Part 2

The Art of Profitability
by Adrian Slywotzky

(Page 2 of 2)

Steve paused. Why, indeed? Because profit is the lifeblood of any organization.... Because the ultimate purpose of business is to create profits for share-holders.... Somehow, he sensed, the clich? he'd repeated in the workplace, and even in business classes he was now taking at night, wouldn't work so well with David Zhao.

"It has to do with my job," he finally responded. "I work in strategic planning at Delmore. It's a big company with a great history. And being in the planning department is a good opportunity for me. I get to look closely at all the various industries we're in, which is almost like getting a business-school education on the job. But as you probably know, the company hasn't been doing very well lately. Profits are flat, and the stock price has been stagnant for about eighteen months."

"For two years, actually," Zhao remarked.

"I guess you're right," Steve said. "You must follow the stock."

"I find Delmore - interesting is the right word, I suppose," said Zhao. "And you're in strategic planning there. Tell me, Steve, what sort of strategy do you plan?"

Was that an amused glint in Zhao's eye? "What I do is more like research - studying potential mergers, acquisitions, spinoffs," he responded, immediately feeling that his answer sounded lame. "But I want to contribute more. I want to learn how I can help the company get out of the doldrums. Does that make sense?"

"Why not?" Zhao answered. "But Delmore has been in business since 1904. It has revenues of $18 billion a year from forty different businesses. Surely the wise men and women who run the firm must know all about how to make profits. Or do you suppose they need Steve Gardner to teach them that?"

Steve reddened and sat for a moment in silence. He was thinking about some of the disturbing things he'd heard and seen around the offices at Delmore in the last six months. About the company-wide strategy conference that was rescheduled twice, then postponed indefinitely, with no explanation as to why, causing rumors to swirl in the corridors ... about the resignations of three members of the executive committee, all within four weeks of one another ... about the disparaging tone of recent comments by Wall Street analysts about Delmore and the defensive tone of the company's public responses. And just this past week, people were whispering that the long-expected layoffs in three divisions would be a lot bigger than anticipated. Life at Delmore was feeling very different than it had when Steve joined the company.

Steve took a deep breath. "I guess I'm not necessarily convinced that the wise men and women at Delmore do know what profitability is all about," he finally admitted. He looked Zhao in the eye, wondering how he would react.

Zhao merely turned his head slightly to stare more closely at Steve. A long moment passed. "Honesty," Zhao commented. "I don't run into it very often."

Another pause, as Zhao stared out the window. Finally, he turned to Steve.

"If you really want to learn about profitability, I'm willing to teach you," he said. "But there are several conditions. First, we'll meet most Saturday mornings between now and next May. Second, every lesson will last exactly one hour. And I'll expect you to spend time between lessons reading and otherwise preparing, which will take about four hours per week. Is that acceptable?"

Steve bowed his head slightly. "Yes, it is."

"Good. There's just one more thing. Did Otto tell you that I charge a fee?"

"No. How much is it?"

"A thousand dollars per lesson."

Steve sucked in his breath. Then his shoulders dropped. He looked away, frustrated and angry. He was tempted to speak his mind - or to simply storm out of the office.

But instead, he simply said quietly, "I can't afford that."

Zhao laughed, cutting the tension. "Of course you can't," he replied. "I'm not asking for the money now. You can pay the fee when you're able to - if you ever are."

Steve didn't know whether to feel relieved, embarrassed, or guilty. He thought about the usual three-digit balance in his bank account. "I might not be able to pay you for five or six years. Maybe longer."

"I know that," Zhao answered, a playful grin now spreading across his face. "Luckily for you, I've decided you're good for it."

Steve's mood turned to puzzlement and mild annoyance. Zhao, he felt, was being condescending, perhaps toying with him. What makes Zhao think I'll ever pay him a penny? he thought. Maybe I'll take all his lessons, absorb all his ideas, then walk away and never see him again.

"Do we have a deal?" Zhao asked.

Steve paused. "Yes, it's a deal." Zhao reached across the desk, and the two men shook hands. And suddenly Steve sensed that he would never simply walk away from Zhao ...that one day he would pay Zhao his total fee ... and that Zhao had known all this before Steve himself did.

Zhao smiled as if he understood. "Very well then," he said. "Let's get started."

Copyright © 2002 by Mercer Management Consulting, Inc.

About the Author

Adrian Slywotzky is the bestselling coauthor of The Profit Zone and Profit Patterns, and How Digital Is Your Business?, as well as the author of Value Migration. A graduate of Harvard College, Harvard Business School, and Harvard Law School, he is a vice president of Mercer Management Consulting, Inc., a global management consulting firm that focuses on profit growth in changing markets.