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Tying Profit to Performance: A Valuable Tool, But Use With Good Judgment

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Journal Article

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Under Secretary of Defense for Acquisition, Technology, and Logistics Washington United States

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One thing I enjoyed about working in industry was that everyone in the private sector understood the definition of success It was profit. If something did not make a profit for a business, then it was not good. Profit is the fundamental reason that businesses exist to make money for their owners shareholders. Without profit, businesses die. From industrys point of view, more profit is always better. Not being profitable makes a company unsustainable and will lead to bankruptcy. Declining profits make it harder for businesses to raise capital or to invest for their futures. These facts make profit the most powerful tool the Department of Defense DoD has to obtain better performance from industry. It is important, however, to recognize that this also implies that over-aggressive use of this tool can seriously damage the institutions we depend upon for products and services.

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