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Proposed Obama tax cuts aren't enough for companies to start hiring again

Thriving companies look beyond short-term profits for shareholders. They work with multiple stakeholders, especially employees, and have a long-term purpose and commitment, according to one Harvard business professor.

By Clayton Jones / September 8, 2010

President Barack Obama holds a roundtable discussion with small business owners at the Grand Central Bakery in Seattle, Washington, on August 17, 2010.

AFP PHOTO/Jewel Samad/Newscom

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President Obama’s latest proposal to boost business by offering tax cuts isn't the only way to help companies create new jobs.

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Research by Harvard Business School professor Michael Beer finds that the most viable companies are ones that are not singularly focused on profits for shareholders and other investors. Rather, firms that did relatively well during the 2008-09 recession had a higher purpose that takes into account many stakeholders, such as consumers, employees, the public welfare, and even the environment.

Adopting a “multi-stakeholder perspective,” as Professor Beer calls it, may now be the best way for a company to revive itself in a tough economic climate. Top executives must be more sensitive to consumers, allow more freedom for innovation among their workers and researchers, and be more mindful of society’s needs, according to Beer, author of “High Commitment, High Performance: How to Build a Resilient Organization for Sustained Advantage.”

It’s not easy for business executives to take their focus off profits in order to stretch their capabilities in other areas. Yet the best ones have learned how to be humble and to listen more to their employees, their vendors, and to the various communities affected by the company. Most of all, they are open to new ideas, a higher purpose than quarterly profits, and the long-term future of the company.

These are not qualities that come from government. Indeed, by dangling the prospect of higher profits through fewer taxes, Obama only reinforces a business model that researchers such as Beer have found is not sustainable.

“High commitment” companies, Beer finds, don’t appeal to people’s sense of greed. Rather they provide workers with incentives to grow and to contribute, to care about customers and the company’s legacy – while avoiding the risks that might ruin the company.

These attitudes are the sustainable assets for a business. That is the lesson that should come out of this latest recession and that can revive companies.

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