‘How to Double Your Profits in 6 Months or Less,’ by Robert Fifer, is a succinct guide to increasing operating profits by the elimination of unnecessary costs. Similarly, Six Sigma and Lean principles center around lowering operational costs through increased efficiency, reduced errors, and eliminated non value-add steps. However, I think many operational improvement activities (the DMAIC process, for instance) focus on the process rather than the end goal, and consider reduced costs as a potential byproduct. ‘Double Your Profits’ focuses on increasing efficiency (similar to Six Sigma and Lean), but it does so with a direct focus on the bottom line. Generally speaking, avenues for reducing costs may seem endless; however, Fifer highlights simple, common areas of waste (materials, time, and thought) that can be quickly eliminated.
This post is not intended to be a summary of the book – the ideas I highlight below do not represent the core premise of the book. I took away 5 concepts from the book that I personally found interesting. This post is intended to entice you to read the book and take in the full array of opportunities to help clients increase operational performance, when appropriate and applicable.
A quick background on the author and the book:
Robert ‘Bob’ Fifer became the CEO and Chairman of Kaiser Associates 3 years after joining the company and only 6 years after graduating from business school. Roughly a decade into his tenure as the CEO (1993), he published this book - ‘Double your Profits.’ In 2000, he facilitated the sale of Kaiser and established his own consulting firm.
The book, ‘Double Your Profits,’ has many strong advocates (including Jack Welch) and is still used today. It was recently brought to mainstream business media following the $23B acquisition of Heinz by Berkshire Hathaway and 3G Capital (they essentially went in on the deal 50/50).
While the Berkshire Hathaway methodology to acquisitions largely follows a ‘hands off’ approach, 3G Capital (a Private Equity Firm) employs a ‘hands on’ approach. This joint ‘hands on + hands off’ (when Berkshire and 3G partner up for an acquisition) approach has been quite successful, so far. It was estimated that following the Heinz deal, 3G helped increase Heinz operating profits by 20%. Berkshire Hathaway, the recipient of 3G’s hard work, has been so pleased with the Heinz Acquisition that they recently completed another deal with 3G: Berkshire helped fund Burger King’s purchase of Tim Horton’s, a Canadian-based coffee chain (3G Capital holds a large stake in Burger King and had formerly reduced Burger King operating costs by 30%).
What does all this have to do with Bob Fifer’s book? 3G requires its managers to read and use principles from ‘Double Your Profits’ to reduce costs in its recently acquired companies. One of the best Private Equity companies (3G), who commonly partners with the best holding company of all time (Berkshire Hathaway), is using Fifer’s book as a guideline for successful acquisitions.
So, without further ado, here are 5 things I learned from reading ‘Double Your Profits”:
- A focus on results should trump a focus on process. Process changes are often necessary and important to fulfill the needs of an organization, but the end goal of process changes is to improve performance and generate results. Spending 80% of the time focusing on the process and 20% of the time on results is not the proper balance.
- “There is little correlation between hours worked and results achieved.” Results require dedication, thought, and real output. Hours worked merely requires face-time, late night email activity, and long-winded deliverables. Don’t penalize your most efficient employees.
- Meetings should be short and should focus on decisions, not discussions. How often do you find yourself in a meeting noticing people looking on their phone, pounding away on their laptop, or simply zoning out? How often do you find yourself in a meeting with someone who talks just because they like to talk? Keep meetings to a minimum, ensure that only the right people are present, and plan meetings around decisions rather than discussions. If you’re not making decisions during a meeting, there’s a good chance the meeting isn’t needed.
- Improving profitability comes from tough decisions, but we live in a capitalistic society. Some of the steps and ideas in the book may seem difficult. Cutting existing benefits (e.g. free employee parking or first class airfare) may feel like hard decisions at the time, but the downside is not as bad as it may initially seem. Higher profitability goals may not be motivation for all employees, but it is motivation for driven employees.
- Increasing profits has more to do with dedication than a secret formula. Increasing margins may seem like an elusive, abstract goal. In reality it requires a commitment from senior management. Once the C-level has made the decision to take the necessary steps, the follow-through is commonly straightforward.