Professional Firms Are Facing Dramatic Changes

Care must be taken in the creation of profit centres, otherwise the potential advantages may be lost. The prerequisite is that a profit centre must be accountable for sales. For example, if two so-called `profit centres' share a common sales force, then accountability for profit does not exist separately; opportunities abound for the 'profit-centre managers' to blame the sales manager for non-performance, and vice versa. In an actual case one profit-centre manager criticised the sales manager for giving his products insufficient attention compared to the other profit centre, and the other one criticised the sales manager for a failure to win new 'accounts. The sales manager criticised both of them for inadequate product supply and slow delivery to customers. The problem was only overcome when one profit centre was created, by putting a chief executive in charge of the whole business.

In the same way, if the control of research and development does not rest with the profit centres, then accountability is reduced. If cost-effectiveness requires a central research and development facility, then responsibility for selecting projects and payment for them should be given to the profit centres as much as possible, except for centrally funded research projects.

The creation of profit centres must be based on serving the customer effectively. For example, a major company purchasing for nationwide outlets would expect to buy centrally, even if the supplier had regional profit centres.

Equally, where competing brands are organised into separate profit centres serving some common customers, care must be taken to ensure that:
customers are happy to purchase separately
the cost of selling, distribution and merchandising is not excessive
competition between competing brands is benef



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