Pay more attention to systems than short-term profits

History demonstrates that companies pay a high price for putting the pursuit of quantitative financial goals ahead of genuine learning, according to Thomas Johnson and Anders Bröms in their book Profit Beyond Measure: Extraordinary Results Through Attention to Work and People. Rather than destructively trying to squeeze higher profits out of the system, management’s main job should be to learn exactly what people do in their jobs and how they can be helped to improve the system’s capability to serve the needs of customers.

The authors describe in detail two examples which illustrate their thesis. Toyota delivered superior results in its vehicle manufacturing year after year because of its management approach which focused on creating an efficient system with minimised waste and downtime when its less successful competitors were focusing on numbers and results instead of optimising the system.  Scania adopted a design process which allowed individual trucks to be tailored to meet customers’ needs while ensuring low costs, never sacrificing design principles to achieve short-term financial targets.

Management accounting is roundly criticised in the book; instead the authors advocate order-line profitability analysis. Typical profit-driven management is described by the authors as “management by results”, and in its place they advocate “management by means”, which involves treating the organisation like a living system of interdependent parts rather than as a machine in which the separate parts can be analysed mechanistically.

The book is more a passionately worded manifesto than a detailed research project. Nonetheless there is a ring of truth to much of what the authors assert. Many companies are very poorly managed, and it is foolish to think that profitability can be improved by concentrating on numbers without devising ways of improving systems underlying a business. Nonetheless this is a book which is fated to be left to one side by the majority of managers who are really more interested in quick ways of improving the next quarter’s figures rather than patiently nurturing relationships and waiting for results to unfold.

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