Despite Economy’s 1pc Growth, Mid-market Firms Boosting Long-term Investments

Michelle Remo, “Big 4″ observer
October 12, 2011 /

Executives at three out of four mid-market companies are maintaining or increasing their long-term investments despite the U.S. economy’s less than 1 percent growth rate during the first half of 2011, according to a new Deloitte survey.

The Deloitte report, Mid-Market Perspectives: America‘s Economic Engine – Competing in Uncertain Times, also indicates that 61.2 percent of respondents are forecasting growth in revenue and 52.6 percent in profitability in the year ahead.

“Major economic events, such as the downgrading of the U.S. debt rating, the European sovereign debt crisis and the volatility in global equity markets, have reduced optimism about the future of the economy among mid-market enterprises,” said Tom McGee, national managing partner, Deloitte Growth Enterprise Services, Deloitte LLP.

“However, the survey results provide compelling insights into what these executives are thinking and doing to maintain a competitive edge for their companies,” McGee added.

Nearly three quarters (70 percent) of respondents see productivity gains principally from their investments in business process automation, technology and strategic hiring, leaving them optimistic about revenue and profitability growth.

The Deloitte survey shows that technology investments are playing an increasingly larger role in mid-market companies’ bottom line. Business process automation and technology improvements are the two top contributing factors to the jump in mid-market productivity. New hiring ranked fifth overall.

Mid-market executives believe the technology driving increased productivity include business process automation (52 percent); data analytics and business intelligence (49 percent); and customer relationship management software (30 percent).

“While 74 percent of respondents believe globalization is forcing U.S. companies to become more productive to stay competitive, 46 percent of companies are focused on higher value customers and getting more revenue per customer,” McGee said.

“Technology and applications such as data analytics can help businesses better understand customers, operate more efficiently and set themselves apart from the pack,” he said.

Although 38 percent of companies agree that strategic hiring of new staff with specific skills is one way to higher productivity, 47 percent of mid-market business leaders say it is difficult to find employees with the skills and education to become productive immediately.

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.

Deloitte commissioned OnResearch, a market research firm, to conduct the survey from July 19 through August 15, 2011. The study polled 696 U.S. mid-sized company executives about their expectations, experiences and plans around becoming more competitive in today’s difficult economy.

The report includes analysis of responses received before and after the debt-ceiling debate and Standard & Poor’s downgrade of U.S. debt.

Respondents were limited to senior executives – with 50 percent owners, board members or working in the C-suite – at companies with annual revenues of at least $50 million and no more than $1 billion.

Two-thirds of the companies responding were privately held, while one-third were public. The private companies were roughly evenly divided between family-owned, closely (non-family) held and venture capital-backed.

The two largest represented industries were consumer/manufactured goods and professional/business services, comprising 25 percent of total responses. The remaining 75 percent were spread across 15 different sectors. IT and finance comprised about one-third of the responses; operations and sales accounted for about 10 percent each.

 

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