The Lucas Group Job Generation Outlooks is an innovative approach to traditional hiring and employment surveys, gauging both recent and planned activity in the United States small to mid-sized business market. This, our third quarter national survey of SMB presidents, CEOs and business owners, examines executivelevel perspectives on critical issues facing the American SMB marketplace, including economic developments, employment trends, legislative initiatives, political environments, and the tangible impact these issues have on business and employment planning.
Conducted in coordination with Polaris Marketing Research and Dr. Goutam Challagalla, Associate Professor at Georgia Institute of Technology College of Business, the SMB Job Generation Outlook is the only economic and employment survey that captures timeless trends – directly from the visions and priorities of the highest executive offices.
Quantitative results and key findings from the SMB Job Generation Outlook survey were analyzed, and through a series of graphs and charts, the statistical relationship of trends in the small to mid-sized business market has been illustrated. A detailed narrative of the data analysis follows the illustration on page 9.
Lucas Group will continue the SMB Job Generation Outlook survey on a quarterly basis via online surveys with invited top executives from a variety of SMBs around the country and across industry segments.
The Lucas Group survey is set to become the outlook standard for the American SMB market, heralded in American discourse as the jobs engine for economic revitalization.
We encourage you to retain this report as a reference point. Consider how this information may impact you – now and throughout the year. As always, please feel free to contact us. We welcome your questions and feedback.
Thank you for your interest in this important analysis of the SMB economic and employment outlook across major industries and around the nation in Q2 2013.
TITLES & COMPANY REVENUE
With a continued focus exclusively on the principles at each company, the SMB Job Generation Outlook surveys only executives who are president, CEO or owners of their companies. In Q2 2013 we surveyed 100 top executives from around the nation and across industry segments.
Nearly half of our respondents reported annual revenue in 2012 at $50M-$150M, representing the US small business market. Another 44 percent reported revenue greater than $151M, with 11% reporting between $601M-$1B.
JOB GROWTH PROSPECTS
Strong second quarter respondent optimism for job growth within surveyed companies mellowed slightly in Q2 as optimism shifted toward the center. While 41 percent responded being somewhat optimistic in Q1, that number dropped to 34 percent in Q2, and respondents who reported in the middle at being neither optimistic nor pessimistic grew from 19 percent in Q1 to 38 percent in Q2. Third quarter optimism regarding job growth prospects for the United States as a whole, remained relatively unchanged from Q1, with a slight uptick in respondents who are somewhat optimistic and a moderate decrease in overall pessimism.
ECONOMIC PROSPECTS FOR COMPANIES & COUNTRY
While job growth optimism cooled slightly, overall economic optimism has grown. More than one-third (77 percent) of respondents are somewhat or very optimistic about the economic prospects of their own companies and only eight percent reported being pessimistic. The greatest change was in the jump of respondents who reported being very optimistic about their economic prospects – bumping from 25 percent in Q1 to 34 percent in Q2.
These leaders are also increasingly bullish on the prospects of the national economy. The number of respondents reporting being somewhat or very optimistic about the nation’s economic prospects grew steadily over the past three quarters, from 37 percent in Q4 2012 to 54 percent in Q1 and reaching 57 percent in Q2. Slightly more than 20 percent remained in the middle regarding the nation’s economic prospects.
2013 COMPANY POSITION
Despite only slight increases in job and economic prospects, SMB leaders reported a marked improvement from the previous quarter regarding the position in which they view their companies. With opinions consistent moving toward growth, 3 percent reported their companies to be in survival mode and 9 percent (down from 19 percent in Q1) reported their companies in a controlled retrenchment position. Those respondents reporting that their companies are maintaining stability or in growth mode increased from 75 percent in Q1 to 88 percent in Q2.
SMB leaders continue to agree with the oft-repeated adage that small and mid-sized businesses are the job generators of the U.S. economy. An overwhelming 84 percent agree with that statement, while only 4 percent disagree. In terms of their companies, agreement moved more to the middle in Q2, with 63 percent of respondents agreeing that their own companies are job generators (down from 77 percent in Q1) and more than double (15 percent in Q1 to 33 percent in Q2) now take a neutral position on their own job generation.
IMPACT OF PATIENT PROTECTION AND AFFORDABLE CARE ACT
The vast majority of SMBs leaders around the nation understand that their businesses must plan or prepare for the October 2013 implementation of the Patient Protection and Affordable Care Act, however only 18 percent report having completed business preparations and being ready. More than half (57 percent) report having worked on preparation plans but remaining unready for implementation. Eleven percent of respondents plan to begin preparation and another 11 percent plan to do nothing to prepare for the law’s implementation.
