The Profit Prophet

Most business school programs focus on the financial aspects of an business endeavor, and most specifically tend to focus on one simple parameter: Return-on-Investment, or ROI. Specifically, ROI is determined by calculating the profit (or gain) from any investment or expenditure, subtracting the cost of that investment or expenditure, and dividing the difference by the cost of that investment or expenditure. While this is a great metric for determining actual expenditures’ returns, it does not really bode well when dealing with intangibles such as services, or activities such as sales, marketing, accounting, etc. A long time ago (30 years ago) I started measuring to a different metric, Return-on-Effort, which took into account how much time, energy, additional assets (such as people), and change any new project will cost and weighed those "costs" against how much easier, faster, or more efficiently you could perform the process by expending that additional effort, to...

Many business owners get stuck at times and feel the need to hire a consultant to supposedly turn the situation around. Here is a timeless lesson on how consultants can make a difference for an organization. Last week, we took some friends out to a new restaurant, and noticed that the waiter who took our order carried a spoon in his shirt pocket. It seemed a little strange. When the busboy brought our water and utensils, I noticed he also had a spoon in his shirt pocket. Then I looked around saw that all the staff had spoons in their pockets. When the waiter came back to serve our soup I asked, "Why the spoon?" "Well," he explained, "the restaurant's owners hired Andersen Consulting to revamp all our processes. After several months of analysis, they concluded that the spoon was the most frequently dropped utensil. It represents a drop frequency of approximately 3 spoons per table per hour. If our personnel are better prepared, we can reduce the number o...