CHICAGO, Jan. 13, 2022 /PRNewswire/ — A permanent workforce transformation is well underway in the middle market, according to the RSM US Middle Market Business Index (MMBI) Back to Work Special Report, presented by RSM US LLP (“RSM”) in partnership with the U.S. Chamber of Commerce. The report reveals the structural shift to remote and hybrid work models is here to stay, and the data confirms that executives expect a tight labor market will continue to be a significant challenge over the next year.
In the fourth quarter of 2021, more than a third (36%) of middle market companies polled stated they now have employees working remotely who weren’t doing so prior to the onset of the pandemic. Of those, 65% are embracing hybrid work, meaning employees work off-site some of the time and in the office some of the time. Almost half (48%) of the survey respondents have made remote work a permanent option for some employees on a full-time basis, while 42% are considering making that shift.
“The pandemic has been a once-in-a-century event that has significantly altered people’s lives and society as a whole,” said Joe Brusuelas, RSM US LLP chief economist. “It has also changed the entire perspective of where, when and how people work. The office of the future will have new standards and employ people with different priorities. Middle market companies that provide the flexibility and culture that workers demand stand to gain a prominent and lasting competitive advantage, all the more important in an incredibly tight labor market that has shifted the balance of power to employees for the foreseeable future.”
In the middle market, earlier concerns around reduced productivity, teamwork and culture were proven mostly unfounded. Of the survey respondents that previously did not allow remote work, 77% said reduced productivity was not an issue at all or a minor issue. A majority (70%) stated that reduced teamwork was either a minor issue or not an issue at all, and 75% said the challenges of managing workers created by remote working were not an issue at all or only a minor issue.
Although 27% of respondents said that remote work created a major issue in maintaining culture, 68% of companies reported that it resulted in only a minor issue, or it wasn’t an issue at all.
Middle Market Firms Adapting to Competitive Labor Market
While many changes have been positive for middle market firms, they are grappling with challenges related to a tight labor market. Fifty-six percent of surveyed companies plan to ramp up hiring over the next year, and of these, over 90% admit that it will be at least somewhat challenging to staff their open positions. The outlook on retention is similar, with 85% of executives stating staff turnover will be a challenge.
A lack of available qualified workers was cited as a reason to anticipate staffing issues by 96% of companies, including 43% that declared it to be a major issue. Even more companies said local competition for workers was a main reason for their hiring difficulties, while slightly fewer companies indicated the competition for workers with other employers in their industry was a factor. Other responses included issues finding people who want to work in their industry and the cost of labor.
“The employment landscape in America has changed dramatically as a result of the COVID-19 pandemic, and we now have a situation where there are too many people without jobs, and there are too many jobs without people to fill them,” said Neil Bradley, Executive Vice President and Chief Policy Officer of the U.S. Chamber of Commerce. “In this tight labor market companies that adapt their workforce practices for more flexibility, invest in training and upskilling opportunities, and seek out workers from overlooked talent pools will be better positioned to compete for talent in the post-pandemic economy.”
Almost half (49%) of the surveyed executives said they are sourcing talent for work that can be done remotely from a broader geographical area than before COVID-19. This is especially true for larger middle market companies ($50 million to $1 billion in annual revenue), with 59% stating they are expanding their talent pool to workers who may not be in the same city, or even the same time zone, as their bosses.
In an effort to recruit and retain people, 59% of middle market companies that believe staffing open positions will be extremely, very or somewhat challenging said they plan to increase compensation, and 48% of these companies intend to enhance their benefits. These findings seem to indicate that many organizations are still trying to attract people with the traditional offers of better pay and benefits.
Returning to the Office and the Future of Work
Working toward transitioning from a pandemic to endemic environment, middle market companies are considering the areas in which they want to invest over the next year. For example, 66% of respondents plan to invest in new skills training for their existing employees. At the same time, companies will need to balance the well-being of their employees and clients with the limitations of their office spaces while adhering to federal or state laws.
The shift to remote work does not seem to indicate a looming reduction in office space because 68% of respondents employing the hybrid model have plans to retain permanent workspaces. Sixty-four percent of respondents are not planning to reduce the number of physical workspaces in their offices over the next two years. Companies that don’t offer remote or hybrid work will face a disadvantage in recruiting and retaining talent, according to the report.
The survey data also shows the future of work includes new systems and technology for increasing worker efficiency and improving cybersecurity. Of the companies that said staffing open positions is at least somewhat challenging, 59% are planning or considering investing in automation or information technology and 73% of those said their goal is to increase employee productivity. The survey findings imply that these companies are not looking to reduce staff, rather, they’re aiming to improve job satisfaction by reducing administrative and repetitive tasks.
The survey data that informs this index reading was gathered between October 4 and October 21, 2021.
About the RSM US Middle Market Business Index
RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter: January, April, July and October. The survey panel consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.
Built in collaboration with Moody’s Analytics, the MMBI is borne out of the subset of questions in the survey that asks respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.
The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.
The responses to each question are reported as diffusion indexes. The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction.
About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business organization representing companies of all sizes across every sector of the economy. Members range from the small businesses and local chambers of commerce that line the Main Streets of America to leading industry associations and large corporations.
They all share one thing: They count on the U.S. Chamber to be their voice in Washington, across the country, and around the world. For more than 100 years, we have advocated for pro-business policies that help businesses create jobs and grow our economy.
About RSM US LLP
RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.
RSM US LLP is the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. For more information, visit rsmus.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.
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SOURCE RSM US LLP