Workforce availability remains a concern as central Ohio CEOs view the local economy with favor in our annual survey.
Workforce availability remains a concern as central Ohio CEOs view the local economy with favor in our annual survey.
Columbus regularly ranks well among the 200 largest metropolitan statistical areas and divisions in the United States on Forbes annual list of the "Best Places for Business and Careers." The city ranked 14th on the Forbes list this year, based on analysis that included metrics related to actual and projected job growth, business and living costs, income growth, college attainment and projected economic growth.
Since we began the Central Ohio CEO Survey not long after the end of the Great Recession in 2009, leaders of local organizations have echoed this confidence in the central Ohio economy, the 12-month outlook for their organizations and the Columbus workforce, business landscape and overall quality of life. These sentiments persist in our 2016 results.
As Columbus continues to outperform many of the nation's largest metropolitan areas on measures of economic recovery and growth, the results of the 2016 Central Ohio CEO Survey demonstrate that area CEOs remain bullish on the local economy and the 12-month outlook for their businesses. Local executives have more conservative expectations for the US economy in the year ahead, with many expecting no change and only about a third expecting continued growth.
Tested by the tight central Ohio labor market, many CEOs continue to rank labor availability as their organization's top business challenge, followed by changing customer needs and expectations and navigating the current economic climate. These threats are commanding the attention of the C-suite, with many organizational leaders saying that sustaining a competitive advantage, attracting and retaining good employees and developing leaders are their top three challenges as senior executives.
The majority finds the quality of the local labor force to be of acceptable or high quality, yet many continue to give high priority to improving public school education as a means of enhancing the Columbus business climate. Other priorities for making the local environment more conducive to business include changing the business tax structure, increasing financial incentives for businesses and improving public transportation.
Area CEOs describe the affordable cost of living, well-educated workforce, proximity to related enterprise and access to logistics and distribution channels as features that make central Ohio an attractive business location.
The Columbus metropolitan area economy has been the strongest in Ohio and among the strongest in the Midwest throughout the recovery from the Great Recession, according to the Cleveland Federal Reserve Bank. The August 2016 unadjusted unemployment rate for the Columbus MSA was 3.9 percent, the lowest unemployment rate among all metropolitan areas in the state and below both national (5 percent) and Ohio (4.8 percent) unemployment levels. Experts on the area economy expect continued but stabilizing economic expansion in the Columbus region.
The majority of our CEO respondents report that they've continued to observe recent improvement in the economy, with 57.5 percent noting "a small improvement," and 8.2 percent noticing "large improvement" in the economic landscape. About 16 percent have seen no economic change, while fewer than 18 percent believe that the economy has deteriorated. Central Ohio CEOs have demonstrated consistent confidence in the Columbus metropolitan area economy across the six-year history of this survey, and most (65 percent) still expect gains in the Columbus economy over the next 12 months. About a third expect no near-term change in the local economy, and only 2.5 percent foresee a downturn in the local economy in the year ahead.
Area leaders are somewhat less optimistic about the prospects for growth in the national economy over the next 12 months. Forty-eight percent foresee no economic change at the national level, 35.4 percent predict growth (down from 44 percent last year), and 15.7 percent expect to see a declining US economy.
It should be noted that the 2016 survey administration occurred in the midst of the presidential election cycle, so uncertainty about the outcome may have contributed to more conservative expectations for US economic performance in the short term. Local executives anticipate greater global economic stability over the next 12 months than they predicted a year ago. Over half (57.8 percent) expect the world economy to remain stable in the coming year, while the proportion of executives predicting global economic decline over the next year fell from nearly 38 percent in 2015 to just over 21 percent this year. A minority of respondents (18 percent) expect to see the international economy expand in the year ahead.
For the second consecutive year, labor availability eclipsed the economic climate as the most salient business challenge facing local organizations, according to their top executives. Concurrently, Columbus led the nation with impressive average hourly wage growth in 2015 of 6.2 percent, far surpassing the national 2.1 percent growth rate.
With job growth of 2.4 percent in 2015 (stronger than 75 percent of the nation's largest metropolitan areas) and unemployment in central Ohio lingering below full employment, it is not surprising that more local CEOs ranked labor availability over other threats as the top challenge facing their companies again this year.
Nearly a quarter of our respondents said that labor availability is currently their organization's top business challenge, about the same proportion as last year, and up from fourth place (14.1 percent) in 2014.
