8 principles of quantum profit management
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8 Principles of Quantum Profit Management. presented by WayPoint Analytics Merrifield Consulting. QPM Principle #1. You’re Making More Money than You Know all companies have internal profits magnitude of the internal profits can be significant - PowerPoint PPT PresentationTRANSCRIPT
QPM Principle #1
• You’re Making More Money than You Knowo all companies have internal profitsomagnitude of the internal profits can be significanto internal profits are being diverted away from the
bottom lineo correcting this is completely in your controlo act to identify and retain more of the company’s
internal profits
QPM Principle #2
• Measure & Evaluate at the Quantum Levelo simpler to measureomore direct controlo consumes less time / resourceso reduces risk of errorso target for high-leverage resultso analyze and manage the business at the granular
level
QPM Principle #3
• Measure & Manage on Net Profito Net profit rarely correlates to GP/GM%o GP/GM% doesn’t account for CTS varianceso GP incentives drive dysfunction:• GP% mirage• work against your true objectives• pits management vs sales force
o GP/GM% evaluation drives poor decision-makingo use Net Profit for decision-making
QPM Principle #4
• Manage the deltas o profit improvement is the main purpose of
executive managemento focus on profit improvement management can
differentiate a company from competitorso profit deltas in customers, territories, product
lines and vendors can all contributeo drive profit improvement at the quantum level
QPM Principle #5
• Financial Averages Mask Realityo every segment is made up of componentso component performance can vary wildlyo analyze and investigate homogeneous segmentso homogeneous segments lend themselves to
uniform, profitable service modelso dig deep enough to find segments with
homogeneous performance
QPM Principle #6• Understand and Manage Service Models
omake money on everything you doo every segment needs its own profitable service
modelo service models must fit within the GP/Margin
envelope of the segmento profitable segment service models eliminate
cross-subsidies, and divert profits back to the company
o develop profitable service models for every segment
QPM Principle #7
• Identify and Manage Cross-Subsidieso in every business, profitable segments generate
profits consumed by losing segmentso some cross-subsidies are intentional and strategico segments can have their own cross-subsidieso cross-subsidies consume the bulk of every
business’ profitso identify and manage cross-subsidies strategically
QPM Principle #8
• Align Goals & Incentives with Net Profitomake sure everyone has the same goals as the
company and senior managementomake sure incentive aren’t driving dysfunctional
or counter-productive behavioro ensure all incentives are based on Net Profit or
CTS improvments
8 Principles of QPM
1. You're making more money than you know.2. Measure and evaluate at the quantum level.3. Manage on net profit.4. Manage the deltas.5. Financial averages mask what's really going on.6. Understand and manage service models.7. Identify and stop non-strategic cross-subsidies.8. Synchronize goals & incentives.