Employees as Profit Centers
By Gregory B. Speight
Ticker, December 2000

Fledgling planners and advisers often struggle to turn a profit as they slowly build their client book. There's often the temptation to improve the bottom line by reducing office staff.

Perry J. Ludy, who has consulted for such companies as Proctor & Gamble and Pizza Hut, addresses this complex problem in his new book, Profit Building: Cutting Costs Without Cutting People. Downsizing or laying off employees isn't the solution, the author argues.

In fact, the massive layoffs of the past decade have proven to be costly and ineffective, according to Ludy. The most common mistakes business leaders make as they search for profits are to lay off people who are "the key resources essential to profit improvement," and to inadequately train managers to improve profits, Ludy adds.

Improving profit is the No. 1 objective of most business leaders. However, Ludy argues that too often, companies respond to the mandate by reducing the workforce. "People are laid off in large numbers and dollars are saved—or so it seems," Ludy writes. In fact, he has found that this approach is merely a short-term solution.

Ludy's method begins with setting up a profit-building team. The five steps include picking the team, preparing the team, brainstorming, taking action and documenting results, and following up. He also offers specific ideas for reducing costs, such as using professional employee organizations to lower the cost of benefits, hiring consultants, and using video conferencing and the Internet to reduce travel costs. Other suggestions are as simple as turning off lights in empty offices.

This handbook offers a simple road map for business owners to stimulate employees' problem-solving skills. Indeed, Ludy suggest that the first place most small-business owners cut corners is likely the last place they should look. "Many cost-reduction questions can be answered by those who know the situation best—the employees," he writes.

back to articles