CEO of the Year: The Optimism Continues

By
From the December 2012 issue of Columbus CEO

Columbus C.E.O. and Capital University’s School of Management and Leadership initiated the annual Central Ohio CEO Survey last year. At that time, we found local C-level leaders optimistic about the 12-month outlook for the Columbus economy and business environment. More than 90 percent of the executives who responded in 2011 expected the local economy to hold steady or improve and forecasted a stable-to-improving national economy. The majority expected that their organizations would experience increasing revenues, productivity and employee salaries in the year ahead, marking further optimism about recovery from the recession that negatively affected 70 percent of their businesses.

Have local executives retained the optimism they expressed last year, with U.S. job growth sluggish and an accelerating crisis in the Eurozone? The Capital University School of Management and Leadership administered the Central Ohio CEO Survey for Columbus C.E.O., polling those in Columbus’s corner offices to find out.

Once again, we mailed the survey to top officers in local businesses, nonprofit organizations and professional services firms throughout the Columbus Metropolitan Statistical Area (MSA) to assess their insights on the health of the business landscape in Central Ohio. An online version of the survey was also available, but few respondents opted to use the electronic instrument. We used an adapted version of the SMU Cox CEO Sentiment Survey, which we modified to address geographic differences.

We assessed executives’ opinions in five business climate categories: the economic outlook, their organization, company practices, perceptions of the Columbus metropolitan area and leadership issues. We also asked them to nominate their peers for 2012 CEO of the Year honors.

 

Our CEOs—Who Responded?

 

Surveys were mailed to C-level and other high-ranking executives in the Columbus MSA (Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway and Union counties). Overall, our respondent demographics remain largely consistent with last year’s sample.

Respondents are primarily male (77.1 percent) and white/non-Hispanic (93.4 percent). The majority (59 percent) is between the ages of 40 and 59, though 7.3 percent are under 40 and 4.5 percent are 70 or older.

Half of the respondents have served in the top spot in their current company for more than 10 years, and another 10 percent have accumulated more than 10 years of executive experience throughout their careers. A very small number (2.8 percent) has served as CEO/president for less than a year. Our respondents are highly educated: The majority holds bachelor’s or graduate degrees, and only 7.4 percent have two years of college or less.

The sample includes a broad range of functional expertise, with 27.1 percent ascending to lead organizations from a general management background, 13.6 percent from sales and 10.2 percent from accounting. About two-thirds of respondents (66.7 percent) direct private companies, though 22 percent are at nonprofit organizations and 6.2 percent are at publicly traded enterprises. Female CEOs are more likely than male CEOs to be at the helm of nonprofits.

Of those who run private companies, three-quarters (75.4 percent) founded, own or both founded and own their organizations. Forty-five percent of the leaders of these private organizations describe their company as a “family-owned business.” The majority of the respondents hold the title CEO (33.9 percent) or president (43.7 percent). A little more than 13 percent are executive or managing directors and 8 percent are managing partners.

The companies these C-levels lead are well-established in this area, with 87.6 percent residing in Central Ohio for more than 10 years. These organizations function across the varied industries that characterize the Columbus MSA, including: professional services (20.7 percent), construction (13.2 percent), financial services (10.3 percent), health care (10.3 percent), human/social services (6.3 percent) and manufacturing (5.2 percent).

A little more than 60 percent of the businesses in our survey record 50 percent or more of their sales in the Columbus metropolitan area, and report that their best opportunity for growth in the next 12 months is in Central Ohio or within the state. However, a quarter of the respondents indicate that less than 25 percent of their sales occur in Central Ohio, and about the same number find greater opportunity for business growth in U.S. regions outside of Ohio.

Once again, our responding organizations are somewhat skewed toward mid- to large-sized Central Ohio employers. While 65.7 percent of respondents employ less than 100 employees, more than 96 percent of the enterprises in the Columbus MSA employ fewer than 100, according to 2009 U.S. Census data. Employers with 100 to 1,000 employees comprise 25.3 percent of our respondents, and 9 percent employ more than 1,000.

Central Ohio CEOs consult a variety of media outlets and publications on a regular basis, including industry-specific and trade publications. Some of the most popular media outlets accessed by our participants include The Columbus Dispatch, Columbus C.E.O., CNN, FOX, The Wall Street Journal, NPR and Columbus Monthly.

 

Economic Outlook

Last year, executives were optimistic about the continuation of Central Ohio’s economic recovery, with more than half anticipating improvement into 2012. This year, the city retained a spot on Forbes’ “Best Places for Businesses and Careers,” moving up to the No. 24 position, and earned the No. 3 ranking as one of Forbes’ “Best Places for Tech Jobs.” The September 2012 unadjusted unemployment rate in Columbus was 5.7 percent, down from 7.4 percent in September 2011 and below September statewide (7 percent) and October national (7.9 percent) rates.

