More C-suites are looking beyond the bottom line—and here’s why
The bottom line in business: the bottom line isn’t the only metric that matters.
With more businesses than ever vying for the same markets, many enlightened C-suites are identifying multifaceted strategies that throw out the old playbook that shunned any initiative that didn’t immediately and obviously impact the bottom line. There are other important considerations that, while perhaps not directly tied to profit, can have a direct influence on future business viability.
What are some factors that have an influence?
- Amplified expectations around increased corporate social responsibility
- Elevated client expectations
- Improved vendors product/service delivery models
- Escalating competition
- Increased business visibility and brand recognition
- The essential need for staff retention and inclusive business cultures
- Legal and regulatory expectations
What’s wrong with focusing on the bottom line?
Robert Kegan and Lisa Laskow Lahey are the authors of An Everyone Culture: Becoming a Deliberately Developmental Organization, which iMeet Central highlighted recently in its roundup of the best books for project managers. Here’s what they had to say when I asked for their thoughts on this subject:
“The bottom line is a ‘result’ or an ‘outcome’ and not a ’cause’ or a ‘driver.’ More CEOs and senior executives have come to realize that if they aren’t looking beyond the bottom line, they will miss what’s actually causing their results. So now more of them are looking further upstream to better understand and influence those things that actually drive more favorable outcomes for their organizations.”
What are some of these favorable outcomes?
“Strictly from a performance perspective, the pursuit of vision has yielded extraordinary results,” the authors said.
Included in a sampling of companies they studied over the last five years, “Next Jump, an e-commerce company based in New York, cut turnover within their largely millennial workforce from the industry average of 40% to single digits while regularly breaking company records for revenue, profits, productivity, and growth rate. Decurion, a Los Angeles-based manager of movie theaters (as well as real estate and senior living facilities) averages the highest gross per screen in the industry. And Bridgewater Associates, a Connecticut-based global investment firm and our third site, runs the world’s highest performing hedge fund over the last 20 years.”
How did they achieve this?
Kegan and Lahey say that “… all of their deliberately developmental practices, in total, contribute to these three companies’ extraordinary levels of performance—not one single, specific thing. But here’s a twist. You might think that DDOs (deliberately developmental organizations) spend less time driving toward business goals than traditionally run companies because of their intense focus on employee growth. In fact, we believe the opposite is true.”
“In a DDO, business performance and human development are seen as enabling each other, really as ‘one thing.’ So DDOs actually set higher goals and hold people accountable more rigorously because they are so committed to gaining the “people-growing” benefits that result from performance-oriented stretching. And failure to achieve their big goals actually receives more attention and corrective action in a DDO. They don’t just focus on their processes that didn’t work as well as anticipated; they use failure to help grow their people as well. So DDOs don’t just fail forward; they fail forward farther than traditional organizations.”
In another example of forward thinking, Larry Sternberg, President of Talent Plus, Inc., says, “The bottom line is the score of the game. You pay attention to the score, but you must understand what drives the score. You focus on the things that you believe will improve the bottom line. So what this accomplishes is a better bottom line. For instance, instead of directly slashing expenses across the board by 10%, focus on eliminating mistakes, rework, breakdowns, inefficiencies and variation. As you take those things out of your system, you achieve sustainable expense reduction.”