Optimism regarding bipartisanship at the national level did not change in Q2. Change was noted, however, in the percentage of respondents being somewhat or very pessimistic regarding federal bipartisanship. While the combined percentage of those reporting being somewhat or very pessimistic grew only two percentage points over Q1, the proportion of very pessimistic responses increased 11 points to 86 percent.
As with last quarter, SMB leaders are less pessimistic regarding state-level bipartisanship (53 percent) than national cooperation (64 percent), although that leveling off of pessimism did no translate into an overall increased optimism. Only 16 percent of respondents reported being somewhat or very optimistic about either governmental levels working together and nearly one-third reported being ambivalent about state bipartisanship.
While SMBs leaders continue not to appear to be in support of increasing the minimum wage, the strength of their opposition weakened slightly in Q2. The largest response continue to be that SMBs would increase prices to end customers in order (23 percent) and another 18 percent said a minimum wage increase would reduce their new hiring plans.
Interestingly, the percentage of respondents who reported that increasing the minimum wage would not impact their business increased from only 1 percent in Q1 to 7 percent in Q2. Additionally, more than half of the respondents reported not knowing how the proposed increase would affect their businesses.
SMB leader support for easing immigration requirements dropped slightly in all four categories polled. Respondents shared greater support for high-demand skilled workers than for the larger population of immigrants. Less than half (46 percent) agree the U.S. should ease immigration constraints for skilled workers in IT, science, and other high-demand fields. Thirty-seven percent of respondents support easing requirements for immigrants already living in the United States. Slightly fewer (31 percent) however, support easing immigration requirements for all immigrants. Higher rates of respondents do not support the easing of requirements for either population (34 percent and 42 percent, respectively).
WORKFORCE RETIREMENT IN 2013
The percentage of SMBs expecting Baby Boomer retirements in 2013 shifted slightly in Q2. Last quarter only two-thirds (66 percent) anticipated that less than 5 percent of their workforce would retire this year. This quarter, that number has increased to nearly threefourths at 74 percent. Respondents expecting between 5 to 10 percent of their workforce to retire in 2013 also dropped from last quarter, from 16 percent in Q1 to 9 percent in Q2. The only grouping to show a slight increase in Q2 was a 2 percent increase in the 11 to 15 percent bracket, to 11 percent in Q2.
IMPACT OF RETIRING BABY BOOMERS
SMBs are beginning to anticipate a greater level of impact that Baby Boomer retirement will have on their company. The percentage of respondents who believe that retiring Baby Boomers will have no impact on their business has dropped 17 points, from 45 percent in Q1 to 28 percent in Q2. Fifty-nine percent now believe Baby Boomer retirement will have some impact (up from 51 percent in Q1). Notably, the percentage of respondents who anticipate
HOW RETIREMENT IMPACTS COMPANIES
Closely related to the level of impact is the manner in which Baby Boomer retirement will impact SMBs. The response option with the highest percentage was that Baby Boomer retirement creates a knowledge gap that’s difficult to bridge, with 56 percent agreeing with this statement (up from 48 percent in Q4 2012 and 37 percent in Q1). One response showing steady increase was that 23 percent of SMB leaders believe Baby Boomer retirement impairs their ability to compete in the marketplace. This number grew 10 points from last quarter and 15 from Q4 2012.
Not all SMBs believe Baby Boomer retirement is solely a negative impact, however. Forty-one percent believe retirements will improve their ability to consider new approaches/processes and 34 percent see retirements as an opportunity to enhance future innovation and growth.
In an effort to bridge that 56 percent perceived knowledge gap, 17 percent plan to hire Boomers back on a contract basis. The majority, however (55 percent), have no plans to do so and another 25 percent are
Recent economic concerns have clearly impacted retirement plans for many workers across the United States, including in SMB companies. Two-thirds (76 percent) of the respondents believe that up to 10 percent of their workforce delayed retirement over the past three years because of the recession, and another 11 percent feel that more than 1 percent did so. A similar percentage anticipate the trend to continue, with 76 percent foreseeing up to 10 percent of their workforce delaying retirement in the next three years.
CONTRACT OR PERMANENT EMPLOYEES?
Q2 witnessed a slight decrease in SMB willingness to hire only permanent employees, down 7 points from last quarter to 35 percent. Another 35 percent report hiring a combination of permanent and contract employees, contrasted with the 12 percent who will only hire contract workers in 2013. Eighteen percent report no plans to hire either permanent or contract workers this year.
