How to Reignite Your Growth Engine

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As the United States begins to emerge from COVID, many businesses are feeling the growth—and for many, also the pain—of the economic recovery releasing pent up demand in many sectors. New post-pandemic realities are starting to take shape, and the owners and leaders in small and midsize businesses (SMBs) who strategize, invest, and prepare for the second half of 2021 will be ready to capitalize on what comes next.

My thoughts here are informed by the CEO Confidence Index, which is Vistage’s quarterly measure of CEO sentiment about business, the economy, and their predictions for the remainder of the year. Since 2003, the Vistage CEO Confidence Index has provided a quarterly comprehensive report of the opinions and projections of more than 1,400 CEOs of small- to mid-sized companies about the economy, their hiring and investment plans, and prospects for their revenues and profitability. (Little-known fact: this Index has been a proven predictor of GDP, two quarters in advance.)

The Q1 2021 index jumped to 102.4, which is up from 88.0 in Q4 2020. This record gain in CEO confidence is the largest year-to-gain in a decade, since the Great Recession recovery in 2009-10.

Surging demand is causing some increases in inflation, but the experts at both ITR Economics and the Fed view these as temporary—supply chain bottlenecks are expected to ease following the initial gains in the economy. SMBs that are immediately able to scale up their activities will benefit from increased demand, but be prepared to face increased input (raw goods/materials) prices. As the economic rebound gains strength, SMBs should be prepared for lower prices due to greater competition on both the input prices and selling prices. The significant gains in confidence and optimism about the outlook for the overall economy point toward the beginning of the end of the pandemic.

The manufacturing sector is especially positioned for a great decade in the 2020s. After the current supply chain risk settles down, significant foreign investment combined with a competitive manufacturing costs compared to other countries will provide plenty of momentum for manufacturing expansion.

With all this good news, three key themes are clear from the Index and from the CEOs I work and talk with: Talent, talent, and talent.

Talent is the driver of everything

The two-thirds of CEOs in the Index who report plans to increase their headcount in the next 12 months highlights what most of you already know: The demand for talent these days is extreme, and the war is now raging for the talent needed to support returning to full operation is upon us. Here are some key considerations for the second half of this year:

To compete for talent, you have to compete for talent. Here I’m talking about pay. If a company is losing people to another company based on pay, first confirm that’s the real reason. Multiple studies have shown that while managers and supervisors believe that pay is one of the top three reasons employees leave a job, employees responding to the same survey indicate that pay is somewhere around nine or ten on that list of reasons.

When pay is the real reason, then it’s time to get serious about talent, and by that I mean money. The math is pretty simple: If you’re really saying “yes” to people, then it means you have to say “no” to something else. That capital project might have to be delayed, or your team might have to get by without that software upgrade for a while longer, or you’ll have to increase your prices to your customers to cover the pay increases (to the chagrin of your sales team). After all, aren’t your suppliers increasing their prices? Don’t worry, the inflation is predicted to level out.

Retention before recruitment. The best offense is a good defense. As much as leaders may be looking forward to the end of stimulus checks to bring applicants back to work, you should be paying just as much attention (if not more) to your current workforce. I’m already seeing evidence that employees are making decisions to stay or leave based on how they were treated during the pandemic. It’s hard to attract top talent when the top talent you have is leaving, so take good care now of those you want to keep.

Upgrading talent means upgrading your selection process. There’s a real risk that the high unemployment figures right now give us false optimism about the number of truly qualified candidates out there. Today’s labor market is teeming with people displaced from industries like hospitality and entertainment. SMBs will need new ways to determine both job fit and cultural fit when evaluating candidates.

My advice: All hiring managers and supervisors should be trained or re-trained on behavior-based interviewing techniques that are directly linked to the values and behaviors required for the job and the company, to make sure you hire right the first time. Forty-six percent of your new hires will not make it to their 18-month anniversary, according to a study by LeadershipIQ. Make sure you’re hiring for fit.

Equally important is your on-boarding process. New hires formulate their stay-or-leave intentions during their first 30 days of employment. If the way you welcome new people to your team is not noticeably different from everyone else’s, fix it or run the risk of never quite getting ahead of the talent eight-ball. This is not difficult or expensive to do, and will pay huge dividends in the long run.

Tap into new and expanded talent pools. Let’s face it: The pandemic has made remote work a viable long-term solution. Now SMBs have the option to look outside the greater Knoxville area to find the best talent. Leaders who are still stuck on their “butts in seats” mentality (you know who you are!) will need to get over it and adapt their recruitment strategies and processes to reach beyond the 865 area code. We’ve all learned a ton over the last 15 months about technology; now we need to leverage it to really connect with the top-notch candidates.

We’re definitely in a time of transition, as confidence grows and uncertainty fades. More people are getting vaccinated, more businesses and schools are reopening, and there’s no doubt the economy is picking up. While there may still be some unknown setbacks ahead, getting the right people in the right seats on your bus now is perhaps the most important ingredient for a successful second half of 2021.

Thanks for reading!

Hi, I'm Kurt Greene, owner of Arrow G Consulting. I also lead CEO/executive peer groups in Knoxville for Vistage.

When I’m not helping CEOs and senior leaders to improve themselves and their companies, you can find me re-arranging the stack of unread books on my nightstand, daydreaming about airplanes, and seriously thinking about getting the ol' college rock band back together. Learn more about the exciting work we're doing here at Arrow G Consulting HERE.