For five years, Brad Stillahn worked to raise prices and cut sales commission expenses at West Tape & Label Inc. Not surprisingly, the effort didn't please the 25-person Denver manufacturer's sales force and, worse, wasn't helping the firm make money. But it seemed as if it ought to work, so Stillahn kept at it-until recently.
"Now we're looking at completely revamping the way we run our business," says Stillahn. "We'll be substantially reducing prices and raising commissions."
What turned Stillahn around was a set of business management ideas called the Theory of Constraints. Constraint management, as it's known, says the key to helping businesses reach their goals is to focus on the factors holding them back. Then, by arranging operations so the origin of the bottleneck is being used as fully as possible, bottom-line performance is greatly enhanced.
In West's case, Stillahn determined that his printing presses were the constraint. His remedies included rearranging the plant floor and changing press operators' duties. By making these adjustments, he basically subordinated the company's operations to his presses, making sure they were running as often as possible.
The result? "We're doing better than we've done since 1987 in terms of profitability," says Stillahn. "And we think lowering prices and raising commissions will double our profitability."