The Profit Chain of the Corporate World

Like most people, my first few jobs were for pocket money through school in retail and hospitality based industries on the weekends, that were superseded by a few weekday shifts as I made ends meet through socialising “Fasting Friday” to make it cool to be poor and starving during my university days. While now it sounds desperate and depressive, in the moment we all laughed along in good fun at how broke we were. We would all then dredge on out to our respective minimum wage, commission boosted roles where the morning would consist of being told the demands on our monetary daily target. Every customer that walked through that door had a very specific price that you would take or leave. The value of your service was set, too. No customers earnt special deals or discounts, and the day’s takings would be openly discussed and applause or abuse was admonished accordingly at day’s end.

Entering the corporate and adult world, money becomes a bigger part of everyday life in a different way, but yet is discussed less. When flipping burgers a manager would often make you aware that the value of the burgers made must exceed the few dollars they are sparing you an hour. In a professional environment, where costs are not quite as traceable, wages not as open, and trust more established, this is a situation those in a suit and tie (or blouse and skirt) are becoming more and more unfamiliar with. More and more, professional work places are shifting even further away from the profit-profit-profit mantra mentality still commonly accustomed to your local Kmart and putting that focus to investing in modern management-economics. Today, more emphasis in the workplace is put on customer reception and employee satisfaction, in the theory that this will influence the bottom line to the same extent the a 5-9 day does as oppose to the 9-5. In order to achieve this, measures of success have been radically revamped: the yard stick being put to customer loyalty, where it used to be put to customer quantity – Frederick Reichheld estimates a 5% increase in customer loyalty can produce a profit increase from 25-85% (1990). The issue with this new yard stick, though, is not only how to measure these new metrics, but to ensure that the benefit continues to flow through to the bottom line as, regardless of success in all other areas, this is ultimately what determines the success of an organisation.  

Initiating this into an accounting firm takes on several aspects- these are addressed in majority through service-profit chains. This is the relationship between profitability, customer loyalty and employee satisfaction.

Customer loyalty is almost exclusively related to the value the customer believes they are getting for their money. Not all customers have the same sized wallet, and not all customers have the same background knowledge or expectations. As such, a generic one-size fits all product is rarely the best approach to customer loyalty as it will have downfalls on both sides of the spectrum. It is not as simple as simply addressing the quality of the product to the price though: what the customer actually perceives they are receiving can vastly differ depending on the communication with the client to what they are actually getting. For example, lucky enough (or not yet lucky enough) to still be renting from a landlord, seeing the quote that I had to submit for approval to get a new heater installed this winter had me thinking that the tradesmen were taking advantage of my naïveté, and had I actually been the one liable for that payment I would have happily said no thanks, and attempted to take my custom elsewhere. It was only on the day of the actual installation that I realised my naïveté to their profession was worse than I realised as five men walked through my front door to pull the majority of a wall down and re-divert the plumbing system to ensure I sleep well through these chilly Melbourne Winter nights. The tradies had not communicated to me what was actually needed for the job, and had I not been home I would have continued life blissfully unaware that they were, in fact, not ripping my landlord off. Similar to the corporate world, the client will often submit some information, sit back, and after a few payments receive a final product without being aware of what has truly gone into the process in the office to arrive not just at that final product, but at that final bottom line figure.

The value is still not as simple as that though, as a firm can have a large influence on what the value should be and the quality of work they can turn out through interaction with their employees. Measuring productivity is one way of ensuring the value of a product is adequately priced – there were five tradies in the house, but if there were only ever two working at once, should the cost to the consumer be the same? Employee satisfaction and other forms of KPIs are important in these instances to measure the actual value. To ensure employees are aiming for these KPIs and not feeling enslaved by them targets and goals can be used as motivation, and rewards to ensure employees feel valued – at the completion of the recent financial year, Mancell treated the staff team to a lunch that my ex-student self could never have imagined, yet alone on a what would have once been a Fasting Friday.  

Professional firms have adapted to this in recent years, some in different ways than others – google allows pets to be brought to work, while insurance companies are now offering more personalised products to consumer’s needs. Learning how to adapt this to your particular workplace, like everything else, should be a dynamic program with trial and error that can help achieve the most optimal outcome for client, employee and firm all in one.

Posted on July 5, 2016 .