The very notion of "cost centres" vs "profit centres" is incoherent. If a function is necessary for the longevity of the business, it is a profit centre. If it is not, it shouldn't be part of the business.
Treating business units that book revenue as "profit centres" only makes sense if the revenue they book is entirely due to goods and services supplied by magic elves. Otherwise, <em>the work done to enable that revenue to be booked is part of the profit-generating business</em>. Letting internal cost accounting say otherwise is a recipe for bad business.
So the first part of the solution is to drop the cost/profit dichotomy, and actually have CEOs focus on understanding their business. This is an unrealistic suggestion, I know, but I can dream.
>The very notion of "cost centres" vs "profit centres" is incoherent. If a function is necessary for the longevity of the business, it is a profit centre. If it is not, it shouldn't be part of the business.
Wow, that hits close to home. I think I'll be using that line in the future, thanks!
Most corporate accounting and MBA-think is incoherent.
Companies full of ego maniacs eat themselves alive from the inside out. It takes a while for small problems to become big problems, but I think the Apple of 2025 is going to look more like today's Hp or Yahoo than the Apple of 2015.
Treating business units that book revenue as "profit centres" only makes sense if the revenue they book is entirely due to goods and services supplied by magic elves. Otherwise, <em>the work done to enable that revenue to be booked is part of the profit-generating business</em>. Letting internal cost accounting say otherwise is a recipe for bad business.
So the first part of the solution is to drop the cost/profit dichotomy, and actually have CEOs focus on understanding their business. This is an unrealistic suggestion, I know, but I can dream.