We often read about how large American corporations have done such a great job of cutting back expenses and strengthening their balance sheets. And yet, our economy continues to languish. Many attribute this lack of growth to unemployment and unwillingness of corporations to open their pocketbooks and invest in growth, for fear of the financial crisis in Europe and our own “fiscal cliff.” In short, fear and perhaps a lack of ideas on where to go from here are holding us back. After all, no track offers a guarantee of success.
The latest quarterly earnings reports reveal that corporate profits rose for the 10th consecutive quarter.1 But as a recent article at Harvard Business Review points out, a lot of the net profit in recent years has come from reduced operating costs. According to the article, “CEOs can’t rely on cost-cutting to keep their profit momentum going – it’s gone about as far as it can at most companies.”
The author proposes ways companies can jumpstart real organic growth – as opposed to acquisition growth – into their balance sheets. One recommendation is to pursue a targeted strategy instead of throwing money at every new initiative. The result should not just be a greater ROI (return on investment) but ROE – a greater return on effort.
1[CLICK HERE to read the article, “Getting Back to Growth” at Harvard Business Review, June 22, 2012.]
Peter Cappelli, a professor at Wharton, recently published a book on hiring issues titled, Why Good People Can’t Get Jobs: The Skills Gap and What Companies Can Do About It. Cappelli addresses the claims that companies have jobs available but that there’s a severe lack of talent available and America’s universities are rolling out a new generation of unqualified candidates.
Do you remember your first job? Was there much you learned in college that honestly prepared you or contributed to your ongoing success? I remember grads who didn’t know how to work a copy machine (although fixing them seems to be the real skill).
Cappelli slaps down these claims with some aggressive observations. For example, to the claim that companies want experience but say they can’t find qualified people who will accept the salaries offered he responds, “Don’t call it a skills gap – you’re just being cheap.” This explains why older workers can’t get jobs (at their previous salaries) and younger workers (with no experience) can’t get in the door.
He also criticizes the “gutting” of HR departments and lack of human judgment in finding candidates. Due to the ramp-up in resumes received, automation is necessary. However, some savvy applicants have learned to “game” the automation system, getting their resumes pushed up the pike while other, less-savvy but more qualified applicants are weeded out. Cappelli observes, “Is that really who you want to be hiring? People who can game the system? I suppose it tells you something about people, but it doesn’t tell you much about who has the requisite skills.”
He’s got an interesting take on why unemployment numbers aren’t improving, with suggestions to bridge the hiring gap. Cappelli says the first thing companies should do is determine the cost of keeping a job vacancy open while searching for the perfect candidate.
[CLICK HERE to read the article, “Why Good People Can’t Get Jobs” at Knowledge@Wharton, June 22, 2012.]
In addition to job growth, there are multiple forward-thinking issues America’s companies must face to drive organic growth. In a recent article he penned for the BBC, the CEO of Coca-Cola put forth five “mega trends” that will influence market demand in the future. The list is below; note that most of these trends are already highly prevalent – it’s just that they will become massively prevalent in a few short years.
1. Mass urbanization – requiring the modernization of infrastructure and supply delivery logistics
2. The aging demographic – baby boomers drive mass demand (as usual)
3. The global middle class – largely comprised of emerging market countries
4. Consumer domination – social media gives consumers a voice in how we conduct business
5. Green issues – sustainability will no longer be a nice-to-have, it will be expected/assumed
[CLICK HERE to read the article, “The five consumer mega trends shaping tomorrow’s customers,” at the BBC, June 21, 2012.]
As we all know from Darwin’s theory of evolution, the strongest will survive. It’s up to our corporations to figure out the best way to meet the demands of consumers and grow organically – while at the same time benefiting our country with domestic jobs and innovation. It’s up to the rest of us to figure out which companies are poised to do that best. Please contact us if you’d like some help with that.
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