The economic outlook is sunny in Central Ohio, according to the annual survey of top business leaders
For the third consecutive year, Capital University's School of Management and Leadership conducted the annual Central Ohio CEO Survey for Columbus CEO. Over the past two years executives at the helm of Columbus businesses, not-for-profit organizations, and professional services firms have remained optimistic about the outlook for the local economy and business environment, despite increasing political gridlock at the national level and international instability.
We surveyed leaders of the diverse industries that characterize the Columbus Metropolitan Statistical Area (MSA) to learn their current assessment of the business landscape in Central Ohio.
Although an online version of the survey was offered, most respondents completed the paper form. The Central Ohio CEO Survey is 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 2013 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 have remained largely consistent over the survey's three-year history.
Respondents are primarily white/non-Hispanic (87.6 percent). The majority (65.4 percent) is between the ages of 50 and 69, though about a quarter of participants (26.4 percent) are under 50. Eighty percent of our CEOs are male. More than 70 percent of these male CEOs lead private organizations, whereas just 48.4 percent of our female CEOs serve in private companies. In contrast, 35.5 percent of female CEOs lead non-profits while only19.4 percent of males do.
Half of the respondents have served in the top spot in their current company for more than 10 years, and 60 percent have accumulated more than 10 years of chief executive experience throughout their careers. A very small number (2.6 percent) has served as CEO/president for less than a year. Our respondents are highly educated: the majority hold a bachelor's or graduate degree, though 9.5 percent have two years of college or less.
Nearly a third (30.5 percent) of our chief executives have a functional background in general management, with another 15.6 percent rising from sales, and 8.4 percent each from finance and engineering. About two-thirds of respondents (67.1 percent) direct private companies, 22.2 percent are at nonprofit organizations and 8.2 percent are at publicly traded enterprises.
Of those who run private companies, just over two-thirds (67.2 percent) founded, own or both founded and own their organizations, down from 75.4 percent in the 2012 sample. Thirty seven 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 (42.1 percent) or president (35.1 percent). Just over 8 percent are executive or managing directors and 5.8 percent are managing partners.
The companies these C-levels lead are firmly-rooted in the Columbus MSA, with 84.7 percent residing in Central Ohio for more than 10 years. These organizations function across the diversified economy that characterizes the Columbus MSA, including: professional services (15.8 percent), financial services (13.3 percent), health care (12.7 percent), human/social services (7.6 percent), construction, real estate and wholesale trade (6.3 percent each).
More than half of the respondent businesses (57.7 percent) reported revenues under $10 million in 2012, though 18 percent experienced 2012 revenues in excess of $100 million, and 5.8 percent exceeded $5 billion in revenue last year. Eighty five percent forecast steady or increasing revenues in the year ahead.
Most businesses in our survey (62.5 percent) record 50 percent or more of their sales in the Columbus metropolitan area, and they also report that their best opportunity for growth in the next 12 months is in Central Ohio (38 percent) or within the state (25.2 percent). However, just over 20 percent of the respondents experience less than 25 percent of their sales in Central Ohio, and about a third see greater opportunity for business growth in other states.
Once again, our responding organizations remain skewed toward mid- to large-sized Central Ohio employers. While 61 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 26.4 percent of our respondents, and 12.6 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 CEO, FOX, the Wall Street Journal, CNN, Columbus Monthly, and NPR.
Buoyed by industry and employment concentration in financial activities, business and professional services, government, education and health, Central Ohio continues to perform well on indicators of economic recovery. The July 2013 unadjusted unemployment rate for the Columbus MSA was 6.3 percent, below both the August 2013 seasonally adjusted statewide (7.3 percent) and national (7.3 percent) rates. Columbus has continued to ascend Forbes' "Best Places for Businesses and Careers", moving up to the No. 20 position in 2013. It earned a No. 5 ranking on Forbes' 2013 "10 Best Cities for Finding Employment Right Now." Likewise, in both 2011 and 2012, local C-levels were optimistic about Central Ohio's economic recovery. Does that optimism extend to the year ahead?
