Businesses are evaluated through a lot of different methodologies, of which, those that are the executives of those businesses, as well as the stockholders and analysts of such, are forever looking at the efficiency, profit, and growth of a given company. The simplest definition of RONA is the amount of profit that a given company generates in its fiscal year, divided by the fixed assets plus net working capital of that company, to thereby come up with the RONA ratio for that company. The higher that ratio is, and the better that ratio is in comparison to like companies, the more efficient it is believed that subject company is in using its capital and assets to generate profits. On the surface, RONA seems like a good and fair test, of exactly what it is meant to represent, which is how much profit management can generate from the given capital and fixed assets that they so utilize. However, in an era in which a significant amount of executive officers, are so often dependent upon the underlying stock performance of the company that they are a part of, to thereby earn lucrative bonuses, and/or to reap the benefits of their vested stock options, there is always going to be a strong tendency for a meaningful percentage of those executives to want to "game" the system, so as to benefit primarily themselves, at the expense of the long term interests of the company, or for society, at large.
That is to say, one way to increase a company's RONA is quite obviously, to generate more sales from the fixed assets and net working capital of that company, of which, by those additional sales, typically, the overall profit amount of that company will increase. Not too surprisingly, to achieve the increase of sales along with the increase of corresponding profit is something that necessitates real effort, planning, and throughput, and may well require some time to successfully achieve. On the other hand, since RONA represents a ratio of profit, divided by the fixed assets and net working capital of that company, the other straightforward way to increase a given company's RONA is, for example, to reduce the amount of fixed assets that a company is the owner of, by the selling of such, and subsequently the replacement of those fixed assets with the successful outsourcing of what those assets use to perform --thereby still capturing those profits through that successful outsourcing. Not only does outsourcing reduce the fix assets of a company, it typically also reduces the amount of those so directly employed by that company; yet, via that successful outsourcing the profit of the company is not only maintained, but the RONA ratio subsequently rises, proving that the management of the company is astute because of its improved efficiency in the utilization of its company's assets and capital.
So then, in the hunt for efficiencies in which executives are judged on their competency by formulas such as RONA and the profit ratio so produced, management in recent years has outsourced more and more domestic jobs, and purchased directly for their company less capital equipment than they would normally have a need for, by virtue of that outsourcing; so that, while corresponding profits and ratios look quite good for those companies, the reverberations of this outcome is part and parcel of why the once vibrant middle class of America continues to get hollowed out.