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Deloitte: 'Quick fix' financial solutions prove detrimental

Nov 22, 2011 Walt Wojoiechowski

Current economic conditions have proved challenging to many small enterprises. From the tightening of the credit market to weak consumer spending, businesses are being forced to leverage "quick-fix" financial solutions that may prove harmful in the long-run. According to a survey released this week by Deloitte, these immediate cost-cutting strategies, such as layoffs and inventory reduction, fail to address the underlying concern: poor return-on-assets, which is an indicator of an organization's ability to channel assets into earnings. For example, employment productivity has surged by more than 250 percent in recent decades, even as ROA dropped by as much as 75 percent, according to the report. "A profound structural issue weighing on our economy began well before the current economic downturn and likely will continue for the foreseeable future unless business leaders address the underlying challenges," said John Hagel, director of Deloitte Consulting LLP. Companies risk making employment or credit decisions - initially perceived as quick solutions - that ultimately weaken their workforces and disrupt the flow of information, leaving them vulnerable to economic forces.