How To Make A Stagnant Profit Center Grow

“To most men, experience is like the stern lights of a ship, which illumine only the track it has passed.” – Samuel Taylor Coleridge (Table Talk, 1835)

Test your CEO acumen: What do you do with a good but stagnant profit center?

For several years now, sales have been the same. Profits too. You’d like to see more growth, but you are afraid to push for it.

Your reluctance is reasonable: You don’t have to spend a lot of your time on the group, you don’t hear many complaints from or about the manager, and you don’t have any no-brainer ideas on how to improve things.

“If it ain’t broke,” as they say, “don’t fix it.”

Still, businesses are supposed to grow. So what do you do?

You have three choices:

1. Do nothing but expect nothing. So long as things continue as they have been, be happy. Focus your energy on other opportunities.

2. Work with the existing manager to spur growth. Set up weekly meetings — just the two of you or including others — and drum up goals and tasks. Keep meeting until something improves. Don’t expect miracles, but do expect some modest improvement. Five percent a year seems reasonable to me.

3. For radical improvement, you are probably going to have to replace the manager. This is the trickiest of the three choices, but probably the only one that will bring you big change.

I remember reading an article about Michael Bloomberg — the guy who is mayor of New York now. He was heading up the Bloomberg News Service and had been doing so for 20 years. Just before he got busy running for mayor, he did something very strange. He told his nine top managers that for the next two months they were banned from running their own profit centers. Instead, they had to insert themselves in someone else’s business and take a shot at trying to make those businesses prosper.

It was a foolhardy decision by most standards. The new profit center managers would be fundamentally inexperienced and unskilled at what they were being asked to do. Bloomberg’s theory was that he wanted his top people to get out of a pattern of lethargy. He wanted them to experience a much more challenging situation — one they knew little about and would be expected to do a lot for.

As it turned out, the strategy worked. Some of the new managers failed, but some developed new strategies that resulted in radical changes and improvements. If Bloomberg had taken smaller steps, he noted, he would never have gotten those results.

[Ed. Note.  Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]