Vistage, a business advisory and executive coaching organization designed exclusively for CEOs, business owners and key executives, boasts having a membership of more than 21,000 expert leaders. And each month they partner with The Wall Street Journal on a small business confidence index that covers a lot of ground on what’s on the minds of small and midsize businesses.
Joe Galvin, Vistage’s Chief Research Officer, shares some of the key takeaways from the latest survey, including why there is so much optimism among small business owners, why they’re looking to add employees, why 2018 will be a year to increase investments in their businesses and why there’s more to leadership than providing motivation and inspiration.
Below is an edited transcript of our conversation. To see the full interview, click on the video below, or on the embedded SoundCloud player.
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Small Business Trends: You recently published one of your monthly SMB Confidence Indexes you do with the Wall Street Journal. Tell us a little bit about that.
Joe Galvin: Every month going back to 2012 with the Wall Street Journal we’ve published the Wall Street Journal Vistage Small Business CEO Confidence Index. We get responses from between seven and 800 of our small business. We define as 20 million or less, asking them questions about confidence in the economy, plans to hire, plans for investment and then different questions depending on what the topics are that sometimes lead to a Wall Street Journal article. But all these feed into our understanding of what our members find is most important to them and where they’re focusing their energies.
Small Business Trends: So let’s talk a little bit about some of the results because it was kind of interesting to see how things have changed so dramatically over a short span of time. It seems like there’s a lot of confidence and it’s just accelerating at this point.
Joe Galvin: You know it’s a remarkable and rare point in time when you’ve got still historically low interest rates. Inflation is a non-factor. We’re effectively at full employment which sounds like a good data point but it was a real challenge for small businesses. All come together along with the changes in tax and regulatory and some of the other legislative things that are occurring. There’s a lot of this to be a unique time for small businesses. And what we found is, that they are doubling down on their investments. We found that now is the time to borrow. Now is the time, easy access to capital, that we see our leaders, our CEO’s going out and looking at where they can make these strategic investments today to drive the growth that is occurring now and into the future.
It’s a real positive time. If we compare this back to a year ago, like you mentioned, 65 percent of small businesses say their confidence is up. Last year in December it was 43 percent so, there’s a real surge of energy and a real surge of optimism in the small business community and, quite frankly, these are the good old days, you know, we’ll look back in three of four years and say, “Wow. 2018, those were the good old days.” Well, these are the good old days. We got to make it happen.
Small Business Trends: Kind of ironically, though, when you look at the CEO’s and the way they expect to gain in the economy, it seemed like they’re a little bit more or, actually quite a bit more optimistic at the beginning of 2017 than at the end of 2017. Why do you think that is?
Joe Galvin: Well I think there was a surge. A lot of things that people believed were going to happen, a lot of the different policy changes during Obama’s administration. I think now that we’re into more of a reality set and, you know, what is getting done and what isn’t getting done and what they think will happen, won’t happen, it’s probably causing some of that shift. But I think it was also an artificial surge coming off the election, the results and what they believed would happen to them.
Small Business Trends: 72% of small firms CEOs plan to hire more people in the next 12 months.
Joe Galvin: That’s a real powerful data point because it all begins with people. It’s all about talent. Talent consistently comes up as the number one issue or topic our CEOs are wrestling with and it’s got two sides to it because while you’re looking to add people, and you want to add great people, you want to get the right people on the bus, so is everybody else. So what we found is, that adding new employees begin with insuring the employees you have are fully engaged.
We’ve got data that shows, we’re seeing CEO’s increase their investments in training and development. Why? I want to ensure the people I have here are growing, engaged and want to continue. We see them boost wages. Why? Because, when that phone call comes in for your number two, your number three person, you’re hoping they’re not even taking the call.
And we’re also seeing expansion of benefits. So, as the pressure and the hiring wars become fiercely competitive, what we’re finding is the strategy is to focus first on the people you have and then add to that.
Another interesting point is that the most successful employees come from referrals of other employees. Not dissimilar from business with referrals being really powerful. So, as a platform to grow, before you can add people, ensure the people you have are fully engaged and they will be your best source to find other people especially in a small business when you operate in a very local market, local economy.
Small Business Trends: I like this one. 52% of CEO’s plan to increase spending on fixed business investments, the highest since mid 2012.
Joe Galvin: Yeah, real surge I mean, the time is now. One of our economists had commented that, if you can sleep at night, you haven’t borrowed enough money because, interest rates are never going to be this low again. Access to capital and people wanting to invest in small businesses well, we’re at a peak, not to say it can’t go higher but, where we are today, consequently we’ve seen that investment shift. We see the shift in more investments. In fixed assets, new equipment, new facilities but also a big surge in technology.
Small Business Trends: So, one of the things I’m always interested in is also how do they view technology? How are they looking at this? Is this a time where some of those investments are going to be in strategic parts of or pieces of technology for growing sales and getting more profitability, or cutting costs?
Joe Galvin: We did a study earlier last year in lieu of, in summer, actually, we did a study in August and published in October with Sales Force exactly on that topic of how, specific to small and mid-sized business, how technology plays and we found a couple of things.
One, there is still a high percentage of small businesses out there that are working in homegrown spreadsheets, whatever-you-make-up type applications to manage your business.
We see another population that are using a combination of multiple point solutions; and we’re seeing another group that are using packaged applications. And, what we find is that in those organizations that are on a high growth track, a; they’re more likely to use a packaged application but more importantly and, this goes across all aspects, they are likely to be more effective in its use. The organizations that are growing don’t just buy the technology, but they’re very good at using it. They focus on the execution.
We did a comparison between high growth double digit, two year performance versus no growth and we found a real disparity between the high growth organization’s ability to really capitalize on what that technology is versus the low growth being highly inefficient in how they use it.
So, I think there’s a fine line between making the investment and making it work and that’s why we think leadership is the art of execution. It’s the ability to not just buy the technology but to put it in place and then do the change management and the innovation required to really get the power of what that technology can do.
And it’s a huge value for small businesses because it gives you the ability to compete with the big boys. You know, I think back to the days, you know, in the 1980s and ’90s, only the big enterprise, class organizations could afford this class of capability. Now there’s so much out there and there are so many capabilities that for small businesses, technology truly becomes a force multiplier.
Small Business Trends: So, with all this extremely high confidence and sentiment, it sounds great, they’re doing things, they’re investing, they’re getting more employees. What things should they still be doing that they aren’t doing just yet when it comes to taking advantage of all this sentiment that they have?
Joe Galvin: Well, I think first and foremost it’s making good decisions. If you really separate your high performance, world-class, small business CEO’s or, any CEOs for that matter, it’s about their ability to make good decisions. Now, you can make decisions based on your instinct or gut feel and, at the end of the day we end up rationalizing it with our gut feel, right?
You can apply your judgment. This is what I think and how it might work but, where we see optimized decision making occur is when they reach out and expand their perspective. They tap in to others with expertise. People that have been down that path before. Maybe someone who has been successful in making this work. It’s this ability to bring the perspectives of others combined with your instinct and judgment that leaves to optimized decision making so, there’s two elements to this.
One is you have to be able to make good decisions and then you have to execute. So, if CEOs are in the business of making decision their leadership has to be the art of execution and, whether you’re a big company or small company, if you’re not able to lead your organization, if you’re not able to affect change, my suggestion is don’t spend the money.