Central Ohio's growth brings with it new challenges.
With optimistic projections for growth in the central Ohio economy and expectations for business gains in the next 12 months, Columbus organizations and leaders continue to be tested by labor market conditions. The most noteworthy result of the 2018 survey may be the dramatic increase in the proportion of central Ohio leaders describing labor availability as the top business challenge facing their organizations, an increase from 22.7 percent of respondents in 2017 to 41.8 percent in 2018. While most continue to rank enhancing public school education as the most important means of improving the Columbus business climate, an increasing number of respondents point to the need for more affordable housing and advancements in public transportation as top priorities.
Improving the workforce and career readiness of students in local public education districts and increasing access to local employment centers through affordable housing and coordinated rapid public transit systems may be strategies aimed at generating labor availability in the region. Central Ohio's collaborative culture and extensive higher education network position it well for using town-gown partnerships to create solutions around these public education, housing and transportation priorities.
How the Survey was Conducted
Capital University's School of Management and Leadership and Columbus CEO have been conducting the annual Central Ohio CEO Survey since 2011 to assess local business leaders' perspectives on the Columbus business climate. The 2018 survey, an abbreviated adaptation of the SMU Cox CEO Sentiment Survey, asked area CEOs, presidents, executive directors and managing partners for their input in several categories: the economic outlook, top challenges facing their Columbus organizations, expectations for company performance, perceptions of the Columbus metropolitan area, leadership challenges and how they measure their professional and personal success. Columbus C-levels responding to the survey also voted for CEOs of the Year in four categories: large for-profit, large nonprofit, small for-profit and small nonprofit. The winners and finalists are profiled in this issue.
Surveys were mailed to CEOs and other high-ranking executives in the private, public and nonprofit sectors across the 10 counties of the Columbus metropolitan statistical area (Delaware, Fairfield, Franklin, Hocking, Licking, Madison, Morrow, Perry, Pickaway and Union counties). Although an online version of the survey was offered, the majority of respondents completed the paper document.
Individuals who responded to the 2018 Central Ohio CEO Survey hold a variety of high-ranking positions in Columbus-area organizations. Their titles include CEO (43 percent), president (40.4 percent), executive or managing director (9.9 percent), managing partner (7.3 percent) and combinations of these designations. The majority of the respondents (63.6 percent) lead privately-held businesses, while only 2 percent head publicly-traded enterprises. Just over 28 percent oversee nonprofit organizations and four percent lead public-sector organizations. About 78 percent of those leading privately-owned businesses founded, own or both founded and own their organizations. Nearly half of the respondents describe their company as a “family-owned business.”
These organizations are firmly rooted in central Ohio—nearly 95 percent have been located in Columbus for more than 10 years and 56.3 percent record greater than 75 percent of their sales in the Columbus metropolitan statistical area (MSA). Another 14.6 percent achieve 50-75 percent of their sales locally. Only 17.4 percent earn less than a quarter of their sales in central Ohio. Nearly 58 percent of participant organizations reported 2017 business revenues below $10 million. Just over 20 percent had 2017 revenues between $10 and $50 million, and 10 percent had revenues between $100-500 million. Only about three percent exceeded a billion dollars in revenue last year.
According to the U.S. Census Bureau's Statistics of U.S. Businesses, more than 90 percent of firms in the Columbus MSA employ fewer than 100 workers. In our 2018 sample, just 63.3 percent of respondent organizations employ fewer than 100. Nearly 27 percent employ between 100 and 1,000, and about 10 percent employ more than 1,000 workers. The organizations reflected in our 2018 survey typify the major industry sectors that characterize the Columbus economy, including professional services (20.7 percent), construction (12.4 percent), human and social services (11 percent), financial services (7.6 percent), manufacturing (7.6 percent), education (6.9 percent), healthcare (6.8 percent) and real estate (6.2 percent).
Experienced C-levels responded to the survey. More than 60 percent have served for more than 10 years as the chief executive in their current organization, and more than 70 percent have over 10 years of CEO-level career experience. The majority has attained a bachelor's (43.3 percent) or graduate degree (44.8 percent), though 11.3 percent have two years of college or less. The functional preparation of these leaders varies. While about 33 percent cite training in general management, others report backgrounds in sales (14.7 percent), operations (7.7 percent), law (7.0 percent), finance (6.3 percent), accounting (5.6 percent) and the liberal arts (5.6 percent).
This CEO sample is predominately male (71.5 percent) and over the age of fifty (78.1 percent). Almost 10 percent of participants are over the age of 70, and very few are under 40 (3.3 percent). Most respondents are white/non-Hispanic (94.7 percent), while only 2.6 percent report their ethnicity as black or African American, and less than 1 percent is Asian. Across the eight years of the survey administration, privately held organizations are more likely to be led by men and nonprofits are more likely to be led by women.
