In Defence of Profit Improvement Programs

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Most of us have been through profit improvement exercises. Programs with acronyms like TPI (Total Productivity Improvement), PIP (Profit Improvement Program), Delta P (Change Performance), and with fancy project names like Genesis, Delphi or Phoenix. Some we umbrella brand as continuous improvement, others are focussed on turnaround or survival. They can be cost, productivity or revenue focussed - or the lot. We may give them positive spins by adding innovation and growth targets or we target cultural change, but ultimately they are about improving cost, efficiency and productivity.

PIPs can be tackled in a variety of ways. We can take a BU, a plant or a supply chain perspective. They can be done as low key exercises or as high profile ones with the help of consultants. Senior management can proactively lead the way or have it forced on them by the CEO with corporate staff or by the regional head office somewhere in Asia.

Despite the collective experience with PIPs, the results for organisations are mixed, typically resulting in scepticism before a program commences: ‘here comes another round of stretch targets’; ‘another group of consultants’; ‘another round of redundancies’. Management may go through the motions but see the exercise as another distraction. At the end of the program, big savings are claimed, but tracing them to the bottom line will be hard, and “maintaining the rage” to continue to drive the PIPs is harder still.

With corporate profits is under extreme pressure, implementing programs to reduce immediate cost, reduce capacity and stem capital outflow are vital. In fact, the current circumstances suggest the timing is ripe for a broader PIP. This article looks at what differentiates good PIPs from the mediocre ones.

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