An Optimistic Outlook
Columbus has been a relatively bright spot in external analysts' appraisals of the American business landscape. National headlines have focused in recent months on Standard & Poor's downgrade of the U.S. credit rating, the European debt crisis, the threat of a double-dip recession and the Occupy Wall Street movement.
Nevertheless, according to a recent study by the Brookings Institution, the Columbus area economy has been one of the 20 strongest performers since the beginning of the Great Recession, suffering less and recovering stronger than most of the 100 largest metropolitan areas in the nation. Forbes picked Columbus as one of 2011's "Best Places for Businesses and Careers." And CNNMoney.com recently positioned Delaware County in the No. 6 spot on its "Where the Jobs Are" list, ranking it among the 25 U.S. counties that have experienced the most job growth over the last 10 years.
But do local CEOs agree with these outsider assessments of the Central Ohio business climate? To find out, the Capital University School of Management and Leadership conducted a poll especially for Columbus C.E.O. using Central Ohio C-suite leaders' opinions to measure the health of the business landscape in the state capital.
Those at the helm of Columbus organizations set the tone and strategy that will drive the local economy in the year ahead, so it's important to understand their assessment of the recent past, expectations for the future and their read on the challenges that lie ahead. How have local CEOs and their organizations weathered the Great Recession? What are their forecasts for the world, national and local economies, and for their own companies' performance in the coming year? Do Columbus CEOs agree on the biggest challenges facing local businesses, and is the Central Ohio labor force up to the task?
Researchers in Capital University's School of Management and Leadership, working in partnership with Columbus C.E.O., mailed our 2011 Central Ohio CEO Survey to thousands of top officers in local businesses, nonprofit organizations, accounting firms and law firms throughout the Columbus Metropolitan Statistical Area (MSA) to record their insights. We asked industry executives to give us their opinions in five business climate categories: the economic outlook, their organization, company practices, perceptions of the Central Ohio area, and leadership issues. We also asked them to nominate their peers for 2011 CEO of the Year honors in four categories: large for-profit, small for-profit, large nonprofit and small nonprofit; the winners are profiled in this issue. Using an adapted version of the SMU Cox CEO Sentiment Survey, which was modified to address differences in geographic locale, we analyzed the responses and discuss the trends.
Our CEOs-Who Responded?
Surveys were mailed to 3,219 C-level and other high-ranking executives in the Columbus Metropolitan Statistical Area (Delaware, Fairfield, Franklin, Licking, Madison, Morrow, Pickaway, and Union counties). Although the survey was available in an online format, the vast majority of our 344 respondents completed the paper survey.
Respondents are primarily male (80.8 percent) and white/non-Hispanic (92.9 percent). Another 2.1 percent are black/African-American and 1.8 percent are Asian. The majority (62.7 percent) is between the ages of 40 and 59, though 5.7 percent are under 40 and 4.2 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 (2.4 percent) has served as CEO/president for less than a year. Our respondents are highly educated: The majority holds bachelor's or graduate degrees, with 10 percent having two years of college or less.
Respondents represent a broad range of functional expertise, with 29.6 percent ascending to lead organizations from a general management background, 11.3 percent from sales, and 10.9 percent from accounting. Over three-quarters (76.2 percent) direct private companies, though 16.9 percent are at nonprofit organizations and 5 percent are at publicly traded enterprises. Female CEOs are more likely than male CEOs to be at the helm of nonprofits.
The entrepreneurial spirit that drives American industry is abundantly present; of those running private companies, nearly two-thirds (65 percent) founded or own the organization. The majority of the respondent leaders hold the title CEO (28.8 percent) or president (41.1 percent).
The companies these executives lead have long roots in the Columbus economy, with 84.2 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 (28.9 percent), financial services (14.9 percent), health care (11.7 percent), construction (7.6 percent), real estate (5.7 percent) and manufacturing (5.1 percent).
Two-thirds of the businesses 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 lies here. However, nearly a fifth 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.