Our 2013 results indicate that Central Ohio industry leaders expect continued economic gains locally, as well as at the national and global levels. About 70 percent forecast economic expansion in the Columbus MSA over the next 12 months (compared with 61.1 percent predicting local economic improvement in 2012 and 51.8 percent in 2011) and only 3.1 percent predict decline. Likewise, 59.1 percent expect the national economy to improve in the coming year (up from 45.5 percent a year ago).
Last year there was considerable pessimism about the global economy in the midst of an escalating crisis in the Eurozone, with 42.8 percent of 2012 respondents envisioning a declining global economy into 2013. Despite persistent political and social instability in the Middle East, 40.2 percent of our executives in the 2013 survey expect the global economy to stay the same over the next 12 months, and 38.4 percent foresee improvement in the international arena.
Notwithstanding considerable optimism about the local and national economic outlook, 60.8 percent of local industry leaders still report that their organizations have endured negative effects due to the economic downturn, while 28 percent report that their organization was unaffected by the recession, and more than 10 percent report positive or very positive organizational outcomes. Nearly half of our CEOs were personally insulated from the economic downturn, as 42.1 percent felt no personal impact and 6.7 percent experienced positive gains.
Organizational Challenges and Change
Given the reported negative economic effect of the recent recession on Columbus' businesses, it's no surprise that the current economic climate retains its position as the top business challenge facing local organizations, according to their CEOs. Leaders also rate keeping up with changing customer needs and expectations, and regulatory and legal issues among their top challenges. Healthcare was the most common write-in response to this question, with 4.8 percent of respondents listing healthcare costs or reform as their most pressing organizational challenge. Adaptive change appears to be the norm in local organizations, as most C-levels (79.3 percent) report that their organizations have undergone moderate to transformational change since the economic crisis began, and only 1.8 percent report no planned change in the year ahead. Nearly 50 percent of respondents plan to increase their company's training and development budget over the next 12 months, which may reflect a strategic investment in workforce development to help manage this change.
CEO confidence in the local economy appears to translate into optimistic expectations for organizational performance over the next 12 months. The majority of our respondents expect that their companies will experience increased revenues (72.5 percent), profits (58.6 percent) and productivity (68.9 percent) over the next 12 months. Nearly 50 percent expect to increase staffing (another 40 percent expect no change), and 71.9 percent anticipate increasing employee salaries. About 57 percent anticipate raising wages by less than 5 percent, while 12 percent forecast wage increases of 5-10 percent.
Ethical and Sustainable Practice
According to the Ethics Resource Center, smaller organizations with fewer than 500 employees are less likely than large organizations to have fully developed ethics programs. Given that the majority of our executives lead organizations with fewer than 100 employees, it is not surprising then that only about half (48.4 percent) say that their company has a formal ethics program. Just 13.6 percent have an ethics office, and 14.2 percent have an ethics officer.
Nonetheless, Columbus organizations employ a range of ethics initiatives, including: a statement of values (54.4 percent), code of ethics (36.7 percent), reviews of ethical behavior as a component of employee performance evaluations (28.6 percent), and providing anonymous channels for 28.4 percent). Just above 9 percent report that they have no ethics initiatives in place.
Our survey results over the past three years indicate continued attention to the triple bottom-line, with more than 70 percent of local executives reporting this year that corporate social responsibility is important or very important to their organization (only 6 percent say it's not important) , and 57.4 percent saying they've integrated sustainability initiatives into their business plans. The top sustainability initiatives in use in respondents' organizations include: recycling (55.6 percent), energy efficiency (41.5 percent), moving toward a "paperless" environment (38.6 percent), conducting regular audits (18.1 percent, LEED (Leadership in Energy and Environmental Design) certification (12.9 percent), and retrofitting facilities (12.3 percent).
