Ernst & Young LLP Survey Uncovers Optimism and Positive Hiring Trends Among Growth Companies
July 7, 2010
Senior executives expect economic recovery and increased profitability
NEW YORK, July 7 /PRNewswire/ — Expectations about corporate growth turned positive this year, according to a new survey by Ernst & Young LLP that measures attitudes about key economic and performance indicators among US companies with $500 million to $3 billion in total revenues. Respondents were particularly optimistic about revenue, profitability, technology spending and hiring.
According to the Ernst & Young Growth Company Leadership survey, fully 75% of senior executives questioned indicate they are optimistic about achieving their companies’ growth expectations over the next two years. Among respondents, almost two-thirds (64%) expect their revenues to increase over the next 12 months by an average of 11.3%. Fifty-eight percent anticipate profit increases this year.
Further, 73% are optimistic that the current economic recovery will continue to expand this year.
“Growth companies are regaining confidence that they can deliver on their potential and their promise to investors,” said Maria Pinelli, Americas Director, Strategic Growth Markets, Ernst & Young LLP. “Their beliefs about hitting strong numbers are great news and a potential bellwether for the markets and the economy as a whole.”
More than half (55%) of all respondents say domestic operations solely will drive revenue growth, with another 39% indicating a combination of domestic and international operations. Regionally, firms in the East Central and West regions are most likely to expect revenue increases this year. Nearly three in four (73%) respondents in the West expect profitability increases over the next twelve months. Growth companies in the West are the most optimistic that the current economic recovery will continue to expand this year (88% optimistic). The Southeast has the fewest believers (56% optimistic).
The industries that are most likely to expect growth in both revenue and profits, according to the survey, are technology (74% revenue and 72% profitability), financial services and retail/wholesale (both 69% revenue and 63% profitability). Financial services companies report the highest average revenue growth rate (13%).
Growth companies plan to hire over next 12 months
Forty percent of executives surveyed anticipate an increase in hiring new employees over the next 12 months. Only 22% anticipate a decrease in hiring.
“Job growth – not just maintenance – represents a turning point from the past 12 months,” said Pinelli. “The largest of these growth companies – over $1 billion in revenue – are even more positive, with 46% projecting hiring increases. With so many companies looking to hire, we foresee a substantial contribution to the overall economy. Growth companies and entrepreneurs could represent significant engines to push jobs in the right direction.”
More than half (52%) of senior executives indicate that their expected increase in new hiring this year is the result of “new growth,” while almost as many (48%) indicate that it is more a “return to pre-economic downturn levels.”
-- Hiring is projected to focus on skilled professionals (68%), entry
level (45%) and middle management (39%).
-- Eighty percent of the hiring will be in the US.
-- The barriers to hiring expressed by the respondents focus far less on
economic uncertainty (only 8% said this is their biggest barrier), but
more on finding qualified candidates (22%).
-- Of those companies not planning to hire new employees this year, more
say they needed to see increased revenue (42%) or an improving economy
(27%) before they will consider hiring again. If the growth sector
optimism proves to be true, perhaps even those not hiring now will do
so in the near future.
Organic growth more likely than M&A
“While M&A activity can support the health and well-being of individual companies, new business development signals the potential for economic expansion,” said Pinelli. “It’s important to examine where revenue growth will come from, what the barriers may be and the likelihood of those barriers easing. Fortunately, we see a preference for organic growth. Also, the leading barrier, health care costs, seems to be factored into executives’ forecasts.”
-- Organic expansion of current operations is cited as the leading driver
(64%) of growth, followed by new products or services (56%) and
innovation of existing products and services (49%). Expense reduction
or mergers/acquisitions are seen as drivers of growth for far fewer
senior executives surveyed.
-- Respondents say health care costs are a more significant inhibitor of
growth in 2010 than access to or cost of capital - 45% indicate that
healthcare costs are a major impediment to their ability or
willingness to grow domestically.
Expect a rise in spending in the growth sector
Six in ten respondents are comfortable spending/investing in the current economic environment in order to realize growth in their businesses. When it comes to capital spending, respondents expect five key investments to increase:
-- Technology (51%)
-- Employee training (34%)
-- Risk management (32%)
-- The majority of financial service company respondents (54%)
indicate an increase in spending on risk management
-- Green initiatives (32%)
-- More senior executives in the West (52%) see increased spending on
green initiatives
-- Research & Development (30%)
Methodology
The Ernst & Young Strategic Growth Markets Growth Company Leadership survey was conducted in April 2010 and represents responses from 349 senior-level executives at US public and private firms, across multiple industries, with $500 million to $3 billion in total revenue.
About Ernst & Young’s Strategic Growth Markets Practice
Ernst & Young LLP’s Strategic Growth Markets (SGM) practice guides leading high-growth companies. Our multi-disciplinary team of elite professionals provides perspective and advice to help our clients accelerate market leadership. SGM delivers assurance, tax, transactions and advisory services to thousands of companies spanning all industries. Ernst & Young is the undisputed leader in taking companies public, advising key government agencies on the issues impacting high-growth companies and convening the experts who shape the business climate. For more information, please visit us at www.ey.com/us/strategicgrowthmarkets.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
For more information, please visit www.ey.com
Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
This news release has been issued by Ernst & Young LLP, a US client-serving member firm of Ernst & Young Global Limited.
Source: Ernst & Young LLP
Psychologist Reveals a New Model for Business Leaders and Decision Makers in the Workplace
June 9, 2010
IRVINE, Calif., June 9, 2010 — Today’s workplace environment reflects the excess that has occurred in the country, which has finally caught up with us.
“Whether it is obesity, taking medications, rampant healthcare costs or failed budgets at the personal, state or federal level – we can no longer ignore our lack of self control,” said J.R. Slosar, a psychologist and author of “The Culture of Excess: How America Lost Self-Control and Why We Need to Redefine Success” (ABC-CLIO: Praeger). “Nor can we ignore the reasons that contribute to it. Financial collapse and the great recession have forced workers to make changes for economic survival and to stay employed.
Companies that are rebounding are now faced with a rapidly changing culture that must redefine what ’success’ is. These cultural forces include the speed of technology, technology coupled with media and the risk-taking that comes with excessive capitalism.”
Understanding these trends and their impact on behavior has profound implications for the workplace.
Slosar explores and discusses these cultural trends and offers recommendations for everyone to develop a focused self-control and utilize good judgment and effective decision-making skills.
Here are some key points of the book that can help offset the fast and uncontrolled pace of today’s workplace.
1. Develop Quantitative Skills.
Today’s workers have much avoidance of numbers and anxieties surrounding math. This is reflected even with overall U.S.
scores in school in math and science. Employers desperately need people with math and quantitative skills. It is paramount for employers to help workers develop quantitative thinking and skills. The development of these skills has a carryover effect: the use of analytic thinking and better decisions. This is because this thought process is slower, more deliberate, and avoids the fast screen media impulsivity that leads to poor decisions.
2. Establish Boundaries and Limits.
Surveys show that one of the most prized workplace issues today is to have flexibility. Workers constantly want to not have fixed hours, to work at home, and to have much flexibility in their schedules. Unfortunately, this contributes to a less structured and diffuse environment that contributes to less self-control. Employers (like
parents) have to set boundaries and limits. A young employee cannot grow and develop without boundaries and limits.
Employers seem to think that productivity increases with flexibility because workers are happier. Slosar points out that the primary culprit in declining self-control reflected in increased risk-taking and cheating, is the lack of boundaries and limits. He states: “In an era that prized deregulation, we have deregulated our internal mechanisms of self-control.”
3. Develop New Measurements of Success.
Total emphasis today in business is usually on quantity and dollar figures, that is, the proverbial bottom line. It is important for decision makers to develop qualitative measures and show how they relate to workplace improvement.
Today’s new model of success is more refined and qualitative. It results in finding ways to improve efficiency, develop better customer relations, and making things safer, easier, and more efficient at work. If it makes life easier, it will surely be noticed and improve the “bottom line.”
The dramatic changes that have come from The Great Recession demand a new perspective and a new model of success. What is more important is that improvement in the above areas will develop an efficient, healthy and productive workplace.
The Culture of Excess is available on Amazon in hard cover and Kindle. It is also available from the publisher (http://www.ABC-CLIO.com). Discussion and blogs are available at his web page: http://www.cultureofexcess.com
