There’s always another
money-making opportunity out there, but the question is, should you go
for it?
Every business is looking
for more profits, especially
as the economy tightens up,
but you have to be careful
not to overextend your business into areas that are not
part of its core focus in a
vain search for return on
investment.
Take a look at the banking
industry. Most banks have
lost millions — and, in some
cases, billions — on bad
mortgages, risky investments
and poor strategy. You have
to wonder if, in some cases,
they didn’t overextend themselves on not only what they
were doing but how they
were doing it.
Citigroup is a good example. The company posted a
fourth quarter loss of nearly
$10 billion. As a result, it’s
expected to eliminate more
than 20,000 jobs and is under
pressure by shareholders to
spin off some units.
Citigroup is a financial
services conglomerate. It
was formed with the merger
of banking giant Citibank
with Travelers Group insurance in 1998, and it also
includes the brokerage firm
Smith Barney. The idea was
to create a one-stop shop for
all your financial needs,
whether it was banking,
investing or insurance.
But you have to wonder if
by trying to be good in
everything, the company
ended up being good at
nothing. Its focus may have
been too broad, leaving it
susceptible to big hits as it
overreached to try to make
every segment profitable.
To keep from losing your
focus, it’s important to set a
clear mission and goals for
your organization and to
stick to them. Drifting from
your original goals is easy
because the market is
always changing and the
profits always seem to be just beyond your reach. Here
are some reasons why companies stray from their original goals:
- Lack of focus. Instead of
focusing on what they originally set out to do, too many
leaders are looking around
them at other alternative
opportunities and dividing
their resources in pursuit of
other goals created on the
fly. Too many companies get
lured into the promise of
instant rewards through
acquisitions but very few
acquisitions work out as
well as they first appear they
should. - Change for the sake of
change. New leaders often
feel the pressure of making
changes to differentiate
themselves from the previous regime. There’s no stability because the goals of
one CEO are often thrown
out the window the moment
the next CEO takes over. - Greed. Too many CEOs
are driven by short-term
profits. That means every
potential money-making
opportunity needs to be
taken so that the company
can maximize its short-term
earnings potential. Unfortunately, many of these
short-term projects are
detrimental to long-term
goals and can lead companies to take more risks than
they normally would. The
banking crisis is a good
example. - Financial instability. Going
after every opportunity also
usually requires a lot of
cash, and that means a lot of
debt. When you start carrying a lot of debt, you become
a slave to it. The more debt
you have, the more other
people from outside your
company — bankers and
investors — start to make
demands on how things are
run. It’s hard not to be pulled
in multiple directions when
this happens.
There are times when you
will need to adjust your
goals. But any time you do,
you need to ask yourself if
this is really a long-term
strategy or a short-term grab
for profits. If it’s the latter,
think again because taking
on too many fronts with
your company can lead to
poor performance in the
long term.
FRED KOURY is president and CEO of Smart Business Network Inc. Reach him with your
comments at (800) 988-4726 or href='mailto:fkoury@sbnonline.com'>fkoury@sbnonline.com.
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