Small and Midsize Business CEOs’ Confidence Continues to Rise Despite Labor Challenges
The Vistage CEO Confidence Index measures sentiment on various economic and business topics among small- and mid-sized business leaders. Despite the Index rising to 108.8, many business leaders are faced with hiring challenges following the pandemic.
While 71% of all CEOs reported that they intend to increase their workforce, a record high since the Index started in 2003, 62% said that hiring challenges are impacting their ability to operate at full capacity.
Compounding this, almost a quarter (24%) say their employee retention rates have decreased since the beginning of the year. Companies report current employees are leaving for higher wages (38%), better career development opportunities (18%) and increased flexibility (14%).
To combat hiring challenges, many companies are turning to increased wages with 56% saying they are boosting wages and half are working to develop existing workers. 65% are investing in technology to reduce their labor burdens, and more than a quarter (27%) are specifically investing in automation and other labor-saving devices to get their jobs done.
“With restrictions easing across the country, businesses are eager to get back to full capacity; however, the talent wars have flipped in favor of the employee and they can bargain more for what they want,” said Joe Galvin, Chief Research Officer at Vistage. “So, while many companies are looking to increase their workforce, they also need to take a step back and see how they can incentivize their current workers to stay. Flexibility is a must for many workers. A dual recruitment-plus-retention strategy is critical now.”
Return to Work
When asked about their return-to-work plans, 70% of CEOs say they will have a hybrid workforce through the end of this year. Almost as many (68%) say hybrid working will remain in place beyond 2021. In terms of masks and vaccinations, 59% are not requiring masks in the workplace and 49% are recommending, but not requiring, that employees are vaccinated. In addition, 67% have already resumed business travel.
Investments and Inflation
When looking at the year ahead, small and midsize business leaders are planning on increasing their fixed investments. 53% of CEOs expect to increase planned expenditures on fixed investments, up from 44% last quarter and double the low of 25% one year ago. Companies are experiencing signs of inflation, however, with 70% of companies citing higher costs for labor and increased prices from vendors. Additional survey highlights include:
Economic Turnaround in Progress
• 76% of CEOs believe the economy has improved compared to a year ago, a jump from 40% in Q1 2021.
• Fears of a worsening economy in the year ahead fell to 15%, down from 34% in Q1 2021.
• 57% expect their firm’s profitability to improve in the next 12 months and 78% expect their sales revenues will increase.
Today’s Labor Landscape
• 65% of CEOs say their retention rates have stayed the same since the beginning of 2021, but almost a quarter (24%) say their retention rates have decreased.
• 38% believe employees are leaving their organizations for higher salaries,18% think they are leaving for better career/development opportunities and just 14% of CEOs believe employees are leaving for more flexibility.
• 62% say hiring challenges are impacting their ability to operate their businesses at full capacity.
• 44% say they are struggling to hire front-line, hourly workers; 41% are struggling to find skilled workers; 36% are struggling to find professional staff.
• In response to difficulty hiring, 56% of CEOs say they are boosting wages; 51% are refining recruitment strategies; 50% are developing the existing workforce; 29% are allowing employees to work remotely; 27% are investing in automation/labor-saving devices; 22% are offering hiring bonuses, and 22% are adding employee benefits.
• 30% report boosting their wages by 1% to 3%; 32% report increases of 4% to 6%; 17% report increases of more than 6%.
The Vistage CEO Confidence Index, established in 2003, is a quarterly survey of small to midsize business CEOs, presidents, and business owners about the U.S. economy. The Q2 2021 Vistage CEO Confidence Index includes responses from 1,589 U.S. CEOs, surveyed between June 7 and June 14, 2021. Since its establishment in 2003, the Index has proven to be a reliable indicator for changes in GDP and employment, two to three quarters hence.