Category Archives: Profitability

Your Business: Management Versus Leadership – Douglas E. Castle

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Your Business: Management Versus Leadership

There Are Significant Distinctions Between Management And Leadership

Article By: Douglas E. Castle

Originally Published In The TAKING COMMAND! Blog

Leaders lead people. Manager manage tasks. There is a significant difference.

In my practice of Management Consulting, I have met managers and I have met leaders. It is clear that some managers are terrible leaders, and some leaders are very poor managers. It is rare that I have met a manager who was a great leader, or a leader who was a great manager. The skill sets and functions of each are quite different, and these differences are important to understand. Each of these two can play a valuable role in the success of any organization, or directly in the revenue production, profitability and market position of your business.

Here is a brief outline of the key differences between the two roles:

The manager’s job is to plan, organize and coordinate. The leader’s job is to inspire and motivate. In his 1989 book “On Becoming a Leader,” Warren Bennis composed a list of the differences:

– The manager administers; the leader innovates.

– The manager is a copy; the leader is an original.

– The manager maintains; the leader develops.

– The manager focuses on systems and structure; the leader focuses on people.

– The manager relies on control; the leader inspires trust.

– The manager has a short-range view; the leader has a long-range perspective.

– The manager asks how and when; the leader asks what and why.

– The manager has his or her eye always on the bottom line; the leader’s eye is on the horizon.

– The manager imitates; the leader originates.

– The manager accepts the status quo; the leader challenges it.

– The manager is the classic good soldier; the leader is his or her own person.

– The manager does things right; the leader does the right thing.

Perhaps there was a time when the calling of the manager and that of the leader could be separated. A foreman in an industrial-era factory probably didn’t have to give much thought to what he was producing or to the people who were producing it. His or her job was to follow orders, organize the work, assign the right people to the necessary tasks, coordinate the results, and ensure the job got done as ordered. The focus was on efficiency, and personalities and individualism in employees were low priorities if regarded at all.

But in the new economy, where value comes increasingly from the knowledge of people and of emotional intelligence and industrial psychology, and where workers are no longer undifferentiated “robots” in an industrial machine or mere pegs in a giant pegboard, management and leadership are no longer as easily separated. Employees and workers in general look to their managers, not just to assign them tasks, but to define and provide them each with a personalized purpose, as well as with a view of how their efforts contribute to the whole of what is being produced or provided by the enterprise. And managers must organize workers, not just to maximize efficiency, but to nurture skills, develop talent and inspire results. More specifically, managers have to cultivate team leadership skills in order to be effective and avoid to obsolescence (and the unemployment which usually goes along with becoming outmoded or disrupted in a troubled economy).

In brief, today’s managers are increasingly having to develop leadership attributes in order to deal with the changing demands and needs of the current and upcoming members of the employee workforce. Managers must have, or must acquire, the people skills of leaders in order to get more cooperation, collaboration and synergy out of the employee teams whom they are tasked with managing.

As an added observation, it is, generally speaking, easier to cultivate team leadership skills in a good manager than it is to train and turn a leader into an efficient and effective manager. I’ve participated in both exercises, and the former is generally much, much easier and more likely to be successful than the latter.

Douglas E. Castle

Tags, Labels, Keywords, Categories And Search Terms For This Article: business, management, leadership, team, cooperation, leaders, managers, industrial psychology, people skills, The Taking Command Blog, Douglas E. Castle, employees, inspire.

NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.

THIS ARTICLE IS COPYRIGHT 2014 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL IMAGES AND LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”

The Douglas E. Castle Consultancy offers a complete suite of business consulting and advisory services for organizations ranging from seedling, "bootstrapped" startups, through established small- to medium-sized enterprises conducting commerce both domestically and internationally.



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Multiple Products: Winners Subsidizing Losers?

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The Douglas E Castle Consultancy

In the above graph, take note of how PayPal's revenues are becoming an increasing component of EBay's revenues. What does this tell us?

In the above graph, take note of how PayPal’s revenues are becoming an increasing component of EBay’s revenues. What does this tell us?

Multiple Products: Are Your Winners Subsidizing Your Losers?

Making The Case For Financial Analysis And Cost Accounting

Know Where Your Profits Are Coming From

By Douglas E. Castle

If your company delivers multi products or services, do you know which ones are contributing to profits and which ones are actually dragging down your potential profitability. Most business owners fail to maximize short- and long-term profitability because they fail to routinely conduct this type of analysis. The greater the number of products or services you provide, the more crucial this type of cost contribution analysis is.

Let’s examine several scenarios (I’ll use the term “product” to include both products and services):

Number 1: The product which generates the highest percentage of revenues costs you the most (direct cost) to produce, and actually renders the lowest profit margin or contribution to fixed cost coverage;

Number 2: The product which generates the highest percentage of revenues costs you more to produce than you charge per unit, so it is a drain on the profitability of your other products, which may be less glamorous, but which generate healthy profit margins;

Number 3: Several products which are small contributors to revenue happen to generate the highest profit margins and are actually subsidizing your company’s greatest revenue-producer, which has a minimal or negative profit margin.

You can make the above determination with the help of some cost accounting and financial analysis – if your accounting staff cannot do this, hire an independent professional consultant to do this work and prepare a report. Then act on that report!

Once you have obtained that report (and the information unearthed is often very surprising) you should take the following steps, although you must occasionally allow a marginal “loser product” to continue in production and sales simply because it is important to your reputation or branding, or because it actually contributes in some way to the sales of the more profitable of your multiple lines. The classic example is the program where you give the razors away at a loss and make all of your profits on the special razor blades or cartridges – specially designed to fit your ‘unique’ razor design:

Step 1: If the market is sufficiently large for a profitable product, consider investing more deeply in marketing that particular product;

Step 2: If a product is inherently unprofitable (and to the extent that it does not stimulate sales of your other multiple products), either stop producing and selling it, or, if the market is large and your competitors are all marginal, consider 1) raising your price per unit, or 2) reducing the cost of production per unit. In some cases, a larger run of production can generate significant economies of scale and increase profit margins for the product on the whole. If neither of these two alternatives are possible, work toweard eliminating that product from your portfolio of offerings.

In viewing your company’s performance, it is not adequate to simply know how much revenue and profit are being generated for a given accounting period – it is every bit as important to know where your profits are coming from (i.e., from which products), and where they are being lost.

Ultimately, by acting on this extremely valuable information, you can optimize your product mix and maximize your profitability potential.

  • Douglas E. Castle

NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.

THIS ARTICLE IS COPYRIGHT 2014 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL IMAGES AND LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”

The Douglas E. Castle Consultancy offers a complete suite of business consulting and advisory services for organizations ranging from seedling, "bootstrapped" startups, through established small- to medium-sized enterprises conducting commerce both domestically and internationally.



***************
This site is proudly affiliated with Global Edge International Consulting Associates, Inc. ["GEI”]
Free Subscription to The GEI Business Daily!
Sign Up For Our Free GEI Newsletter!
Receive Our Free GEI RSS Feed!

***Follow GEI's Company Page On LinkedIn!

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