Many C-levels also continue to rank changing customer needs and expectations (19.7 percent) and the current economic climate (14.8 percent) as top concerns for their enterprises, as well as employee attrition/turnover and healthcare reform (both 8.9 percent), and regulation and legal issues other than healthcare (8.4 percent).
We also asked these leaders to name the top three challenges they face in their roles as CEO or president. Consistent with results over the six-year administration of the Central Ohio CEO Survey, most respondents rank sustaining a competitive advantage (54.6 percent), attracting and retaining good employees (44.4 percent) and developing leaders (38.5 percent) among their top three challenges as senior executives.
Despite these challenges, the year ahead looks promising for area businesses. Nearly three-quarters of our respondents expect their organizations' revenues to increase over the next 12 months, and over a quarter of these (26.3 percent) expect revenue growth to exceed 10 percent.
Over half (58.1 percent) predict that their organizations will be more profitable next year, and two-thirds expect productivity to rise. Along with increasing productivity, nearly half (48.8 percent) of area C-levels expect their companies to increase staffing levels in 2017, and 44 percent of these plan to boost employment by 5 percent or more. This job growth is likely to exacerbate the challenge of attracting and retaining labor in the tight Columbus market.
Many executives also anticipate that their organizations will increase employee salaries over the next 12 months. While 60 percent of our respondents expect to raise employee salaries by less than five percent, another 17 percent predict that employee salary gains will exceed that mark. While fewer than half (44 percent) expect to spend more on training and development, investment in employee development, retraining or cross-training to redeploy existing workers may help to mitigate labor shortage concerns.
Despite the labor availability and retention challenges local organizations and their leaders are facing, area executives continue to view the caliber of the Columbus metropolitan area workforce favorably. The vast majority (92.7 percent) says that the overall quality of the workforce is acceptable, and nearly 45 percent of these describe the local labor force as "high quality."
These CEOs look to ensure the continued quality of the central Ohio workforce by putting a high priority on improving public school education. For the past four years, respondents have consistently ranked improving public school education as their top recommendation for enhancing the Columbus MSA business climate. This year is no exception, with 35 percent ranking it as the top priority for the local business climate. About 16 percent say that "changing the business tax structure'' is needed, and 15.7 percent chose "increasing financial incentives for businesses," such as tax abatements, fee rebates and expedited permits. Another 15 percent rank "improvements to public transportation" as a top priority for improving the business climate.
Money named Columbus the Best in the Midwest in its September 2016 selection of The Best Big Cities, choosing it for its performance on factors including job growth, affordable housing, good schools, low crime and great quality of life. Columbus also ranked seventh on Forbes 2016 list of America's 20 Best Cities for Young Professionals, and the American Institute for Economic Research ranked the city fourth on its list of midsize metro Best Job Destinations for College Grads, citing the quality of life, work opportunities and the presence of a young, well-educated population as attractive features for millennial job seekers.
Because many of our respondents' organizations have strong ties to central Ohio, we wanted to know what their chief executives think makes Columbus an attractive place to both do business and live. According to the Council for Community and Economic Research, the current Cost of Living Index calculation for Columbus is 90.3 (the US score is 100). Over 80 percent of our C-levels rate the area's affordable cost of living as one of the top three factors that makes central Ohio a great location for their business.
With over 60 college and university campuses in the Columbus region and an area college attainment rate of 33.4 percent for adults over 25 according to the US Census Bureau, it's not surprising that over half (58.9 percent) of our local CEOs also cite the area's educated workforce as a significant boon for businesses. Proximity to related enterprises (39.1 percent) and the area's logistics and distribution channels (33.7 percent) are also highly rated qualities that make central Ohio a desirable business location.
In addition to examining what makes Columbus an appealing business location, we were also interested in knowing CEO impressions of the factors that contribute most to the overall quality of life in the Columbus metropolitan area. Once again, the moderate cost of living in central Ohio topped the list, with over 75 percent selecting it as a top three contributor to the city's overall quality of life. Nearly half (49 percent) also credit the community's family-friendly environment, and over a third (35 percent) rank the "welcoming community" as a significant reason to call Columbus home. Employment opportunities (25.2 percent), healthcare and medical facilities and resources (24.4 percent), educational resources (19.1 percent) and recreational resources (18.9 percent) all make valued contributions to the standard of living in central Ohio.
