Every organization employs key staff to manage production of their product or service, sales and overhead. The first chart shows representative costs for these functions. Costs lead to profit, in this case 6% of revenue.
Key staff employed to |
Cost |
Produce |
33% of Revenue |
Sell |
15% of Revenue |
Control |
15% of Revenue |
Profit |
6% of Revenue |
If key staff members achieve a 5% performance improvement, we will generate a much larger increase in profit. A 5% improvement in the effectiveness of key staff reduces cost.
|
Cost |
Reduction |
Produce |
33.0% |
1.65% |
Sell |
15.0% |
0.75% |
Control |
15.0% |
0.75% |
|
|
2.475% reduction |
Original Profit |
6.0% |
New Profit |
6.0% plus 6.3% = 8.475% a 41% profit increase
|