5 Reasons for "Respectful Workplaces": Optimizing for Growth

In a recent post, I pointed to an article by ProActive ReSolutions' Richard Hart as support for the proposition that, within the current economic climate, organizations should consider Respectful Workplace Programs as part of their strategy for growth. In this post, I want to explore further the rational behind that proposition.

Since the global fiscal collapse was triggered in September 2008, when New York investment bank Lehman Brothers declared bankruptcy, there has been a dramatic shift within the world's economic landscape. In the US alone, as a direct result of those developments, more than $11bn of personal wealth has been lost, millions of jobs have been eliminated, and more than 10 million homes have been foreclosed on. (Bob Abeshouse, Prosecuting Wall Street, Aljazeera, posted 14 September, 2012)

From our work with private and public sector clients in over 25 countries, we had the opportunity to hear first-hand from executive leaders and managers about their concerns over projected reductions in revenues immediately following the onset of the fiscal collapse. The initial reaction from both corporations and government organizations was wide-spread cost-cutting and restructuring. The benefits of those strategies have been largely realized, and there is little ability to effect further reductions in workforces or resourcing without the negatively impacting operations and innovation in fundamental ways.

At a macro level, central banks across the world have clung tenaciously to low interest rates in an attempt to stimulate both domestic spending. and investment in the stock market. However, corporations have largely failed to respond to these "motivators", opting instead to accumulate cash reserves, stockpile commodity inventories, and sit on excess production capacity. This picture is particularly evident in relation to the worldwide holdings of U.S. companies, which, as David Cay Johnston points out in his article, Idle Corporate Cash Piles Up (Reuters, posted July 16, 2012), appear to have good reason to hoard cash:

First, Congress lets overseas profits accumulate untaxed, so long as offshore subsidiaries own the cash. Second, companies have a hard time putting cash to work because fewer jobs and lower wages mean less demand for products and services. Third, a thick pile of cash gives risk-averse CEOs a nice cushion if the economy worsens.

Given the enduring hard times, you might think that corporations have used up their cash since 2009. But real pretax corporate profits have soared, from less than $1.5 trillion in 2009 to $1.9 trillion in 2010 and almost $2 trillion in 2011, data from the federal Bureau of Economic Analysis shows.

That is nearly $1 trillion of increased profits over two years, while actual taxes paid rose less than a tenth as much, BEA reports show. Dividends, wages and capital expenditures all grew less than profits, while undistributed profits rose. The result: more cash.

More cash -- and fewer places to park it. 

Under these conditions -- an abundance of cheap capital, continuing low demand in traditional markets, excess production capacity and commodity inventories, and low returns on bonds and related investments -- we see two primary areas for real growth potential for corporations:

Inorganic growth: The realization of growth through the acquisition of existing businesses, in order to gain access to new markets and new product offerings. The combination of accumulated cash and stagnant markets leaves larger, more stable multi-national corporations in a prime position to acquire other businesses, technologies and companies. By way of example, one of our clients, ABB Inc., has spent billions on acquisitions in the U.S. over the past several years, expanding its corporate base to include Baldor, Ventyx, and most recently, Thomas & Betts. In the process, ABB has added tens of thousands of employees to its workforce, expanded into new markets, and expanded its share of existing markets. Just over a year ago, in November 2011, ABB's CEO, Joe Hogan, indicated that the company had allocated $15 billion for further acquisitions.  Internal efficiencies: Moving beyond cost-cutting, present conditions suggest organizations have an opportunity to fundamentally transform themselves in terms of internal capacities and efficiencies, learning how to not simply do more with less, but how to do it all better, faster and more responsively in relation to the emergence of local and regional opportunities. In Alberta, for instance, we see our client, the City of Red Deer aggressively pursuing safety and injury reduction targets by engaging both staff and the public within the scope of its Respectful Workplace Program. Meanwhile, since 2006, staff at City of Kamlooops, British Columbia, have worked collaboratively on developing an award-winning on-line service, MyCity, which allows city residents to deal with everything from property taxes, to building permits, to re-zoning and subdivision processes, to utility billing. The 24/7 access to relevant file information reduces complaints and increases user satisfaction, while enhancing organizational transparency and accountability.

Real growth, then, will come from optimizing workplaces, to ensure that new business units are quickly integrated into the organization, and that the full potential of the existing human capital is operating for the benefit of the enterprise. Organizations that focus strategically on creating and leveraging an effective, sustainable and responsive "corporate consciousness" – essentially, cultures of respectful and responsible behavior, that empower people to work together more safely, productively and effectively – will be best positioned to maximize returns on acquisition and internal rationalization initiatives, and thereby drive enterprise performance. From this perspective, Respectful Workplace Programs as workplace optimization programs may indeed offer a path to future growth.

View the original article here