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Business Solution: Organizational Profitability
Overview
Organizational profitability, simply defined, is the difference between the revenues earned from, and the total costs associated with, an organizational unit over a specified period of time. Typically a very small percentage of your firm’s best organizations account for a large portion of your net profits. Conversely, a small percentage of your organizations usually cost the corporation more than the revenue they deliver. These unprofitable organizations detract from overall firm profitability. Profit winners and profit losers are a natural consequence of the variability in the revenues and the true costs related to certain organizations. With organizational profitability insight, you benefit from knowing exactly which organizations create value, which destroy value and why.
Our Experience Reveals That Typically:
• <20% of your products generate > 280% of your net profits
• 60% of your products break even from a net profit perspective
• <20% of your products lose >180% of your net profits
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Organizational profitability is also commonly referred to as: line of business profitability, segment profitability, business unit profitability, region profitability, division profitability, branch profitability, facility profitability, store profitability, location profitability, or even sales representative profitability. Organizational profitability analysis must always include intersections with other business dimensions like customer, supplier, and product profitability to drive correct strategic and operational decisions related to your organizational structure.
Customers using Acorn's Solution for Organizational Profitability
AON Risk Services, Global 2000 Retailer logo, Coca Cola Enterprises Belgium
Acorn Capability |
Value to You |
Enterprise Scalability & Performance
Un-paralleled scalability to perform cost and profitability calculations consistently for each LOB in your enterprise - inside Acorn’s application – and in a short time period. |
Insight for each part of the organization reflects their true cost and profitability, including utilization of ‘back office’ or shared service functions. This enables you to consistently measure the performance. Those measurements roll-up accurately to overall corporate performance.
Empower your executives and Board of Directors to define a fact-based strategy. Feed this new insight into your strategy map; planning, budgeting, and forecasting, and other closed-loop performance management systems
Dynamically analyze your lines of business – drive performance-based compensation or other transformational strategies to ensure organizational alignment and accountability to key corporate targets.
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Unified Model
A unified model linking organization cost and profitability to other critical dimensions of your business (customer, product/service, channel, segment, transaction, order, etc.). |
Fewer models to maintain and link together using 3rd party applications means a lower TCO for you – requiring less people, processing time and 3rd party systems/software. |
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Accuracy
Due to Acorn’s methodology, your model is validated by finance and operations. This ensures the accuracy of your organization profitability measurements. They truly represent the sum total of all revenue and expense associated with the organization and ‘indirect costs’ associated with customer facing units. This ensures accountability in your organization’s decisions about how to consume corporate resources (and associated expenses) and how to maximize profitability, not just revenue or volume. |
The complete and accurate view of organization profitability allows for better strategic, operational and tactical decisions in alignment with corporate objectives, with total confidence.
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Flexibility
Organizations are diverse, Acorn provides a flexible solution that accommodates the diversity and variability of their, processes, terms and conditions, behaviors and policies. |
Acorn has baseline solutions for profitability modeling, yet collaborates to understand the unique requirements for your organization, ensuring you can understand and action key drivers to organization profitability. |
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Sustainability
Organizational structures change over time and a solution must be able to sustain its insights into profitability with minimal ongoing maintenance and accommodate corporate restructurings, mergers and acquisitions and restatements. |
Acorn clients spend more time analyzing organization profitability and driving performance improvements, not in non-value added activity just to generate numbers. |
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