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0 pointsLudwigNagasena2y ago0 comments

It doesn't become any less nonsencial just because some business leaders who are still stuck in 1980s believe in it.

Both profit centers and cost centers are supposed to increase profit, otherwise you wouldn't hire those people. If a department doesn't drive profit, then just axe it and stop wasting money on it. If you can't [1], then it actually drives profit, you just have no idea how. The fact that you can't set proper KPIs to measure impact doesn't imply absence of impact, and of course it doesn't imply that you should treat it as if it has no impact.

Departments are engaged either in primary or support activities. And those activities are either efficient and optimal or not. Your competitive advantage doesn't even have to be your primary activity. If you are successful at making fidgets because you hire, plan and budget better than others in your industry; what insight can talking about profit centers and cost centers provide to you?

[1] How is someone supposed to run a company without HR or accounting?

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esafak2y ago

Thank you! I think I'd disqualify a candidate manager who earnestly referred to cost/profit centers. The framing is misleading and betrays a broken understanding of value creation.

Everything the company does should generate value.

grecy2y ago

> It doesn't become any less nonsencial just because some business leaders who are still stuck in 1980s believe in it.

Of course it does.

Whatever your business leaders believe is reality in that company. It makes no difference what you or the outside world believe.

You're either OK with it, or you need to get out ASAP.

feoren2y ago

"Business leaders" are almost universally short-sighted, narrow-minded parasites focused on trying to fatten up their own division so they can suck more of its blood for 2 or 3 years before the next Musical Chairs game when they'll compete with all the other psychopathic mouth-breathers for the best seat, regardless of whether they know a damn thing about whatever division or company they end up in and subsequently pretend to "lead". It's an entire societal caste of pathetic, worthless, ambivalent assholes cosplaying as Business Magicians in order to compete in their own corrupt feudalistic games against each other to win the fattest host to parasitize. It's the modern day Priest Caste. If you "get out ASAP" from such companies, you will have nowhere to work.

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Gormo2y ago

The cost center vs. profit center concept has some utility for accounting, but overall it makes more sense to model the business as a modular system seeking a global optimum, a la Goldratt, rather than a set of separate sub-organizations each to be optimized separately.

In other words the business as a whole should be viewed as a singular profit center, and each department or project should be evaluated in terms of how much it contributes to optimizing the overall performance.

count2y ago

You redefined cost / profit center as 'primary' or 'support'. This is a circular argument.

CRConrad2y ago

> You redefined cost / profit center

Well, those are rather funny categories in the first place. Cost and profit aren't complementary categories; cost and revenue are. Profit consists of them both (i.e. the difference between their sums across all departments).

Just as there are no pure revenue centers -- every department has costs! -- it could be argued that there are no pure cost centers: Every department contributes to revenue in its own way. Without maintenance, you'd soon have no services to sell; without R&D you'd soon have no new products to sell... Heck, even HR -- without it, you'd soon have no personnel to staff the other departments.

Seems a bit skewed that some departments get to hog the "profit" label all to themselves while others are -- pejoratively, in MBA-speak -- condemned to the "cost" category.

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