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.

We’ve been answering that question now for one year with nearly 370 articles on all aspects of a world-class management system. Our guide for what to address is the Baldrige model defined by the Baldrige Criteria and used to determine Baldrige Award winners. No other management model in the world has been as thoroughly tested, refined, and deployed.

The goal of any management system is to produce the results you want your organization to achieve. Ideally, those results align with your organization’s mission and vision. In world-class organizations, results are multi-dimensional and not just profits for a business or test results for a school. The Baldrige Criteria identify six areas where excellent results are necessary for long-term success.

The rest of the Baldrige Criteria address the development and deployment of the systematic processes needed to achieve world-class results. The Baldrige model is a process model: It asks how you do what you do more than 130 times.

Process has four dimensions:

• The approach you use to get something done
• Consistent deployment of the approach to all relevant areas of the organization
• Refining the approach through cycles of learning
• The integration of your approach with the rest of your management system

Questions about your processes are organized in six Categories: leadership, strategic planning, customer focus, measurement, workforce focus, and process management. Everything you do to run your organization fits into one or more of these Categories.

The articles on Baldrige.com explore the Categories, as you can see by clicking on one of the Categories on the menu bar at the top of the page. We also provide information about the Baldrige assessment process and Award and about specific sectors such as business, healthcare, education, and government.

In our experience, the Baldrige model is relevant for any type and size of organization. That’s the beauty of the Baldrige model: It captures the key elements that must be addressed for any organization to achieve its potential. You can see what those elements are by reading the Baldrige Criteria, and you can find out how well your organization performs on those elements by conducting a Baldrige assessment.

A Baldrige assessment can be a transformative experience. Organizations that want to improve will find opportunities for improvement that will change how they operate, and because the Baldrige model has been tested and proven effective for more than 20 years, leaders can feel confident that the changes they choose will make their organizations better.

To learn more about Baldrige, check out the articles listed in blue in the middle column on this page. To learn more about what each Category addresses, click on the Category at the top of this page and you all of the articles about that Category will be listed.

As the graph shows, last year the health care category accounted for 60% of all applicants. This year it represents 65%. While health care is embracing the Baldrige model, businesses are snubbing it: Only 14.5% of the applicants came from the three business categories, down from 15.7% last year. The Baldrige program came into existence to make American businesses more competitive. While it got business leaders’ attention during its first decade, it has fallen off their radars over the last ten years. It’s hard to imagine the Baldrige program could have survived if it had not added the health care category.

So what will it take to get business leaders to consider the Baldrige model? Or is the program’s inability to market its product too complete to overcome?

To read more about the Baldrige Award, click on these articles:

• What Is Baldrige?
• How the Baldrige Award Works
• Baldrige 101
• How to Integrate Baldrige
• Baldrige Gets Results
• A Baldrige Leader
• Summaries of 2009 Baldrige Award Winning Applications

Hello? I understand the whole “business-exists-to-make-a-profit-and-nothing-else-really-matters” position, but are ROA or ROE really the best ways to measure company performance? I thought the balanced scorecard came along because our obsession with financial performance wasn’t working. Apparently, a lot of folks can’t stop obsessing.

Case in point: HuffPost Business. If you visited its home page today you would find articles on Goldman Sachs, predatory lending, Hank Paulson, the Treasury Department, AIG’s bonus cutbacks, robber barons, financial crisis, financial innovation, bank bailouts, Federal Reserve, credit card blacklists, financial reform, economic oracles, Citigroup, China, more on the Federal Reserve, home sales, jobs bill, dollar vs. euro, Greece bailout, still more Federal Reserve, etc. About the only articles on the home page that weren’t about money were about health care and fast cars.

It shouldn’t be HuffPost Business; it should be HuffPost Finance. And they’re far from alone. Pick any random site that purports to tell you what’s happening in the business world and you’ll find that 90% of their articles revolve around finance. The same is true for most business magazines.

This is how the Baldrige Criteria, which define performance excellence, measures company performance:

• What are your product performance results?
• What are your customer-focused performance results?
• What are your financial and marketplace performance results?
• What are your workforce-focused performance results?
• What are your process effectiveness results?
• What are your leadership results?

Financial performance accounts for one-half of one of these items, worth 35 points—out of a thousand. Still, you would have trouble winning a Baldrige Award if you had poor financial results, but you’d have trouble if you performed poorly on any of these questions. A well-run company cannot be obsessed with financial results at the expense of these other important—some would say equally important—indicators. But what Baldrige Award winners have shown is that performing well in all of these areas stabilizes and improves their financial performance.

When Bob Galvin was chairman of Motorola (when it received one of the first Baldrige Awards), he made quality the first item on the agenda of corporate performance reviews, which were four-hour meetings held eight times a year. Quality and cycle time took up half the meetings. When the group finished discussing them, Galvin left the meeting. His message was clear: If you’re improving those factors that determine the bottom line, the bottom line will be fine.

The best way to measure company performance is with a balanced set of metrics that address those areas that are most important to current and future success. Financial performance is one of those key indicators. But it’s not the only one.

The top 20 most innovative companies are: (1) Facebook; (2) Amazon; (3) Apple; (4) Google; (5) Huawei–a Chinese telecom equipment provider; (6) First Solar; (7) PG&E; (8) Novartis; (9) Walmart; (10) HP; (11) Hulu; (12) Netflix; (13) Nike; (14) Intel; (15) Spotify–a European music-streaming site; (16) BYD–a Chinese car-and-battery maker; (17) Cisco Systems; (18) IBM; (19) GE; and (20) Disney.