Our 2012 results show that Central Ohio industry leaders are even more unified in their expectations for improvement in the local economy in the year ahead, with 61.1 percent forecasting economic gains over the next 12 months in the Columbus MSA (compared with 51.8 percent in 2011) and only 4 percent predicting decline. This optimism extends to the national economy, with 45.5 percent expecting economic expansion at the national level (up from 38.8 percent a year ago). Overall, 70 percent of respondents report observing recent improvement in the economic environment.

It’s not surprising that the dark spot in respondents’ economic forecasts for the year ahead is the global economy, where expectations have diminished considerably. Compared with just 30 percent predicting global economic decline in 2011, this year, 42.8 percent of respondents envision a declining world economic outlook over the next 12 months.

Despite recent observed improvement and future expectations of growing local and national economies, survey participants remained consistent in their reports of the negative effects of the recent recession locally. Leaders of local industry reported that 62.7 percent of their organizations were negatively affected by the recession, with 6.2 percent recording “very negative” outcomes. However, more than 13 percent report a positive or very positive organizational outcome from the economic downturn, which is consistent with last year’s survey results and may reflect Central Ohio’s diverse industry base. Likewise, while 53.7 percent of CEOs indicated that they have personally felt the negative effect of the recession, 46.3 percent felt no impact or were positively affected.

 

Organizational Challenges and Change

Columbus executives’ assessment of the top obstacles facing local organizations remains unchanged since the 2011 survey: The current economic climate, keeping up with changing customer needs and expectations, and regulatory and legal issues were cited as the top three challenges facing their enterprises in 2012.

Leading an adaptive organization appears to be the norm for those local executives whose organizations are navigating these challenges. Most CEOs (72.2 percent) report that their organizations have undergone moderate to significant change since the economic crisis began, and 3.3 percent have led their organizations through complete transformation. The vast majority (98.9 percent) expect to make additional changes in the year ahead.

The majority of our respondents seem confident that these organizational changes and the improving economic environment will pay off in the form of enhanced revenues (70.9 percent), profits (52.5 percent) and productivity (59.6 percent) in their companies over the next 12 months. More than 44 percent expect to increase staffing (another 46.4 percent expect no change), and 72.5 percent anticipate increasing employee salaries.

 

Ethical and Sustainable Practice

Slightly more than half of our executives—53.6 percent—describe their organization as having a formal ethics program, which has not changed from a year ago. Just 9.3 percent of respondents have an ethics office in their organizations, and 8.8 percent have an ethics officer. Given that the majority of our respondents lead organizations with fewer than 100 employees, these results are not surprising. According to the Ethics Resource Center, organizations of this size are less likely than large businesses to have formal ethics programs.

Nonetheless, Columbus organizations are using a variety of ethics initiatives, including: statement of values (53.3 percent), code of ethics (41.2 percent) and including ethical behavior as a component of employee performance reviews (34.3 percent). Less than a third of the organizations represented in our survey offer anonymous channels for reporting violations (31.9 percent), encourage a whistle-blowing process (31.3 percent) or require ethics training (29.7 percent). Overall, 12.3 percent report that there are no ethics initiatives in use in their organization.

Sustainability and corporate responsibility continue to be salient in local business plans and practices, according to area executives. Nearly 60 percent of our survey participants say they’ve integrated sustainability initiatives into their business plans, and more than 70 percent report that corporate social responsibility is important or very important to their organization. Specific sustainability initiatives in use in respondents’ organizations include: recycling (56.6 percent), moving toward a “paperless” environment (42.9 percent), energy efficiency (42.5 percent), conducting regular audits (16.5 percent), retrofitting facilities (14.3 percent) and LEED (Leadership in Energy and Environmental Design) certification (11.6 percent).

 

Perceptions of the Columbus MSA

Columbus ranked 10th among Forbes’ 2012 “Cities Where a Paycheck Stretches the Furthest.” According to its list of cities with the highest income when adjusted for the cost of living, our resilient economy and relatively low cost of living made the 2011 average annual Columbus area wage of $48,483 worth $53,691.

For the second quarter of 2012, the Council for Community and Economic Research calculation of the Cost of Living Index for Columbus was 89.1 (the U.S. score is 100). More than two-thirds of the organizational leaders responding to our survey agree that this moderate cost of living is one of the top three contributing factors to the city’s overall quality of life.

