TThe average return on assets of U.S. companies has steadily fallen to almost one quarter of what it was in 1965, and the trend line approaches zero in 2020. ROA is a measure of how profitable a company is and how efficient management is at using its assets to generate income.

The decline in ROA has occurred despite steady improvements in labor productivity, which have occurred despite stagnant wages for the labor. As a result, businesses have been paying no more for an increasingly productive workforce, which pretty much eliminates wage control and productivity as factors in improving ROA.

So how can leaders reverse the trend?

John Hagel III and John Seely Brown address this issue in “Six Fundamental Shifts in the Way We Work” (HBR, August 17, 2010). The six shifts they mention are:

1. Management practices and corporate institutions are fundamentally broken. Most have not yet figured out how to compete more successfully.
2. The source of value creation is shifting from your stock of knowledge to the flow of knowledge, and most executives lag in understanding what this means for their companies.
3. Management innovation is not enough: Institutional innovation, exemplified by China’s open production and design models and India’s open distribution models, are needed.
4. A new kind of performance curve is emerging: The collaboration curve, which brings together participants in a carefully designed environment to make rapid leaps in performance improvement.
5. Talent development is broader than training programs: People need to learn new skills and behaviors through their involvement in the work of the management system such as strategic planning, process management, and measurement.
6. Passion is everything. According to the authors’ survey in 2009, less than 20% of employees in U.S. industries say they are passionate about their work. “Passionate workers participate much more actively in knowledge flows that are the new key to value creation,” the authors write. “If you can help make your employees more passionate, you can create value in today’s economy.”

You can improve your performance in several of these areas by integrating the Baldrige model. The model helps fix broken management systems, promote talent development, and engage employees in what you are trying to accomplish. Integrating the Baldrige model will also free up resources to explore knowledge flow, institutional innovation, and collaboration.

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