While the flow of veterans back into the workforce continues to accelerate and the topic has become a mainstream media and political discussion, the majority of SMB respondents in Q2 (80 percent) report that their companies hire military veterans but that they have no specific plans regarding their recruitment or hiring. This number is up more than 20 points from Q1. In Q2, only 15 percent report having specific veteran hiring plans, down from 22 percent in Q1. The move to the middle was also noted at the other end, where the percentage of SMBs who specifically said they will not target military veterans for hiring in 2013 has dropped steadily since early 2013, from 24 percent in Q4 2012 to 19 percent in Q1 and only 5 percent in Q2.
PROFESSIONS IN WHICH COMPANIES WILL HIRE IN 2013
SMB leaders were asked to segment their hiring plans based on key corporate professions. In six of the eight professions surveyed, the percentage of companies who plan to decrease workforce has dropped. Reciprocally, six of the eight professions also saw a decreased percentage of anticipated hiring, though at lesser rates.
Sales, Marketing, and IT continue to top the types of jobs most in demand by SMBs, a trend in place for the past three quarters. In Q2, those positions continue to be in demand with 46 percent anticipating adding employees in Sales, 34 percent in Marketing, and 24 percent in IT. Manufacturing Management demand has remained consistent at 25 percent in Q4 2012 and Q1 and 22 percent in Q2. Notable changes in Q2 include:
• Active hiring plans for IT in Q2 have dropped from the past two
• The percentage of SMBs planning to decrease HR employees
dropped 10 points in Q2, from a consistent 17 percent in Q4 2012
• Legal hiring plans have remained relatively flat in 2013, with nearly
80 percent planning no change in Legal staff numbers.
HIRING OR DOWNSIZING IN 2013
SSMBs reported hiring plans for the next quarter that were both stable and fairly growth-oriented. The large majority of respondents reported plans to either hire (40 percent) employees or make no changes (46 percent) in Q2. Only 14 percent plan to reduce workforce numbers this quarter. Looking ahead to the next twelve months, respondents were slightly less certain in their hiring or downsizing plans than they were for the single quarter, with 14 percent continuing plans to downsize, 41 percent reporting plans to hire, 39 percent remaining stable and 6 percent uncertain about the next twelve months (up from 0 in Q2 considerations).
The challenge of finding top talent in the marketplace continues to be an issue for SMB leaders. The percentage of respondents who reported that finding top talent was easy dropped from 13 percent in Q1 to 8 percent in Q2, and only 1 percent of SMBs leaders reported hiring top talent to be extremely easy. More than 60 percent responded that finding top talent
WORKFORCE, WAGES & SALARY, AND BENEFITS DECREASES IN 2012
Of those expenses reported to have decreased in 2012 over 2011, most companies reported those decreases to be in the lower level bands, with the vast majority reported decreases of less than 10 percent. Decreases in benefits expenses were overwhelmingly light, with 80 percent of respondents reporting less than 5 percent decreases in related costs. Workforce and wages & salaries related expense decreases were less pronounced, with decreases of 20 percent and 33 percent, respectively. As opposed to expense increases, where no more than 3 percent reported increases greater than 25 percent, SMBs leaders in Q2 who accounted decreases in related expenses reported more significant decreases at that greater than 25 percent level, between 7 and 14 percent.
WORKFORCE, WAGES & SALARY, AND BENEFITS INCREASES IN 2012
Of the companies reporting an increase in workforce related expenses in 2012, approximately 39 percent reported increases that exceeded 11 percent. Fewer companies saw increases in benefits (29 percent) or wages & salaries (23 percent) that exceeded 11 percent. Benefits expenses saw the largest increases between 5-10 percent with 47 percent of responding SMB leaders reporting in that band. Both workforce and wages & salaries saw the greatest expense increases in the less than 5 percent band (with 40 percent and 47 percent, respectively).
CHANGE IN WORKFORCE AND RELATED EXPENSES
The percentage of SMBs reporting expenses increases and decreases for 2012 were similar to Q4 2012 and Q1 findings. Workforce related expenses dropped 40 percent in Q2 the findings, whereas both Benefits and Wages & Salaries saw a 5+ point increase in related 2012 expenses by Q2 respondents, at 61 percent and 59 percent respectively. Forty-five percent of SMB leaders reported that workforce expenses stayed the same in 2012, and 15 percent continued to report a decrease in workforce related costs.
LENGTH OF TIME IN BUSINESS
The survey group continues to be composed of long-standing businesses with more than half of the Q1 respondents in business for more than 20 years. Another 38 percent have been in business from 6-20 years.
Small businesses are the majority of the survey sample with 56 percent employing fewer than 500 employees and only 7 percent employing more than 5,000.
