The "Profit Centre" is a Regrettable Error

Traditionally, it has become the case that,

- "cost centres" refer to supporting operations, and

- "profit centres" refer to core value-chain operations ...

... furthermore often we encounter the entirely ridiculous practice where,

- "profit centres" refer to sales operations.

This is ridiculous because profits are composed of sales and costs, and this equation is completely obfuscated if sales are otherwise equated with profits.

In fact, "profit centres" don't exist within individual businesses units. In a map of business units, each business unit can be a profit centre or a loss centre. Within each business unit, profits result from a VALUE-CHAIN.

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What more can we do to clean up this corruption of language?

The context for this language often arises in the activity of analysing profitability. In a map of business units, we can encapsulate value-chains within business units, and so this is relatively easy. Within each business unit, an analysis of profitability must take into consideration the OPPORTUNITY COST of alloting the HIRED TIME of each INDIVIDUAL TALENT, to this or that activity. From this observation we should proceed to understand that even staff in a sales function should not be judged primarily on sales, but on contributions to profitability based on such a model.

This is where the fun begins.