Waukesha, Wis. – The just published National Economic Trends Survey of nearly 2,000 organizations reflects a more optimistic view by employers across the nation for all types of companies. A significant finding when looking at the 570 respondents from Wisconsin, Illinois, and Iowa is that the manufacturers are definitely more optimistic than their counterparts in the non-manufacturing sector. The manufacturing companies report that they did better in 2011 than 2010, they expect sales / revenue to be even stronger in 2012, they are planning on pay increases for their employees, and they are planning on hiring and making new investments in people, facilities and / or equipment in 2012.
“This survey reflects the hundreds of conversations we’ve had with MRA members over the last few months. Midwestern employers are much more optimistic about business in 2012 despite the fact that they would like more clarity about significant growth triggers or inhibitors in the economic, political, and global environment,” said Susan Fronk, President of MRA. This Executive Summary focuses on the results for these Wisconsin, Illinois, and Iowa organizations, and the full national report is available on MRA’s website.
Economy & Business Outlook: Manufacturing Recovering Faster than Non-Manufacturing
Both the manufacturers and the non-manufacturers in Illinois, Wisconsin, and Iowa agree about the economy, with an impressive 92% of the executives expecting the overall economy will be about the same or better in 2012 compared to 2011. However, the manufacturing respondents are much more confident about their own business outlook than the non-manufacturing companies. When looking forward and projecting 2012 sales / revenue, 77% of the manufacturers expect an increase in their own sales, while only 61% of non-manufacturers do so—a large16 point difference. This trend began last year, with far more manufacturers (74%) reporting better business results during 2011 compared to 2010 sales / revenue than non-manufacturers (56%) – a 17 point difference. In 2012, fewer manufacturers anticipate flat sales / revenue (17%) with only 6% expecting a decrease in sales revenue. In strong contrast, 23% of non-manufacturers anticipate flat sales / revenue and 21% expect a decrease in sales / revenue.
Plans for significant new investments in people, facilities and/or equipment reflect this difference in optimism, with 66% of manufacturers saying they will make investments while only 45% of non-manufacturers are planning investments to improve service capacity and/or revenue in 2012.
Job Creation Barriers
Both segments have the same concerns about further economic decline as the greatest barrier to job creation, according to 60% of manufacturers and 58% of non-manufactures. They also had similar views about the next two biggest barriers, which are limited consumer demand (about 16%) and excessive government regulations (about 13%). However they diverge significantly in their projections and plans for 2012.
Staff Size: Growing
Nearly half the manufacturers (48%) plan to hire additional staff in 2012 compared to only about a third (34%) of non-manufacturers, with most of the hiring expected during the first half of 2012. The remaining organizations in each sector plan to maintain their current staffing level, with very few planning to reduce staff levels in 2012 (under 5%).
Compensation Strategies: Pay Increases Returning
Employer confidence has improved over one year ago with 83% of manufacturing and 73% of non-manufacturing organizations giving a pay increase in 2011. In both sectors, between 10% – 12% pay lump sum awards and about a third of the organizations in both sectors report pay variable / bonus awards. We see a similar pattern projected for the 2012 forecast, although many companies are still uncertain at this time. Significantly fewer organizations are planning on freezing wages in 2012, (5% of manufacturers and 11% of non-manufacturers) and no organizations are planning on reducing wages or reducing hours worked—strategies that were commonly used in 2009 and 2010.
Cost Cutting Reduced with Focus Shifting to Lean Strategies
As executives continue to manage their organizations through the uncertain economy, it is significant to note a change from the past two years when companies were reducing payroll through layoffs, reduced hours, frozen pay, reduced pay, and shutdowns. In 2012, the focus has shifted to lean / process improvement initiatives. The top cost-cutting measures planned for 2012 are outlined below. There are distinct differences in how manufacturers and non-manufacturers are planning to trim costs in 2012.
Top Cost Cutting Measures for 2012*
Measures – Percentage Manufacturers – Percentage Non-Manufacturers
Lean / process improvement initiatives – 68% – 40%
Shift a larger percentage of healthcare costs to employees – 31%- 19%
Layoffs (permanent reduction in staff) – 4% – 5%
Company shutdowns (above and beyond regularly scheduled shutdowns – 3% – 0%
* More than one response could be selected
Given that the non-manufacturers are less optimistic overall, an unexpected finding is that only 48% plan on some cost cutting measures for 2012 compared to 73% of the manufacturers—a 27 point difference. “This may be due to the stronger focus that manufacturers have on lean / process improvement as they move forward in a recovery mode. Af4ter the difficult staff-related cost-cutting years of 2009 and 2010, manufacturers may be operating as lean as possible, and are now focusing on the more positive side of cost cutting through lean operations,” said Bonni Yordi, PhD, Director Surveys and Business Research.
The 570 respondents from Wisconsin, Illinois, and Iowa were almost evenly split between manufacturing and non-manufacturing and represented all sizes of companies. For details, see the full survey report. The Employer Associations of America’s (EAA) data reflects national conditions and the EAA National surveyed 1890 companies: The survey data was collected in October through November of 2011.
Founded in 1901, MRA—The Management Association is a not-for-profit employers’ organization serving more than 3,000 employers throughout Wisconsin, Illinois, and Iowa, covering close to a half million employees. An expert in the optimization of human resources, MRA helps companies create powerful teams and a safe, successful workplace. For more information on MRA visit http://www.mranet.org or call 800.488.484. MRA is a member of the Employer Associations of America which conducted this survey. The Employer Associations of America (EAA) consists of 37 regional employer associations that serve 48,000 companies and over 5,600,000 employees. The EAA’s mission is to advance a national presence as well the regional success of its members through collaboration, efficiency, and shared knowledge and resources.