they tell us nothing about how to actually “change the people,” which may be why so many misguided CEOs end up firing so many perfectly good manag- ers. Tere is a better way, a way to change the people without the counterproductive trauma of replacing them, and that way is all about words and deeds. I have written endlessly about the deeds enlightened CEOs must do if their com- panies are to achieve superior profit- ability, but I have not until now explored the language of leadership. That fact notwithstanding, I take language very seriously, as words are the precursors to action and as such the essential building blocks of positive change. So much so that a far better version of that old catch- phrase is this: Change the language and change the people. Language has in this way played


an invaluable role in every turn- around I have participated in. Once, when the management team was highly receptive, subtle language changes applied consistently did the trick. But most times the resistance to change is so strong that the heavy linguistic artillery has to be brought to bear in the form of a semi-official ban on certain words and phrases. In each of those cases, the very first item I put on the banned list is the word tons. Tis drives most foundry people crazy, but the simple truth is that there are no tons on the profit and loss statement, employees do not get paid in tons, the banks do not consider tons when assessing finan- cial viability and owners do not pay out dividends in tons. Te parlance of


The Parlance of Profitability N


DAN MARCUS, TDC CONSULTING INC., AMHERST, WISCONSIN


early everyone understands that a new way of doing business is required to dra-


profitability requires top management teams to talk and think about dollars and, especially, profit. Next to be banned is the word


absorption in all its forms, espe- cially as part of the phrase “fixed cost absorption.” Why? Because the wrongheaded notion that fixed costs are so high the business needs more absorption (i.e. more volume) to be more profitable is responsible for more bad decisions than any other


Change the language and change the people.


concept I have encountered. Te parlance of profitability demands that these destructive ideas be replaced by a number of concepts, beginning with compatibility, which recognize that superior profitability is rooted in intelligent part selection, market pricing and the elimination of huge operational wastes (especially scrap and overtime) that are imbedded in the variable cost of goods sold. Te words sales and volume also


move to the banned list, as they frequently follow from one of those daft conclusions about absorption and too often work to the detriment of the company’s bottom line. While the concept of volume is banned outright, the word sales is handled more subtly. First, the sales department becomes the marketing department, and not because “marketing” is a magical term but because the far more accurate moniker “mix and margin enhance- ment and customer support depart- ment” is too unwieldy. Ten the sales manager becomes the marketing man- ager, the large sales staff is repopulated with fewer account managers, and the lone sales secretary is transformed into a larger and far more empowered customer and pricing support staff.


Next to appear on the banned list


are the interrelated terms budget and variance. In this case, the parlance of profitability recognizes that budgets are outdated and ineffectual manage- ment tools, variance analysis is a coun- terproductive distraction, and CEOs intent on creating a business that can earn double-digit profits should insist on new and far more robust manage- ment tools. Tese tools emanate from a linguistic foundation of words and concepts including performance management, monthly P&L projections and targets, rev- enue and expenditure forecasts, checkbooks, commitments, and real-time dollars and cents data. Te word efficiency gets


banned, too, and not because I think efficiency per se is bad but because I have seen how it can


give managers the wrong impression and lead businesses down the wrong path. Te parlance of profitability eschews the concept of efficiency in favor of effectiveness and dictates this conceptual shift be applied across the business. First and foremost, that means replacing measures of effi- ciency, such as hours per ton, molds per hour, and the like, with the only measures of operational effectiveness that really matter: quality and on- time delivery, both in the context of schedule attainment. In each of my turnaround experi-


ences, I have found that the pen is indeed mightier than the sword; care- fully chosen words lead to bold new deeds that together actually work to change minds, cultures and bottom lines. For CEOs, a new language can be the key to their own enlight- enment—to understanding anew their job and the business of making money, as well as to mustering the courage they need to do the deeds that will put their companies firmly on the path to achieving sustainable double-digit profitability.


Keep the conversation going. Reach the author at tdcmetal@wi-net.com to comment on this or any CEO Journal column or to suggest future topics.


October 2011 MODERN CASTING | 47


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