Q&A talks about business growth and productivity with Ethan Brysgel, partner, Deloitte & Touche LLP and Deloitte Growth Enterprise Services’ mid-market practice leader in Hartford.
Q: Deloitte recently surveyed 696 U.S. mid-market executives. What’s their overall perception for the future of growth and productivity for their own business?
A: Despite an increased sense of uncertainty and economic pessimism, mid-market executives have a positive outlook when examining their own businesses. Nearly three in four of the mid-market companies we surveyed are maintaining or boosting the level of long-term investments in areas like business process automation, technology and strategic hiring, leaving these executives optimistic about revenue and profitability growth in the year ahead. Looking at the Northeast specifically, almost half of the companies are more likely than those in any other U.S. region to say that they are planning to boost long-term business investments. Additionally, in the Northeast, over 70 percent of mid-market executives expect higher revenues and just over six in 10 expect higher profits in the next 12 months.
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Q: It’s interesting that they are so up on their own companies but so down on the economy. What has happened to their confidence levels since last surveyed in April?
A: When we conducted a similar mid-market survey in April, the results showed that 38 percent of executives were positive about the future of the U.S. economy. With the current survey, we spoke with mid-market executives between July and August 2011 and found that they estimated the average economic growth for the next 12 months at 2.1 percent. What we saw was that the later the respondents answered the survey — and the more they learned about unfolding economic developments — the more pessimistic they became, with August respondents forecasting growth of only 1.6 percent.
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Q: What’s it going to take to restore that confidence? Or, does it not really rebound until after the next presidential election, regardless of who wins?
A: The survey looked at the reasons behind mid-market uncertainty in the economy, with the main factors being taxes, regulatory issues and credit availability. While we did not look at the issues that will restore this confidence in the broader U.S. economy, I can tell you that many mid-market companies are preparing themselves for an economic rebound by exploring or embracing technology and business process automation as a means to boost productivity to stay ahead in the marketplace. By focusing on things that executives have control over within their own business, such as technology and business processes, they have already seen, and will continue to see, productivity improvements that contribute to increased confidence in personal business growth.
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Q: Forty-seven percent agree with the statement, “It is difficult for us to find employees with the skills and education to become productive immediately.” Why is it difficult for them? What can to done to correct the problem? Is it an accurate perception?
A: Strategic hiring of skilled talent — people who can be productive immediately — ranks high on the mid-market executive agenda. Our survey shows that nearly 40 percent of executives agree that strategic hiring of new talent with specific skills helps to boost productivity in the long run. Yet, there is a mismatch between job requirements and skilled workers to fill those jobs. The U.S. economy is still in the midst of major economic structural changes, so there is no quick fix. Until the economy shows stronger gains, it will be difficult to realize significant employment gains. The consensus is that economic growth over the next year will remain stalled, possibly even negative, and the 3.5 percent growth rate widely seen as necessary for real job creation is unlikely. By August, only 12 percent of executives polled anticipated growth of 3.5 percent or more.
U.S. mid-market companies surveyed are keeping up with, or even increasing, their pace of capital spending. Three out of four of the companies surveyed are maintaining or boosting the level of long-term investments, despite higher levels of economic uncertainty. This is good news because long-term investments typically drive higher productivity, which — if accomplished by rising output — is associated with job growth.
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Q: Despite the skilled labor conundrum, 44 percent of the respondents indicate that their companies are prepared to increase the size of their U.S. workforce and hire over the next 12 months. Doesn’t that seem to indicate faith in the economy or is it, again, just faith in their own businesses?
A: What we are looking at here is the desire for companies to hire if they are able to increase productivity. This is based on individual business performance and not on broader faith in the future of the U.S. economy. Historically, productivity and employment have risen together. Fifty-eight percent of respondents said that if they could increase productivity, they would hire specific talent in critical areas.
