It seems so obvious - but it’s so wrong - for top management to push all managers to see themselves as profit centres. It seems so motivationally useful to say: You are going to be judged on the basis of how well you do.
But that ignores the fact that each of those management units is part of a larger organisation. And each unit’s effort to be profitable will lead those managers to do things that look good for them - but often at the expense of the larger organisation - the company as a whole. Too much emphasis on profit centres throughout the company results in loss of economies of scale and loss of internal co-operation.
The tough thing is that top management must do both. Manage for profits and also for the general, long term health of the company. But you can’t achieve that by letting management get myopic. It may make sense to take a loss on a particular service to a customer, if that customer buys other products or services or is critical to a start-up operation of the company in another area of business.
Isn’t it amazing that it’s coming as such a surprise to so may managers to discover that good customer service is the hallmark of performance among those companies that have the best long-term records of excellence? Managers today have to be constantly reminded that customers are important. For years, they have been deceived into thinking that the only thing to consider is the bottom line - their own particular bottom line.