TYPE OF COMPANY
Lucas Group SMB Job Generation Outlook Survey
The SMB Job Generation Outlook survey evaluates key economic, employment, and political drivers for the small to mid-sized business market. Through detailed analysis, the Outlook provides timely insight into both recent and near-term planned employment activity. This Q2 survey captures visions and priorities of noteworthy SMB senior leaderships, including Presidents (36 percent), CEOs (35 percent) and Business Owners (29 percent).
Q4 2012 & Q1 Summary
The inaugural survey conducted in December 2012 revealed a dichotomy between how SMB leaders viewed their own businesses and how they viewed the national economy. In Q4 2012, respondents were confident in the 2013 prospects for their own companies, with 57 percent believing that they would grow and 55 percent planning to hire new employees. They were far less optimistic about Washington with almost half pessimistic about the prospects for the national economy.
Several months later, this SMB optimism continued with 71 percent optimistic about their companies’ prospects in 2013 and 59 percent optimistic about their companies’ job growth prospects. One notable change between Q4 2012 and Q1 was reported in SMB leaders’ opinions regarding the national economy and national job growth prospects. In Q1, 47 percent reported being optimistic about job growth prospects, compared to only 28 percent in Q4 2012. Key political and economic issues, such as The Affordable Care Act, potential increases to the minimum wage, and immigration reform evoked varied—and in some cases—uncertain opinions from the SMB market.
Q2 – A Shift toward the Middle
Strong first and second quarter optimism for job growth prospects of the surveyed SMB leaders’ own companies mellowed slightly in Q2. Respondents reported a move to the middle with 38 percent feeling neither optimistic nor pessimistic, up nearly twenty points from 19 percent in Q1. However, while job growth prospect optimism slowed; economic prospects for surveyed SMBs continued to increase quarter over quarter, rising from 37 percent of respondents in Q4 2012 reporting being somewhat or very optimistic about their own companies’ economic prospects to 54 percent in Q1 and 57 percent in Q2.
With an overall increase in economic optimism, Q2 saw a positive move in how SMB leaders viewed their company positions. In Q1 three quarters of respondents reported their companies in either a stable, maintenance mode or a growth position. In Q2 that number rose to 88 percent of surveyed companies maintaining stability or growing. In terms of job generation, the majority of survey respondents continue to agree with the statement that SMBs are the job generators for the U.S economy, with more than 80 percent agreeing or strongly agreeing steadily over the past three quarters.
Slowdown in both Growth and Reduction
Slightly fewer SMB leaders report planning to hire in the next 12 months, with respondent percentages dropping from 61 percent planning to hire to 41 percent. This decline, however, does not indicate an increase in subsequent downsizing. The percentage of SMBs leaders planning to downsize their workforce in the next 12 months also dropped from 20 percent in Q1 to 14 percent in Q2. Nearly 40 percent of respondents report planning no significant change in the size of their workforce over the next 12 months.
Sales, Marketing, IT and Manufacturing Management continue to be the most indemand professional segments, with Sales leading the hiring charge at nearly half of the respondents looking to increase their Sales
force in 2013. The majority of SMB companies surveyed plan to keep force sizes the same for Legal, Accounting, Finance and HR during 2013. Both hiring and downsizing appeared to slow slightly in Q2 for most professional segments, indicating that many SMB leaders anticipate that the days of cutting are over, even if growth remains moderate.
Baby Boomer Retirement Creating Increased Impact
As national employment models indicate that Baby Boomers will retire at the rate of approximately 10,000 workers a day for more than a decade to come, measuring and evaluating the impact this retirement flood will have on business is a significant conversation in the marketplace. Based on a comparison of our survey responses in Q1 and Q2, SMBs are beginning to anticipate impact to their businesses. The percentage of SMB leaders who foresee no impact to their companies dropped from 45 percent in Q1 to 28 percent in Q2. Likewise, 11 percent anticipate a very big impact – up from only 3 percent in Q1.
The types of impact, however, are not necessarily negative. While more than half of survey respondents anticipate that Baby Boomer retirement will create a knowledge gap that’s difficult to bridge, 41 percent say retirements may improve their ability to consider new approaches and processes and another 34 percent agree with the statement that Baby Boomer retirements enhance their prospects for innovation and growth. In response to bridging the surmised knowledge gap, at this point less than 20 percent of SMB leaders anticipate hiring back retirees on a contract basis.
Lucas Group will continue to survey SMB leaders across the country about these significant economic and employment issues each quarter and will monitor how SMB opinions and business plans may alter as Washington politics persist, Congressional actions occur, and Wall Street responds.