That’s quite a variety of companies, from the “old guard”—Intel, IBM, GE, and Disney—to the “tech titans”—Amazon, Apple, and Google—to “green” companies First Solar and BYD.

Fast Company also identified the ten most innovative companies by industry, including consumer products, retail, technology, the Web, and consumer electronics.

It’s interesting to note that two-thirds of the 50 were not on last year’s list. As the chairman of HTC, ranked second in consumer electronics, said, “What you have learned is never enough.”

To read more about innovation, click on these articles:

• 3 Systematic Innovation Processes
• Making Innovation Part of Your Culture
• Innovation in the U.S.: The Bigger Picture
• Management System Innovation
• Innovation and Quality

The Baldrige Criteria ask how you engage customers to serve their needs and build relationships. Engaged customers are loyal, do more business with you, and recommend your products and services to others, which is why more and more companies are taking steps to develop “very satisfied”—as opposed to merely “satisfied”—customers.

One obstacle to engaging customers, according to Pegasystems, which commissioned the survey, is the constraints imposed by legacy Customer Relationship Management (CRM) platforms. Only 43% of respondents can provide a consistent customer experience across all delivery channels. Part of the problem can be traced to the digital divide: legacy CRM systems don’t have the flexibility to adapt to differing requirements and can’t deliver a high-quality customer response to all customers.

I’m reminded of a story Michael Dell tells in Behind the Cloud by Marc Benioff and Carlye Adler. Benioff had told Dell about an internal networking technology they were using at salesforce.com to create a feedback loop with their customers. Dell adapted the technology to create IdeaStorm, an online community forum that Dell uses to engage customers and elicit and act on their ideas. To date, Dell customers have contributed more than 13,500 ideas, which have been promoted by other customers nearly 714,000 times with more than 88,800 comments. Dell has implemented 409 ideas to improve its products and services. You can read more about IdeaStorm here.

Salesforce.com is a perfect example of using an open platform that makes it easier to connect with customers versus a “walled garden” client like Lotus Notes. It shows the impact digital can have on what you offer your customers and how you interact with them, and the advantages it offers in engaging and satisfying them.

To read more about customer engagement, click on these articles:

• Which Side of the Digital Divide Is Your Organization On?
• Lessons Learned from Dell Hell
• Why Customer Loyalty Matters
• 10 Critical Questions: Your Customers
• Bottom-Line Value of Customer Engagement
• 9 Ways to Get Closer to Your Customers
• Customer Loyalty Myths

Honeywell Federal Manufacturing & Technologies, Kansas City, Missouri, in the manufacturing category. With 2,700 employees and an annual operating budget of $540 million, FM&T is a management and operating contractor at the National Nuclear Security Administration’s Kansas City plant. Performance highlights include:

• Overall customer satisfaction at or above 95% for the last four years compared to a commercial best-in-class benchmark of 85%
• A Management Assurance System for identifying, implementing, measuring, and sustaining the “critical to quality” needs necessary for desired performance
• An Enterprise Alignment Process for daily accountability, aligned with FM&T’s balanced scorecard and strategic plan
• Cost savings of $23.5 million to $27 million annually for the past three fiscal years through the Six Sigma Plus Continuous Improvement Model

MidwayUSA, Columbia, Missouri, in the small business category. MidwayUSA has 243 full-time and 100 part-time employees and annual revenue of $185. It is a catalog/Internet-based retail merchant that offers shooting, reloading, gunsmithing, and hunting products. Performance highlights include:

• 1,500 documented processes, each focusing on the customer
• Overall customer loyalty of 94%
• Growth rate of 30% compared to 10% for its top competitor
• Strategic planning process that systematically aligns key processes to company goals, customer key requirements, and core competencies

AtlantiCare, Egg Harbor Township, New Jersey, in the health care category. AtlanticCare is a nonprofit health system with 4,872 employees and $700 million in annual revenues. Performance highlights include:

• Ranked seventh out of 4,200 hospitals in 2006 by Commonwealth Fund for clinical results in patient care
• Medical center volume increased from 34,000 discharges in 2000 to 56,000 in 2008, more than twice the state growth rate
• Uses a five-phase Voice of the Customer inquiry process to understand patient and stakeholder requirements and identify and innovate health care service offerings.
• Recognized for the second time as a Magnet nursing organization in 2008

Heartland Health, St. Joseph, Missouri, in the healthcare category. Heartland Health has 3,216 employees and annual revenues of approximately $750 million. Performance highlights include:

• Ranked among the top 15% of hospitals nationally for patient safety
• Uses a three-tier approach to improve community health
• Incorporates an electronic medical record system into its Lewis and Clark Information Exchange program to establish a lifetime medical record for patients in the region
• Saved more than $25 million from process improvements

VA Cooperative Studies Program Clinical Research Pharmacy Coordinating Center, Albuquerque, New Mexico, in the nonprofit category. A federal government organization that supports clinical trials targeting current veteran health issues, The Center has 111 employees and annual revenues of $21 million. Performance highlights include:

• Productivity of $221,000 in revenue per employee compares favorably with competitors, the highest of which has approximately $195,000/employee
• Uses multiple methods to listen to customers, which helped it improve customer satisfaction from 83% in 2003 to 100% in 2009
• Creates an agile, learning organization through the use of a fully deployed, agile matrix management system and an interlocking committee structure
• Low turnover, a supportive learning environment, and leadership effectiveness helped The Center earn recognition as a Federal Executive Board Employer of Choice in 2008 and 2009