Those at the top of area organizations define success using a variety of measures. Most gauge their professional success by the financial performance of their organizations (83.7 percent), their ability to attract and retain customers (78.3 percent) and by their capacity to attract and retain employees (66 percent). Many also tie judgments about their personal success to the success of their businesses, with 67.6 percent rating "my company's success" as one of their top three indicators of personal success. Most also consider their "impact on the lives of employees and customers" (64.2 percent), and 44.1 percent weigh "the amount and quality of time spent with loved ones" as important touchstones of personal success. Only about 16.2 percent base their personal success on compensation.
Keirsten S. Moore is an associate professor in theSchool of Management and Leadership atCapital University and Beckett A. Broh is Director ofDiversity and Community Life at Columbus Academy.
How the Poll is Conducted
Capital University's School of Management and Leadership and Columbus CEO launched the Central Ohio CEO Survey in 2011 to discern local CEOs' views about the Columbus business climate. The annual poll, an adaptation of the SMU Cox CEO Sentiment Survey, looks to capture local executives' thoughts on the economy, contemporary business challenges, expectations for the year ahead and their perspectives on what makes Columbus an attractive business location. Surveys were mailed to CEOs and other high-ranking executives in the private, public and not-for-profit 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, most respondents completed the paper instrument.
We also asked these area leaders to select CEOs of the Year in four categories: large for-profit, large nonprofit, small for-profit and small nonprofit. The 2016 CEO of the Year winners and finalists are profiled in this issue.
Over 77 percent of the respondents to our 2016 survey are CEOs, presidents or both. About 15 percent are executive or managing directors, and 7 percent are managing partners. Their organizations reflect the industry diversification that contributes to the resilience and robust performance of the Columbus economy, including: professional services (22.9 percent), construction (11.9 percent), financial services (9.5 percent), healthcare (8.5 percent), human and social services (8 percent), real estate (6.5 percent), education (5 percent), retail trade (4.5 percent), travel and transportation (4.5 percent) and manufacturing (4.0 percent).
About a fourth of the 2016 poll respondents direct nonprofit organizations, and a small percentage (3.9 percent) head public-sector organizations. The majority of our respondents (68.1 percent) are at the top of privately-held companies, while only 2 percent lead publicly-traded entities.
Of women leaders, 57.7 percent head private organizations and 36.5 head nonprofits, while 72.4 percent of male leaders head private organizations and 20.4 percent head nonprofits.
Our respondents are entrepreneurial; over three-quarters of those who run private organizations founded, own, or both founded and own their companies. Forty-seven percent of respondents describe their company as a "family-owned business."
Our executives also have significant experience leading organizations. Just over 60 percent have served for more than ten years as the chief executive in their current organization, and 72 percent have served as CEO for more than ten years in their careers. These C-levels claim varied functional backgrounds, including: general management (32.9 percent), accounting (9.7 percent), law (8.7 percent), sales (7.7 percent), operations (7.2 percent) and engineering (6.3 percent). Most have higher education with either a bachelor's (42.5 percent) or graduate (45.9 percent) degree, yet about 9 percent have two years of college or less.
Respondents' organizations have significant ties to central Ohio-93 percent have resided in the Columbus metro area for more than 10 years. More than half (54.5 percent) record 75 percent or more of their sales in the Columbus metropolitan area, and 70 percent earn more than half of their sales here.
Most of our participant organizations (58.8 percent) reported 2015 business revenues below $10 million, about the same proportion as last year. Twenty percent had 2015 revenues between $10 and $50 million. A small proportion (3.5 percent) exceeded a billion dollars in revenue last year.
Although more than 89 percent of firms in the Columbus metropolitan area employ fewer than 100 employees according to U.S. Census data, just 66.2 percent of our 2016 respondent organizations have fewer than 100 employees. Almost a quarter of respondents' enterprises employ between 100 and 1,000, and nearly 10 percent employ more than 1,000 workers.
Most of our C-levels are 50 or older (75.4 percent), and 9 percent are over 70. Relatively few (4.8 percent) are under the age of 40.
The respondents are primarily white/non-Hispanic (91.3 percent); about 3 percent are black. Three-quarters of respondents are male.
Get the 2017 Survey!
The Central Ohio CEO Survey is an annual poll. If you didn't receive our survey this year and would like to participate in 2017, please complete the request at capital.edu/ceo-survey.