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Economic optimism is powered by innovation

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BrainstormingMuch of the current middle-market company optimism about revenue growth is based on product or service innovation, which in turn relies on innovative talent. To accelerate the growth process, leadership is focusing on talent attraction and retention by reaching beyond traditional incentives to offer enticements such as flexible schedules and benefits promoting financial well-being.

These and other thoughts of C-level executives appear in the National Center for the Middle Market’s third-quarter 2017 Middle Market Indicator. Their survey responses also reveal that at 7.0%, third-quarter revenue growth beat the six-year average. And the growth rate is expected to keep rising. While 60% of their companies derive all revenue from U.S. sources, their confidence in global and local economies remains near peak levels.

This confidence in future revenue is founded largely on expectations of company innovation, a driving factor in growth. Company innovations expected to have the greatest impact on performance are improvements to existing products and services, creation of new products and services, and the development of processes to boost profitability.
Most effective innovations
Of companies that successfully innovate, two-thirds are attracting and retaining innovative people. (See Business confidence is not translating to high investment in innovation for further information about investment and growth.) Most middle-market companies see innovative employees as a success factor on par with understanding customers and anticipating market evolutions.
Factors in success
Hiring of employees in general shows a 6.4% growth, well above the six-year average of 3.8%. Staff growth at larger middle-market companies is proceeding at an even faster rate. Compared with a year ago, companies with annual revenue of $100M to $1B added staff at an 8.4% pace.
Hiring rate 2016-2017
However, hiring qualified employees can be difficult. Talent management is one of the top three internal challenges that will have the biggest impact on performance in the next year. Talent recruitment and retention are considered to be as challenging as core business issues, which include maintaining growth, capital and IT. Obstacles to recruitment and retention are more pronounced as the labor market tightens.
Challenges impacting performance
To stay competitive, high-growth companies are thinking more comprehensively about how prospective candidates evaluate a total package. Premium compensation remains an important draw, but it is no longer enough. Candidates are tending to choose a company offering intangible rewards such as an effective onboarding experience, strong development and succession plans, and a positive culture that permeates the work life. The workforce is increasingly made up of millennials who expect a business environment where they want to stay and deliver results, one that sets them up for success through resources and processes, and supports their career development and dreams.

Companies are responding by adding flexible work arrangements and enhanced training and education, and providing higher salaries and additional incentive compensation.
Addressing workforce expectations
Larger companies will lead the way in offering more nuanced benefits. Benefits under consideration are intended to promote physical, emotional or financial well-being. Examples are awards for activity tracking and improvement in metrics, access to anonymous screenings and follow-up advice, virtual Q&A with health and financial professionals, and counseling and support helplines.
Benefits under consideration
As companies plan for growth and increased value, they are focusing on hiring innovative people and making work as stimulating and satisfying as possible. They anticipate being positioned for success through innovative products and services.

Source: Survey data from the National Center for the Middle Market Q3 2017 Middle Market Indicator
Respondents to the national survey were C-level financial decision-maker executives in middle-market companies.


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Jim Brady
Chief Operating Officer
+1 312 602 8145