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Increasing Profits by Changing the Game

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Businesses today run on a ‘profit engine'. Everything in business is about profits only. Wall Street rewards profits. Executive compensation is tied to profits. Unless corporate profits increase, shareholders are not happy. Boards are motivated to make sure their companies are profitable.

This is a ferocious engine that has created the current financial crisis. The U.S. Government (and many other countries) are bailing out the very same engine that has brought this crisis in the first place. - without solving the real problem. It is impossible to improve the future with only historical thinking. We cannot use existing thinking(rooted in the past experience only) and use it to create future. That is like an engineering teacher certifying a group of students as excellent engineers, but then asking the same teacher to suggest that all the students should also learn American History and Business Management. This type of thinking would be incomplete. In fact, we never notice how incomplete and inadequate it is.

This suggests that most of our societal thinking(and other types of thinking) is completely wrong if the only way we think is from the past.

For businesses, they think, the easiest way to increase profits is to increase efficiency and to reduce costs. They generally do this by reducing employment and laying off workers, instead of driving innovation and grow the top-line (much harder to do). So, they resort to making ‘quick profits'. Why? Because that is how they are incented. This ‘underground' motivation - to gain personal profits have driven business leaders to be greedy - the fundamental root cause of the world's sad situation today - in all sectors, in all issues.

So what can be done? What can be done in our thinking?

We need a new more humanistic approach and out of the box radical thinking to this problem. I don't know of anyone thinking along these lines. Why? Maybe because it is too hard? Of course.

Solution I propose is to change the rules of the game. What if a corporation is allowed a specific profit per head for everyone employed? There would now be an incentive to employ as many people as possible. These people would still need to be employed productively because otherwise there would be no profit. The skill and thinking of executives would now be used to increase employment rather than to decrease employment.

What do you think?

-Jatin DeSai

The global financial crisis has led many companies to slice payrolls, but many employers are staying loyal. Meet 9 of this year's Best Companies that, as of mid-January, have never had a layoff. Click here to read more.

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