Survey: Companies Spend on Technology Instead of Training – or Talent

“Technology — rather than hiring — is on the minds of most executives of mid-market companies.”

So says Mid-Market Perspectives: America‘s Economic Engine – Competing in Uncertain Times, a Deloitte survey of almost 700 executives at companies with revenue of $50 million to $1 billion.

A majority of the executives surveyed expect both revenue (61.2 percent) and profitability (52.6 percent) to increase next year, despite limited faith in any significant improvement in the national economy. What drives their optimism is a continued focus on cost controls and increased productivity.

Of the 70 percent of executives reporting an increase in productivity, the average saw a 6.1 percent improvement since the beginning of the recession. The majority of executives credit the rise to improvements in business processes (62.2 percent) and technology (50.3 percent), especially the automation of business operations and increased use of data analytics for business intelligence.

Less than 30 percent of the respondents attributed improved productivity to making better hires (29.7 percent) or better workforce training (28.6 percent).

As the report declares plainly, “if a job can be automated — if it can be reduced to an algorithm, an application, or a set of instructions — it probably will be.”

And the survey also made this point:

In short, technology — rather than hiring — is on the minds of most executives of mid-market companies It is important to have informed, creative, and empowered employees to interact with customers and suppliers. But to the extent that software can be substituted for people, companies are able to operate more efficiently, scale more easily, and generate higher levels of revenue per employee.”

While 44 percent of the respondents expect to increase headcount of full time employees next year, hiring is being restrained, 45 percent say, by the need to wring more productivity out of the company. Labor, say 49.3 percent, is the cost the company is most focused on controlling.

Another problem, survey respondents identified, was the challenge in finding new workers who can hit the ground running. The Deloitte report says 47 percent of mid-market business leaders report difficulty finding employees with the skills and education to become productive immediately.

This is becoming a hotly argued issue here on TLNT. A post Wednesday by editor John Hollon asks, “Are We Short of Skilled Workers, or Is it Just a Training Problem?” The post amplifies the discussion that began here with a reference to an opinion piece in The Wall Street Journal by Dr. Peter Cappelli.

He argued that employers are wrongly blaming schools for failing to train workers. “The real culprits,” Cappelli says,” are the employers themselves.”

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What’s interesting to note in the Deloitte survey are the responses to the question, “What organizational changes, if any, has your company attempted to implement since the onset of the U.S. recession?” Of the eight options. 60.8 percent chose “Improved business processes.” That would be where streamlining workflow and automation fit in; essentially, the tech over talent decision.

“Improving training” was selected by 37.8 percent. “Higher standards, in terms of skills or education, for hiring new employees” was the choice of 35.2 percent.

According to Deloitte, the survey was conducted in July and August 2011, by OnResearch, a market research firm. They polled 696 executives at U.S. mid-market companies about their expectations, experiences, and plans for becoming more competitive in today’s difficult economy.

Respondents were limited to senior executives at companies with annual revenues of between $50 million and $1 billion; two-thirds of the companies responding were privately held, while one-third was public. The private companies were almost evenly divided between family-owned, closely (nonfamily) held, and venture capital-backed.

The industries surveyed were diverse; the two largest, consumer/manufactured goods and professional/business services, comprised only 25 percent of the responses. The other 75 percent were spread across 15 different sectors. IT and finance professionals contributed about one-third of the responses; operations and sales accounted for about 10 percent each.

Exactly half of the respondents were C-suite executives, owners, or board members; the other half included managers, department heads, vice presidents, or leaders of business lines.

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.

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4 Comments on “Survey: Companies Spend on Technology Instead of Training – or Talent

  1. OK, so “downsizing” resulted in 2 people doing the work of 3.  Relatively no problem.  The 50% increase of workload of the survivors was offset by 1) Productivity improvements and 2) Remaining employees’ already existing knowledge of corporate practices, processes, and “workarounds” to both – something most organizations do not account for.

    So additional cut-backs result in now 1 person doing the work of 2 (originally 3), resulting in basically “red-lining” that person’s productivity engine to the point of breakdown (i.e., engagement, productivity, etc.)  They quit.  So now where you originally had 3 people, you now have 0.

    Now you are left with looking for:
    – a person who can do the work of 3,
    – with no previous knowledge of the organization, it’s practices and procedures
    – who can “hit the ground running”

    NEWSFLASH:
    These people either do not exist, or are in such small numbers that demand far exceeds supply and they are priced outside of what most “entry-level” situations are willing to bear.

    So we are at an interesting junction where business are saying “Where are all the ‘good hires’?” and a ready, willing, desirous and able (with a little bit of development) workforce is saying “Why won’t somebody hire me?”

    All the productivity-enhancing technology won’t do a thing if there are not any people using it.  No matter how much you automate it, business is still a people-driven enterprise.

    Somebody somewhere needs a good reality check.

  2. I agree with John’s comment and would like to a few more:

    1) Not sure the improved productivity in business processes should be 100% attributed to technology.  A company can streamline processes without automating.   I know companies are “flush” with cash these days (great profits) but automation takes a lot of time, consultant cost as well as capital expenditure.  It is faster to have management close to the work flow to streamline processes as a first line of defence.

    2) I have to laugh at the comments made by executives on wanting to find people that can hit the ground running.    They should communicate that with recruiters.  Many who can hit the ground running are older people with lots of experience that cannot only hit the ground running but know how to streamline processes and know ways to cut costs.   But companies say these candidates are over-qualified.  So it is odd they won’t hire people that can immediately help them.    They don’t want to train (I can understand that in these times — companies don’t a lot of time to spend on it) — but they don’t want to hire people who are experienced not only technically but in bringing new ideas to streamlining and cost cutting.
    Sounds like they are sending mixed messages.

    This fits in nicely with John’s comment that companies need 1 person to do the work of 3.  So in situations like that you need “over-qualified” people.   In fact, when the economy turns around companies would have less people because it would have a lot of people doing work of 3 easily.

    3) I know Deloitte is supposed to the “cream” of consulting —– but who in their right mind would lump companies from $50M to $1B in the “mid-market”?????????   There are so many differences among companies in that range that’s like saying apples and oranges are the same!!!!

    The last is just a personal comment.   With all due respect to BOD, CEOs and owners —– they are not close enough to the process problems as managers, heads of business lines or directors of departments.
    Especially not the BOD.

    Enough said.

  3. to play devil’s advocate, it’s a major turn-off to me if an organization doesn’t have the technology to help me be the most effecient at my job.

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