Our responding organizations are somewhat skewed toward mid- to large-sized Central Ohio employers. While 71.9 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 22.4 percent of our respondents, and 5.7 percent employ more than 1,000. Of the organizations reflected in our survey results, 65.4 percent had 2010 revenues of less than $10 million, 22.6 percent had revenues between $10 million and $50 million, and 2.7 percent had revenues in excess of $500 million.
Central Ohio CEOs are informed by an array of media outlets and publications, including many industry-specific journals. Some of the most popular media outlets consulted by our participants include The Columbus Dispatch, Columbus C.E.O., CNN, FOX, The Wall Street Journal and Columbus Monthly.
Despite the continued uncertainty surrounding the national and global economy, analysts generally like the Columbus economy for its diversified industrial base; relatively large government, education, business services and research sectors; projected annual job growth; and reasonable cost of living. The 15th-largest city in the nation, Columbus is home to 15 Fortune 1000 headquarters, state government, and more than 35 colleges and universities.
The Columbus Chamber's 2011 Blue Chip Economic Forecast recently predicted average employment during 2011 to be about 0.8 percent higher than during 2010, and the August 2011 unadjusted unemployment rate in Columbus was 7.8 percent, below statewide (8.8 percent) and national (9.1 percent) rates.
Our results show that Columbus CEOs agree there is cause for optimism about the continuation of Central Ohio's economic recovery. Area leaders also foresee a stable-to-improving outlook for the national economy, which is surprising given the pessimistic tone of many media pundits. Almost 40 percent predict no change in the world economy over the next 12 months, with nearly equal numbers forecasting a decline or expecting improvement. That is, better than two-thirds expect a steady to improving international business climate. At the national level, 80 percent of CEOs envision no economic change or forecast progress in the year ahead. The executives' outlook for the Columbus economy was upbeat, with only 7.3 percent foreseeing decline, 39.3 percent predicting no change, and more than half of respondents (51.8 percent) anticipating improvement. The rest had no opinion.
Despite their relatively positive expectations for the local economy, few survey participants reported that their organizations or they themselves had escaped the economic downturn unscathed. Leaders of local industry reported that 67.7 percent of their organizations were negatively affected by the recession, with 12.9 percent of these recording "very negative" outcomes. In an interesting counterpoint, about the same percentage reported a positive or very positive organizational outcome from the economic downturn.
Likewise, 60 percent of CEOs indicated that they personally have felt the negative effect of the recession, and 7.8 percent of these reported that the personal consequences of the economic decline were "very negative."
Reflecting Columbus's diverse economy, 18.5 percent of those at the helm reported that their organizations have felt no harm or benefit from the economic downturn. Additionally, 40 percent of the CEOs have been personally insulated from the results of the recession, with 7.5 percent reporting positive personal outcomes.
Organizational Challenges and Change
The top obstacles facing local organizations are not unique to the region. Columbus CEOs count the current economic climate, keeping up with changing customer needs and expectations, and regulatory and legal issues among the top three challenges facing their businesses.
With macroeconomic forces causing volatility and emerging markets altering the scope and pace of change in the competitive landscape, leaders must work to create adaptive organizations capable of responding to new environmental realities.
Change has been and will continue to be the norm in our respondent organizations, with very few reporting that their companies have undergone no change since the onset of the 2008 recession. Most (70.3 percent) report that their organizations have undergone moderate to significant change since the economic crisis, and 2.9 percent have led their organizations through complete transformation. Asked about expectations for the coming year, only 6 percent plan no organizational change.
The majority of our respondents seem confident that these organizational changes will produce dividends in the form of enhanced revenues (63.4 percent) and productivity (58.2 percent) over the next 12 months. Moderated by ballooning costs, more than two-thirds expect to see organizational profits stay the same or increase. More than 40 percent expect to increase staffing, which should keep the area's unemployment rate below state and national averages.
Fortune recently proclaimed that in the new economy, "human capital is the whole game." It's encouraging to find that many Columbus C-levels understand that investment will be required to feed the knowledge economy. Nearly a third expect to increase their training and development expenditures in the coming year, and more than half forecast a bump in employee salaries.
