Every quarter, the National Center for the Middle Market surveys 1,000 executives. One thing we ask is whether their company’s overall performance has improved, deteriorated or stayed the same in the past year. At the end of 2017, 71 percent said performance was better, and 6 percent said it weakened — a ratio of nearly 12-to-1. When the Middle Market Indicator started in 2012, the ratio was below 5-to-1.
Given this growth period, which began in June 2009 and has become the third longest in American economic history, it’s no wonder that middle-market leaders feel more confident. Growth, however, means growing pains. Half the respondents say talent is their biggest long-term challenge. One they don’t see getting better: By a 8-to-1 ratio, they expect labor market conditions to tighten even more.
The need for talent is likely to be more intense in Columbus. Economist Bill Lafayette’s 2018 area forecast expects the number of jobs here to grow 1.8 percent, versus 1.4 percent for the U.S.
Openings need to be filled, but fewer people are out of work. Plus, new jobs require more digital skills, which heats up the competition for people with those skills.
We’re nearly at full employment, and the shortage of available talent is made worse by several factors, such as the ravages of the opioid epidemic. A Princeton economist estimates as much as 20 percent of the decline in workforce participation among men can be attributed to these drugs — a number that’s probably higher in Ohio, an epicenter of the crisis.
Also, new jobs in the Columbus area tend not to be located near the homes of the poorest residents who are the most likely to be looking for work, according to the Brookings Institution. The government and private sector should work together to solve this issue.
How to respond
As an executive, train and retain should be your mantra. In a full-employment economy, if you hire, you’ll probably take them away from another job, and when others are hiring, they’ll be looking at your people. So, you need to look good.
You have to raise your workforce productivity. You can’t increase output by putting more people on the job if more aren’t available. That means improving skills and investing in up-to-date, efficient equipment.
You should reach out to the “workforce system,” a decidedly unsystematic collection of community colleges, universities and groups like the Workforce Development Board of Central Ohio and Ohio Means Jobs. Our work with Brookings shows that middle-market companies usually lack strong connections with these organizations.
When executives report their challenges, we ask how they’ll address them. In 2015, 26 percent wanted to tackle their talent shortage by investing in workforce training and education. At the end of 2017, the number had jumped to 38 percent. During the same period, executives expecting to use wage increases as a retention tool remained at 43 percent.
Investing in employees makes them more likely to stay. It sends a message that yours is a good place to work. And improved skills enable you to increase output without adding headcount.
Thomas A. Stewart is the executive director of the National Center for the Middle Market, the leading source for knowledge, leadership and research on midsized companies, based at the Fisher College of Business at The Ohio State University.
Thomas is an influential thought leader on global management issues and ideas — an internationally recognized editor and publisher, authority on intellectual capital and knowledge management, and a best-selling author.