Since the inaugural CEO Survey in 2011, central Ohio CEOs have been optimistic about the Columbus economy. The majority (66.7 percent) of our 2018 cohort of top executives expects to see the local economy improve in the next 12 months, while about 30 percent predict a stable economic environment. Our sample also foresees either improvement (43 percent) or stability (30.9 percent) in the U.S. economy, although 25.5 percent predict a declining U.S. economy over the next 12 months. There is less optimism for growth in the global environment. While 44.3 percent expect the world economy to remain stable in the next year, only 27.5 percent predict a booming global outlook. About 25 percent of our 2018 respondents expect a global economic downturn, whereas only 15 percent of those participating in 2017 predicted a dip in the world economy.
Challenges and Change
According to the Bureau of Labor Statistics, the August 2018 unemployment rate for the Columbus MSA was 3.8 percent, below all other Ohio MSAs and less than both national (3.9 percent) and Ohio (4.6 percent) unemployment figures. Labor availability persists as the most commonly identified “top business challenge” facing local organizations in 2018. The proportion of CEOs ranking labor availability as their company's top challenge increased markedly, from 22.7 percent in our 2017 survey to 41.8 percent in 2018, suggesting that the labor shortage is affecting central Ohio organizations across a broad range of industries. Other top challenges to area businesses include changing customer needs and expectations (19.9 percent), domestic competition (8.5 percent) and employee attrition (6.4 percent).
Although labor shortages continue to test Columbus enterprises, the quality of the Columbus workforce does not appear to be a significant barrier. Nearly 90 percent of these C-levels say that the area workforce is of acceptable or high quality. Nonetheless, asked to identify “the single most important thing that would improve the Columbus metropolitan area's business climate,” Central Ohio CEO Survey participants consistently identify “improve public school education.” This year was no exception, with over 32 percent indicating that enhancing public education is the greatest potential boon to the local business climate. For the first time in the survey's history, the need for more affordable housing was among the top-three priorities chosen by area CEOs for enriching the business climate. Over 15 percent of respondents said that creating more affordable housing is the most important improvement needed. Another 14.8 percent ranked improved public transportation above all other climate-enhancing measures.
We also asked what pressures challenge leaders in the top strata of central Ohio organizations. Three factors emerge as the top challenges faced by area CEOs and presidents: sustaining a competitive advantage (51.7 percent), attracting and retaining good employees (47.7 percent),and developing leaders (46.4 percent).
Despite these organizational and leadership challenges, overall CEO confidence in the economy translates into positive 12-month projections for their Columbus-area businesses. Nearly 80 percent of those answering our survey expect their organizations to experience increased revenue, and more than 55 percent predict greater profitability in the year ahead. Despite widespread concerns about labor availability and employee retention, about 58 percent expect productivity gains, and 63 percent expect their companies to increase staffing in the next 12 months. In a tight labor market, most respondents (87.9 percent) expect employee salaries to rise; 19.4 percent foresee employee salaries in their organizations increasing by more than 5 percent. Over half (53.6 percent) expect to increase their organization's investment in training and development, perhaps investing in retraining or cross-training initiatives to mitigate labor shortages.
Perceptions of MSA
Central Ohio regularly fares well against other large metros on measures of “best places” for business and careers. Columbus ranks 19th among the 200 largest U.S. metros on Forbes' 2018 list of Best Places to Live and Work. Forbes also rated Columbus first among 2018's Top Ten Rising Cities for Startups. Based on hiring opportunities, cost of living, and employee satisfaction, Columbus ranked 15th on Glassdoor's 25 Top Cities for Jobs 2018 report.
What characteristics do area CEOs think contribute the most to the quality of work and life in central Ohio? Survey respondents point to the region's affordable cost of living as a top attraction. According to the Council for Community and Economic Research (C2ER), the current composite Cost of Living Index (COLI) calculation for Columbus is 89.6 with a housing index of 76.8, against the national average of 100. Over two-thirds of the leaders responding to our 2018 survey highlight the cost of living as one of the top three characteristics that make the region a smart business location. More than half (54.3 percent) say that the area's collaborative culture is a key reason they do business in Columbus. And, with “one of the highest concentrations of higher education in the country,” according to Columbus 2020, 52.3 percent list central Ohio's educated workforce as one of the top three reasons for locating their businesses here.
More than 68 percent of local C-levels say that the reasonable cost of living also plays a key role in the overall quality of life in the Columbus region. They also like the city's family-friendly environment (47 percent) and ample employment opportunities (32.5 percent) and recognize the contributions made to the quality of life in Ohio's capital city by the area's “welcoming community” (28.5 percent), healthcare and medical facilities (27.2 percent) and educational resources (25.8 percent).
Central Ohio leaders gauge their professional and personal success using a variety of financial and human metrics. Most say that they measure their professional success by company financial indicators (83.3 percent), the ability to attract and retain customers (80.7 percent) and the capacity to attract and retain employees (63.3 percent). They evaluate their personal success by considering their impact on the lives of employees and customers (71.5 percent) and the success of their company (68.2 percent). Just over 45 percent say that the amount or quality of time spent with loved ones is one of their top three measures of personal success. Relatively few list compensation (10.6 percent), beating the competition (9.3 percent) or individual professional recognition or awards (2.7 percent) among their top indicators of personal success.
Keirsten S. Moore is a professor in the School of Management and Leadership at Capital University.