But it’s not just the reasonable price tag that makes Central Ohio a desirable place to live. Nearly half of local business leaders cite the area’s “family-friendly environment” as an important attribute. And the area’s health-care and medical facilities, employment opportunities and educational resources each were cited by about 30 percent of respondents as having an important influence on quality of life. Columbus executives remain generally pleased with the quality of the area’s labor force, with more than 90 percent rating the overall quality of the region’s workforce adequate (55.9 percent) or high (36.3 percent).

There was no change from 2011 in C-level opinions of the measures local governments should take to improve the business climate in Central Ohio: 1) change the business tax structure; 2) increase financial incentives for businesses, such as tax abatements, fee rebates and expedited permits; and 3) improve public school education.

 

Leadership Perspectives

Our CEO sample has significant tenure, with more than half reporting more than 10 years of experience at the highest organizational level. What do they think of the next generation of emerging leaders in their organizations? What attributes have they found integral to their own success as leaders of industry? What persistent challenges do they face as CEO, and how do they assess their effectiveness? And who do they most often turn to for support and counsel?

More than 83 percent of our CEOs describe the leadership depth within their organizations as good to excellent, and less than 2 percent find leaders in short supply. Yet more than 55 percent do not have a formal succession plan in place. This figure is only slightly higher than the percentage of respondents who founded or own their companies (50 percent), which may signal a need for more formalized succession planning in owner-run private businesses. Most Central Ohio organizational leaders (60.5 percent) deploy a “grow” strategy to leadership development, primarily developing leaders from within the organization. Another 35 percent promote leaders from within and bring proven leaders in from outside of the organization about equally.

Since nearly a quarter of our survey respondents identified “keeping up with changing customer needs and expectations” as the top business challenge facing their companies, it’s not unexpected that more than half (54.1 percent) rank “sustaining a competitive advantage” as one of their top three challenges. Many of those polled also rate attracting and retaining good employees (36.1 percent), developing leaders (25.1 percent), managing growth (23.5 percent) and meeting quarterly earnings projections (23 percent) as the top challenge in their role as CEO. More than 90 percent are satisfied or very satisfied with their job (nearly 10 percent more than last year), and more than 75 percent report that they feel secure about their job.

We asked respondents to reflect on the attributes and skills that have contributed the most to their success as organizational leaders. Sound decision making (67.8 percent), strategic thinking (59.7 percent) and strong ethics (38.8 percent) were the most frequent responses. Interpersonal skills (33.3 percent), financial acumen (28 percent) and being a good judge of people (21.3 percent) rounded out the list.

Few of our executives measure personal success by their paycheck. More than three-quarters (77 percent) indicate that they measure their personal success by their company’s success, and more than 65 percent gauge success by their impact on the lives of employees and customers. Forty-four percent measure personal success by the amount of quality time spent with loved ones. Loved ones are also a source of significant counsel and influence. More than 80 percent rely on their spouse or significant other as an important confidant, and more than half cite their spouse/significant other (24.4 percent) or parent (29.7 percent) as the single most influential person in helping them achieve professional success.

Others credit professional mentors (16.9 percent) and/or bosses (11 percent) with playing an instrumental role in their professional success. Outside of their households, these leaders most often rely on friends (41.8 percent), a business partner (28 percent) or their CFO (21.4 percent) as trusted confidants.

 

Conclusions

The results of the second annual Central Ohio CEO Survey continue the theme of leader optimism revealed last year. An increasing percentage of respondents expect the local and national economies to improve in the next 12 months, and 70 percent have witnessed recent improvement in the economic environment. This buoyancy is moderated by gloomier expectations about the world economy, with more than 40 percent of respondents predicting global economic decline.

The top organizational challenges facing area businesses remain unchanged from last year, according to their leaders: the need for continued economic recovery, competitive forces, and regulatory and legal issues. Central Ohio business leaders would like to see local governments create more business-friendly tax structures and financial incentives to improve the area’s business climate. They rate the quality of the Columbus workforce as adequate to high, but would still like to see local governments improve public education.

Local executives consider themselves custodians of their institutions, employees and customers. Most tie their personal success to the success of their company and impact on their employees and customers, but also highly value time with loved ones. They appreciate the quality of life in the Columbus metropolitan area for its moderate cost of living, family-friendly environment and medical and educational resources.

We intend to make the Central Ohio CEO Survey an annual poll. If you didn’t receive our survey this year and would like to participate in 2013, please complete the request at www.capital.edu/ceo-survey.

Keirsten S. Moore is assistant dean of the School of Management and Leadership and Beckett A. Broh is former assistant professor of sociology/criminology at Capital University.

Reprinted from the December 2012 issue of Columbus C.E.O. Copyright © Columbus C.E.O.