With labor costs now absorbing almost 87% of the output of nonfinancial corporations, companies are likely to face a lethal combination of rising interest rates and rising wages as inflation accelerates. To overcome this profit squeeze, companies must increase productivity fast enough to fund both higher wages and decent profits for shareholders.
Back in the roaring 1990s, real wages for the average private-sector worker rose by about 14% (as measured by the Labor Dept.'s employment cost index). That's compared with a slim 1.4% gain in the previous decade.
Now that workers are starting with a bigger share of output and faster wage growth, to satisfy them and build profits at the same time, companies are going to have to do better than the 2.2% productivity growth of the 1990s. And that will likely take place in an environment of rising interest rates, putting more pressure on profits.
One of the best ways to build management capability for productivity growth is through an executive coaching program. Executive coaching provides the high leverage learning necessary to help managers excite, energize and coach their people to greater productivity.
For information on Executive Coaching's return on investment (ROI), go to:
http://home.att.net/~coachthee/Archives/execroi.html
John G. Agno, certified executive & business coach, www.CoachThee.com