Perceptions of the Columbus MSA
The Cost of Living Index calculation by the Council for Community and Economic Research, a research organization with members in the U.S. and Canada, for Columbus was 86.7 for the second quarter of 2013 (the U.S. score is 100). More than 65 percent of our C-levels cite this reasonable cost of living as one of the top three contributing factors to overall quality of life in the Columbus Metro Area. In addition to the area's affordability, local business leaders tout healthcare and medical resources, a family-friendly environment, employment opportunities and educational resources as important contributors to quality of life in Columbus. Columbus executives continue to be satisfied with the quality of the area's labor force, with more than 93 percent rating the overall quality of the region's workforce adequate to high.
When asked what the single most important thing that local governments can do to improve the area's business climate, area leaders recommend improving public school education (28.4 percent), changing the business tax structure (27.7 percent), and increasing financial incentives for businesses, such as tax abatements, fee rebates and expedited permits (20 percent).
Our CEO sample continues to have significant seniority. Two thirds are age 50 or older, and more than half report over 10 years of experience as chief executive.
More than 84 percent of these execs find the leadership depth within their organizations good to excellent, and only 2.5 percent see emerging leaders in short supply. Yet 56 percent do not have a formal succession plan in place. This figure is especially troubling since 67 percent of our executives who run private enterprises founded and/or own their own business.
Nearly half of our survey respondents (48.5 percent) rank "sustaining a competitive advantage" as one of the top three challenges in their role. Managing growth, developing leaders, attracting and retaining good employees and funding were also rated as significant challenges faced by local C-levels. Despite these trials, 81.7 percent report that they are somewhat or very satisfied and 70 percent feel somewhat or very secure in their job.
Organizational leaders have been consistent over the past three years in their judgment of the skills that have contributed most to their success, ranking strategic thinking (55 percent), sound decision making (53.8 percent), strong ethics and interpersonal skills (each with 37.4 percent) among their most important leadership attributes.
How do those at the top of Columbus institutions measure their personal success? Seventy percent indicate that their company's success is one of the top three indicators of their personal success, and more than 60 percent gauge success by their impact on the lives of employees and customers. Forty-four percent look for success outside of their organizations, measuring their achievement by the amount of quality time spent with loved ones. Personal relationships continue to be of significant importance to our CEOs. More than two-thirds rely on their spouse or significant other as an important confidant, with friends (38.7 percent) and business partners (31.5 percent) rounding out the top three intimates in whom they are most likely to confide.
Those closest to home get most of the credit from these CEOs for influencing their career accomplishments. Twenty six percent say that a parent or parents were the single-most influential person in helping them achieve professional success, and another 21.6 percent credit a spouse or significant other. Twenty percent cite a professional mentor's influence.
For the third year, Central Ohio CEO confidence in the local economy continues to be a highlight of our survey results. Although more than half noted no recent improvement or deterioration in the economic environment, it is notable that well into the recovery from the 2008 recession an increasing percentage of area executives still foresee improvement in the local and national economies in the year ahead. Additionally, their expectations for the global economy have improved, from just 18 percent forecasting international economic improvement last year to well over a third predicting global gains in the next 12 months.
And the economy remains at the forefront of their concerns, retaining the top spot on the list of business challenges facing their organizations. In addition to the need for continued economic recovery, Central Ohio organizations are challenged by competitive forces, and regulatory and legal issues. Among these issues are likely healthcare cost and reform, challenges that garnered numerous write-in responses.
Locally, business leaders continue to encourage area governments to improve public education, change the business tax structure, and increase financial incentives for businesses, especially since well over half find their greatest opportunity for growth in the next twelve months within the Columbus MSA and across the state.
While local executives find the leadership depth within their organizations good to excellent, fewer than half have a succession plan in place. This may be because they feel well-satisfied and secure, but could present a challenge to business continuity given their advancing age.
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 2014, please complete the request at capital.edu/ceo-survey.
Keirsten S. Moore is an associate professor in the School of Management and Leadership at Capital University and Beckett A. Broh is Director of Diversity and Community Life at Columbus Academy.