Ethical and Sustainable Practice
Much has been made of the role of ethical failures in the financial crisis: consumers spending money they didn't have; heedless financial institutions; and business schools that failed to produce leaders more concerned about value creation and the public good than their own pocketbooks. Yet, nearly a decade after Enron, WorldCom and Global Crossing, just slightly more than half of our respondents--53.7 percent--describe their organization as having a formal ethics program.
However, more CEOs (64.5 percent) say their organization has a statement of values and 56.8 percent have a code of ethics. Many establishments (41.3 percent) hold individuals accountable for ethical behavior by including it as a component of employee performance reviews, though less than a third require ethics training (31.3 percent), encourage a whistle-blowing process (27.8 percent) or actively monitor ethics violations (25.1 percent). Relatively few have formally integrated ethics structures into the organizational chart; just under a quarter describe ethics offices (10.8 percent) or officers (13.9 percent) within their hierarchies.
With much buzz about "green" practices and sustainability, it's hard to garner agreement around a single definition of the term, or which practices merit the "sustainable" label. An inclusive characterization of sustainable business would describe strategies and activities that balance social, environmental and financial responsibility. Sustainability may be part of a wide range of initiatives, ranging from green practices to increased financial transparency to ethical consumerism.
Nearly 60 percent of our survey participants say that they've integrated sustainability into their business plans, and slightly more than two-thirds report that corporate social responsibility is important or very important to their organization. Asked to enumerate current sustainability initiatives within their organizations, CEOs' lists include: recycling (81.4 percent), moving toward a "paperless" environment (57.6 percent), conducting regular audits (23.8 percent), package reduction (18.2 percent), retrofitting facilities (14.9 percent) and LEED certification (12.6 percent). Six of our respondent organizations have rooftop gardens.
Perceptions of the Columbus MSA
Factoring in job growth, business and living costs, income and projected economic growth, educational attainment and opportunity, and quality of life, Columbus ranked No. 25 among Forbes' 2011 "Best Places for Business and Careers." The optimistic outlook evident in our respondents' forecasts for the Columbus economy and their own business operations in the next 12 months affirms this rating.
However, our participants largely agree that there are three primary measures local governments could 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. A small but vocal minority of the respondents concurred with the most popular write-in response: advising local governments to reduce red tape. More than one of these punctuated their write-in remark by asking local government to "get out of the way" of local entrepreneurs and business owners.
More than half of the organizational leaders responding to our survey point to the moderate cost of living as the single factor that contributes the most to the overall quality of life in the city. For the second quarter of 2011, the ACCRA Cost of Living Index for Columbus was 88.8 (the U.S. score is 100), confirming Central Ohio's economical living environment.
Also, 13.2 percent of CEOs attribute the quality of life in Central Ohio to the area's educational resources, which include more than 35 colleges and universities. Additionally, 7.6 percent applaud the travel and transportation infrastructure, and 6.9 percent point to the health-care and medical facilities in the area. Many CEOs have a lot to say about the quality of life in Columbus, as indicated by the volume of effusive write-in responses to this survey question. One respondent describes the city as "the best kept secret in the nation," while others laud its friendly, hardworking "Midwest values," and "open," "smart" and diverse citizenry.
Columbus executives are also complimentary of the area's labor force. Just under 40 percent rate the overall quality of the Columbus MSA workforce high, and another 53.1 percent find the human capital available in the region adequate.
How do those in Columbus's corner offices assess the availability of competent leadership within their own organizations, and what characteristics do they believe are important in reaching the highest echelons? What are the most demanding challenges in their executive roles, and how do they measure their own success? Is it really lonely at the top?
Nearly 85 percent of our respondents describe the leadership depth within their internal labor markets as good to excellent, and less than 5 percent find leaders in short supply. Given this favorable assessment of available talent, along with the percentage of small to mid-sized private organizations in our pool of respondents, it is logical that two-thirds of these CEOs deploy a "grow" strategy to leadership development, primarily developing leaders from within the organizations. Another 30 percent promote leaders from within and bring proven leaders in from outside of the organization about equally. Most of the organizations responding to the survey do not have a formal succession plan.
