Reading Room

Why The Bottom Line Isn’t

Plenty of emphasis is put on the bottom line, and rightly so, but the profit of a business is not necessarily a good indicator of its value or long term success prospects.  Enron was, after all, a highly profitable trading business and we all know of businesses that have been profitable but failed because of cashflow issues.

In Why The Bottom Line Isn’t Dave Ulrich and Norm Smallwood take a look behind the figures of business that are doing well, looking at businesses in the same industry who have share prices that seem high or low based on their profitability and revenue statements.

What they seem to have found is that investors value good leadership and well organised people policies above simple accounting.  Those businesses that investors were backing had a strong culture, well motivated, talented employees and leadership throughout the organisation, rather than one charismatic leader at the head.

Why The Bottom Line Isn’t walks through the intangibles that matter and helps readers to critically look at the intangibles within their own organisation.  It moves the debate started by Jim Collins in Built To Last and
Good To Great on, providing a slightly more academic outlook, although it’s well worth the read.

Claudine McClean
T: +44 (0) 1789 734333
E: claudinem@predaptive.com