People before profits

When I was working on my doctorate in finance at Georgia State University, we were taught the objective of the firm is to maximize shareholder (or owner) return. I, myself, reiterated this mantra again and again in the first five books I wrote on finance and in the classroom so many times.

In time, however, I have come to realize how wrong that was. After assisting so many small businesses, I now understand the true objective of the firm must be to look out for staff first, customers second and owners last.

If you take a minute to consider who has the most to lose in a business, you will see it is the staff. Just compare the impact of an employee losing his or her job versus an investor or owner losing some money. Loss of employment has a huge effect on a person’s sense of worth, his or her family, the community at large and so much more.

Now I am not advising that you take your eyes off profits, but rather that you keep watch on those things that are most important to your business’ viability. Clearly profits are on the list, but your employees are so much more important than pure profits. They keep your organization running and generate the necessary sales and profitability.

I have seen too many cases where businesses cut expenses and staff just to increase the return to its owners. In every one of these cases, morale plummets and staff productivity declines as well. It is hard to give your best when you know management sees you as nothing more than a pawn to improve profits.

If customers are going to be served well, staff must feel empowered and rewarded. It is management’s responsibility to cultivate a corporate culture that values staff and considers them a priority.

Agri-Products, Inc. is a firm in Tallahassee that provides wood shavings for horses and other animals. When their primary factory in Georgia was destroyed by fire, they kept the staff paid for almost an entire year without any revenue coming in. Clearly Agri-Products values their people above their profits.

Mike Sheridan, founder and chairman of the board of FBMC Benefits Management also understands this concept. He has established a large ESOP plan for his employees and ensures that 50 percent of profits earned go directly back to staff. Without a doubt, Mike puts people ahead of profits.

Putting people above profits is not ignoring profits. Rather, it shows that you understand your people are the foundation of your business and the building blocks of profitability.

Now go out and make sure your organization is putting people before profits. Shifting from a focus on pure profits to a more people-oriented one will produce many positive returns.

You can do this!

Jerry Osteryoung is a consultant to businesses - he has directly assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is an Amazon.com bestseller. He can be reached by e-mail at jerry.osteryoung@gmail.com.

Tags: Florida Small Business