Asked to identify their top three challenges as CEO/president, well over half of our leaders (60.6 percent) agree that sustaining a competitive advantage is one of their toughest tasks. Many also find that the most demanding aspects of their roles include attracting and retaining good employees (38.2 percent), meeting quarterly earnings projections (32.4 percent) and leadership development (30 percent). Nearly a quarter included "maintaining the integrity of our brand" (24.5 percent). Despite these challenges, the vast majority of respondents-more than 80 percent-are somewhat or very satisfied with their positions and more than 75 percent feel secure in their jobs.
Leadership literature abounds with lists of attributes thought to characterize effective leaders, such as integrity, self-confidence, business acumen, cognitive ability and emotional intelligence. Leadership guru Warren Bennis describes several essential qualities: developing and communicating an inspiring vision for the future, building trust, searching for self-knowledge and transcending adversity. Jim Collins' Level 5 leader blends personal humility and professional will.
More than half of Columbus executives include sound decision making (61.7 percent) and strategic thinking (59.7 percent) among the top three personal characteristics that have contributed to their success. Strong ethics (39.7 percent) and interpersonal skills (38.8 percent) rank high on this list, and nearly a quarter believe that being a good judge of people is integral to their professional accomplishments.
Clearly our local CEOs consider themselves custodians of their institutions, employees and customers. More than three-quarters indicate that they measure their own personal success by their company's success, and well over half are concerned about their impact on the lives of employees and customers. Rounding out their top three measures of personal success, 45 percent of CEOs gauge their personal success by time spent with loved ones. Less than 15 percent use compensation to judge personal success.
Professional networking tools such as LinkedIn and Identified were developed around the adage, "It's not what you know, it's who you know." So who did our CEOs know who helped them work their way to the top? Most didn't have to look much further than family members to find those who've had the most influence on their professional success. Nearly 30 percent of our industry leaders credit their spouse as the most influential person in their professional success, and an equal percentage acknowledge their parent's or parents' role in their career attainment. Outside of their households, nearly 20 percent were significantly influenced by professional mentors.
Having reached the pinnacle of the organization, our respondents continue to rely on their spouses, who most commonly serve among the executives' three most important confidants (75.5 percent). Friends provide an important sounding board to more than 50 percent of those completing the questionnaire. Within their organizations, CEOs/presidents most commonly turn to CFOs (24.8 percent), who edge out COOs (23.9 percent) and board chairs (16.4 percent).
The results of the inaugural Central Ohio CEO Survey reveal several themes. Most important is the tone of optimism with which local leaders approach current economic, competitive and regulatory challenges. A very high percentage feel secure in their jobs and satisfied with their work. They lead their companies with confidence for continued success in this geographic region, though they are more skeptical about the national outlook and even less positive in international markets. In addition to the need for continued economic recovery, our respondents identify competitive forces and regulatory and legal issues as high on the scale of organizational challenges.
In Columbus, they find a ready and competent workforce in general, but include improvements in public education as a worthy goal for local governments. They describe adequate leadership resources within their companies, but recognize the need for continued intellectual capital development. The qualities of living and doing business in Columbus get high marks for reasonable cost of living, educational opportunity, transportation and health care.
Columbus organizations who responded to our survey believe that ethics in business is important, yet few have formal programs and training-relying instead on the employee and his/her accountability.
In general, enterprises in the Capital City have embraced sustainability initiatives, but concentrate on improvements in operational efficiency rather than programs such as alternate fuels and LEED-certified buildings.
These CEOs attribute their success to sound decision-making skills, strategic thinking, high personal ethics and interpersonal skills, and believe they have honed their ability to judge people. Most tie their personal success to the success of their company, employees and customers, but also highly value time with loved ones. They count on their spouses and close friends for good counsel and most often credit their success to family influence.
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 2012, please complete the online 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 an assistant professor of sociology/criminology at Capital University.
Reprinted from the December 2011 issue of Columbus C.E.O. Copyright © Columbus C.E.O.