Talent and labor availability, inflation, and supply chain disruptions are the biggest hurdles to growth for West Michigan executives, while many plan to turn to automation and price increases to mitigate those risks.
Those are among the key findings of an Association for Corporate Growth Western Michigan and MiBiz survey of 322 people conducted in September. Nearly 70 percent of the respondents identified as C-Suite executives or owner/partner, while roughly half came from the manufacturing and professional services sectors.
Respondents were nearly evenly distributed among small to large companies, with roughly one-third overseeing fewer than 10 employees, one-third with 10 to 99 employees, and one-third with more than 100 employees.
Reflecting anecdotal evidence and ongoing concerns over labor and talent availability, 212 respondents, or about 65 percent, listed “talent/labor force” as their biggest hurdles to growth over the next year.
ACG Western Michigan Board member Greg McCormick said the significance of talent and labor issues was perhaps the most surprising component of the survey results.
“It does not show signs of letting up, suggesting the broader Western Michigan community has an opportunity to make Grand Rapids a more desirable place to attract talent,” McCormick said, adding that he’s wondering whether the “latest news around layoffs in the tech industry will spread to our part of the country.”
Survey respondent Gunther Brinkman, general manager of Battle Creek contract snack food manufacturer Snackwerks of Michigan LLC, confirmed that talent availability is the primary hurdle for the company’s growth plans.
“We’ve tried to be creative,” such as offering workers free onsite classes in English as a second language, Brinkman said. “We care about the whole person, not just a pair of hands that show up to work.”
Founded in 2016 by the former director of innovation and R&D at Kellogg Co., Snackwerks has a 20,000-square-foot manufacturing facility and has grown to 115 employees. Brinkman said focusing on employees’ first two weeks, which play a key role in determining whether a worker stays with a company longer term, has been a key priority to increase retention.
Elsewhere in the survey, economic conditions are also top-of-mind among executives, as about 40 percent of respondents, or 131, listed inflation as one of their biggest hurdles, followed by 109 people who listed supply chain and 68 people who named interest rates among their biggest hurdles. Among real estate and construction executives, in particular, interest rates were even more of a concern than talent availability, according to the survey.
“There is clearly a concern when you look at inflation impact, interest impact and the impact of government policies,” McCormick said. “Eighty-seven percent of total respondents see government policy as having a neutral-to-negative effect and it’s consistent (among ACG members). When you look at how interest rates will impact, almost half indicated it will slow us down. Importantly, when you look at how companies will fund their growth, it’s primarily internal cash flow or owners’ capital — not many are going into the market.”
To mitigate these risks to growth, survey respondents said they planned to increase their use of technology/automation as well as increase prices as the most popular strategies. Nearly one-third of the respondents said increasing compensation would help their growth plans, followed by rationalizing their customer base.
Similarly, nearly three-quarters of respondents said that finding new customers in existing markets would be among their largest opportunities for growth, followed by pursuing new geographical markets and offering new products. Investments in that growth prioritized sales and marketing, followed by recruiting, training, automation and software, according to the survey.
McCormick found “everyone’s willingness and desire to invest in their people and talent acquisition” to be the “most noteworthy” part of the survey findings.
“I believe that is a reason why we should be able to attract greater talent to Western Michigan, and would like to better understand what business owners need to do to keep the talent coming here,” he said.
In addition to “creative” talent retention strategies, Snackwerks has experienced enough organic growth over the past year that it will be out of capacity “in the not too distant future,” Brinkman said.
That may require investing in off-site property for warehousing to clear up production space at the company’s existing facility, or by acquiring a nearby bakery “where we can leverage a management team across two facilities.”
“We’re looking at both of those options,” Brinkman said.
As well, Snackwerks has invested in more efficient and automated production lines that increase capacity as well as productivity.
“There are a couple of reasons why we’re looking at increased automation,” he said.
Overall, mergers and acquisitions appear to be a minor priority for business executives as 56 percent, or 181 respondents, indicated that they would not pursue M&A activity in the next year, while 90 respondents said they would. Similar percentages on M&A interest played out among the manufacturing, real estate/construction and professional services sectors. However, M&A interest was higher among ACG Western Michigan members.
“Clearly, the concern generated about inflation and interest rates, while not surprising given the timing of the survey, is even more critical now with the latest interest rate hike,” McCormick said. “(This) could possibly be a reason why a lot of companies aren’t looking at M&A as a growth strategy.”
Here’s a look at some additional findings from the ACG Western Michigan/MiBiz survey: