Leaders Invest, Managers Control Costs

Leaders invest managers control costs

During my 35+ year career I have observed what sets successful organizations apart from those that struggle or suffer from limited growth. More than anything, long-term success often comes down to the quality of the company’s leadership—even more so than the uniqueness of its product or service, its quality, or the market it serves.

One trait of a successful leader is making investments for the good of the long-term prospects of the organization. Costs are easy to deal with if you have a manager mindset—you control them, cut them, and find more efficient ways to get things done. Costs are a necessary part of business, but controlling them will not materially increase the value of your organization. Investments, on the other hand, involve an outlay of money in search of a longer-term return of profit. That approach takes courage – and a strong leader.

Investments come in many forms—equipment, people, new technology, expanded markets, new products, etc. They often involve significant up-front costs, but effective leaders are confident that the investment will pay off in the long run. I have observed leaders effectively analyze the merits of capital equipment additions, but miss the “softer,” less tangible opportunities.

Three sound investment areas that come to mind are technology, human resource management, and the company’s succession plans for key employees.

  • Investing in technology allows you to more effectively and efficiently accumulate and manage data with goals towards maximizing efficiency and increasing profit margins. This does not just mean purchasing new hardware and software; it often requires an overhaul of processes and systems that you may have utilized for years or generations.
  • Hiring a top-notch human resource executive (either full-time or part-time) can assist with hiring, retention, risk mitigation, strategic planning, efficiency, and more. A recent survey of corporate executives indicated that, in today’s world, the CEO’s most important executive is not the CFO, but the chief people officer.
  • Leaders often wait too long to hire a key person’s successor. This results in missed opportunities for knowledge transfer, tapping good candidates in the marketplace, and exploring new ways to do things.

Effective leaders are always looking for ways to enhance long-term success—often at the expense of short-term profits. This concept takes courage. Are you up to the challenge? People are watching and counting on you.

Stephen W. Christian, CPAStephen W. Christian is a director at Kreischer Miller. Contact him at Email or 215.441.4600. 

 

 

 

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