Out of the Crisis.Org

[Louis Altazan]

Individual success is very personal and may be defined in a number of ways. In business, success is normally equated to a business meeting the purpose [aim] for which it was established.

For example if the primary aim of a business is to produce ethical profit, then the measure of success would be ethical profit produced. For instance a business may gross $1.2M and net 25% or a profit of $300K. A similar business may gross $2.5M and net 8%. In this case net profit of the latter business is $200K and by this definition is not as successful as the former.

The problems of the latter business may NOT be an inability to pay expenses. More likely the symptoms are seen as health care cost too high, taxes too high, etc. While these cost may be too high, relative to income, the reason is more gross under-utilization of resources rather than actual cost being too high.

Many of the cost a business pays are based on the number of people employed. Certainly health care cost is largely a function of the number covered. Workman’s compensation, liability and several other substantial cost are also based on the number employed.

More sales ethically generated by fewer people will normally result in higher profit. This is a good definition of efficiency. From the above example, if six people generate $1.2M in sales, the profit will likely be much higher than 15 people generating $2.5M.

The same parallel could be drawn with a smaller operation. For example a two-person shop generating $333K in sales may also feel cost are too high. The relationship of staff to sales is $166K per person, the same as the 15-person operation. The same company producing $400 in sales, with the same staff may show a vastly superior profit.

Companies can be efficient at any size and they can also be inefficient at any size. If the aim of the business is ethical profit, success cannot be measured by size. Growth is no more the answer to an inefficient business model than downsizing. The same can be said for trying to cut cost. Certainly cost should always be kept within reason, but that is not the solution to inefficiency. Rather the reasons for the lack of efficiency must be found and eliminated.

I believe by applying Dr. Deming’s fourteen points, businesses may transform themselves into more efficient models. My experience of applying the philosophy to my business produced what I feel were astounding results.

Over the next several weeks I will post several articles on these points and how I believe they relate to the auto repair trade. They will be posted in this new forum, entitled Deming Management Philosophy. My hope is to generate interest in what I feel is one of the most overlooked opportunities available in business today.

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Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA