Survey Results: Addressing Your Business Needs for 2012 and BeyondApril 30, 2012
At BlumShapiro, we are committed to providing our clients and friends with the most relevant and current information available in the industry. Throughout the year, BlumShapiro regularly conducts surveys of manufacturing, distribution and retail companies to understand how the economic, regulatory and fiscal environment impacts business.
This year we added an additional survey to help identify what manufacturers, distributors and retailers see as key areas to focus on in 2012 and beyond.
The following highlights the areas of priority for New England manufacturers, distributors and retailers:
Of the 26 questions regarding business priorities for 2012 and beyond, the following five topics stood out as the highest priorities, or of the most interest, for companies in the manufacturing, distribution, and retail industries:
Health care costs, and consequently employee health benefits costs, have been increasing at an alarming rate for nearly a decade. A recent Bureau of Labor Statistics report1 indicated that the increase in the cost of benefits for private industry workers was 3.6 percent for the 12-month period ending December 2011, higher than the December 2010 increase of 2.9 percent. Employer costs for health benefits increased 3.5 percent for the 12-month period ending December 2011, lower than the December 2010 increase of 5.0 percent.
Our survey results confirm that companies are concerned with how this continuing trend will impact both their business and their employees as this topic was ranked as the highest priority facing businesses in 2012 and beyond. Our clients have expressed similar concern and continue to focus on deploying innovative solutions to control costs.
Hiring Skilled Workers
Also of interest and a priority to respondents, statistics indicate that hiring highly skilled employees will continue to be a challenge facing growing businesses. By 2015, 60% of the new jobs being created will require skills only held by 20% of the population, according to a recent report from the American Society for Training and Development2. In 1991 fewer than 50% of U.S. jobs required skilled workers but by 2015, 76% of all U.S. jobs created will require highly skilled workers, for example people with special skills in science, technology, engineering or math. The impact of the recession on the mindset of workers and the realization that virtually no one is irreplaceable, combined with the increased use of social media to network, has lead to an extremely competitive hiring landscape. Businesses will have to be creative and embrace this new landscape in order to secure the highly skilled employees that their business requires.
We have seen an increased emphasis on employee training and retention among our clients as a defensive move to retain the skills they already have in place. This is in addition to more creative and multi-channel approaches to find and appeal to the skilled workers they will need to stay competitive.
Federal Tax Provisions
On the tax front, a number of key federal tax provisions have either expired or will soon expire. A struggling economy and failure to reach an agreement on reducing the budget deficit could only add to the uncertainty many businesses are facing in 2012. Some of the most favorable business tax incentives expired at the end of 2011, and others are expected to expire after 2012. Although Congress may retroactively reinstate some or all of these provisions, an agreement before the November election seems unlikely.
Survey respondents agree that understanding how these tax law changes will affect their business needs to be a priority. Clients that have worked with us to proactively plan for possible changes should be well positioned to make strategic decisions when the time comes. Planning for uncertainty is challenging — keeping well informed is your best strategy.
Technology and Business Systems
In addition to the above-mentioned challenges, businesses are also under pressure to reduce costs, streamline operations, leverage technology, increase revenues and expand market share. Therefore, not surprisingly, many respondents expressed interest in evaluating their existing business systems. It is crucial for a company to have access to real-time information and ensure that their technology solutions will support the businesses’ long-term strategy and provide them with the information required to make critical business decisions.
A recent Enterprise Resource Planning (ERP) study conducted by the Aberdeen Group3 found that improving business execution remains the top goal for organizations of all sizes. In addition, 72% of the companies considered “best-in-class” indicated that standardized business processes had the most impact on performance and the ability to execute on their business strategy. Many of our clients have had great success undergoing a Business Enterprise Review to make sure that their people, processes and technology are working well together and delivering as planned. The process can identify opportunities such as minimizing risk, increasing efficiency, improving cash flow and better leverage existing or new technology.
Planning for the Future
One of the critical decisions that may be on the table is the future plan for a business, whether it is a merger or acquisition or the company's succession plan. Wisely, our survey respondents expressed interest in better understanding the business value drivers for their company. Results from a recent M&A survey conducted by the Brunswick Group4 confirmed that need, as nearly half of the advisors polled predict an increase in deal flow over last year's volume, both in North America and globally. Other industry reports predict an even greater increase. Business value drivers also need to be understood in order to properly design a succession plan. According to a recent poll from the Society for Human Resource Management (SHRM)5, the number of U.S. organizations with a formal succession plan in place decreased during the past five years from 29 percent in 2006 to 23 percent in 2011. While less than a quarter of businesses have a formal plan in place, the numbers improve when informal plans are considered. Perhaps a better understanding of the economic value of a business will encourage more formal planning and increase future preparedness. Recently, we have started to see a slight increase in the amount of M&A activity with our clients, those with proper insight on their business value drivers as well as a thorough understanding of the other assets involved have had greater success. The same is true with our family-owned business clients — those with proper succession plans have a higher likelihood of successfully operating a business through the next generation.