Results are In: The SMU Cox CEO Sentiment Survey

Even with recent market ups and downs, the SMU Cox CEO Sentiment Survey 2008 reveals continued confidence in the DFW economy.

In 2007 the Cox School of Business set out to survey the leaders of the Dallas business community by launching the SMU Cox CEO Sentiment Survey. We wanted to hear first-hand their perception of the city where they live, work and volunteer. The results were both surprising and inspiring. The positive economic expectations that these CEOs conveyed flew in the face of global and domestic news that talked of a credit crunch, inflation, and an economic downturn. Our participants envisioned a 2008 Dallas-Fort Worth region that would weather the predicted threats. A resounding 70 percent optimistically believed the DFW economy would show improvement.  While that overall optimism was conveyed in their responses, they were less optimistic about the improvement of the national economy (41 percent) and the world (43 percent).

What a difference a year makes! True to predictions, the 2008 domestic and global economies have endured tumultuous events that started in late 2007. Since then, we have seen unemployment increase, home values plunge, the mortgage industry collapse, gas prices skyrocket, industrial production falling steeply, and consumer confidence bottoming out.

Before this year’s surveys were mailed out, Bear Stearns, Fannie Mae, and Freddie Mac were in serious trouble and either Wall Street or Washington was going to have to step in and do something (they were all subsequently bailed out). As the participants completed the surveys, and the last of the submissions were received, the economic cloud grew even darker. In one short week the overnight demise of Merrill Lynch, Lehman, and AIG caused the press to label the turn of events the “Worst Crisis since the Depression.” Around the world fear rapidly turned to panic as the U.S. government stepped in with quick bailout proposals that momentarily bolstered the world’s confidence.  The crisis is not over. No one can predict when it will end, or what the outcome will be. Daily, our hopes and fears teeter on the news we receive.

As we reviewed last year’s survey responses, we realized anew how the optimism that was expressed by our DFW leaders has prevailed again this year. In the midst of the historic economic storm, the DFW area stood only minimally shaken. Compared to that of the nation, the DFW housing slump has been mild.  While we have felt the subprime crisis, the stockpile of homes for sale is only slightly larger than normal, and the price of residential property has dropped minimally. Home foreclosures, while accelerating, have been far below the national average. Texas banks are lending money.  New job additions lead the nation. The friendly business climate is continuing to draw corporate headquarters, and businesses of all sizes. The quality of life, and the low cost of housing, is attracting young and old alike. Indeed, as the year progressed, we watched with excitement as the DFW community stood seemingly sheltered from the economic turbulence around it.  

We consider it fortunate that the timing of the 2008 survey occurred when it did. The historic economic events are far from over.  But this year’s survey allows us to peer into the minds of the Dallas business leadership at a very critical time—to see how they interpret the economic unraveling that is going on nationally and internationally. We could not have planned a better time for this survey. We acknowledge that DFW cannot stay immune to the threats forever. Yet it is with continued excitement that we look at what our CEO leaders predict for 2009.


Who Responded to the Survey?


We are very grateful to the 543 DFW-area CEOs who responded to our survey.

Nearly 9,000 surveys were mailed out on Aug. 1, 2008, and responses were collected until Sept. 15, 2008. CEOs were able to mark their responses on the paper survey that they mailed back to SMU, or electronically through a secure server. Interestingly, the vast majority of respondents (more than 80 percent) chose to use the old-fashioned paper method.

CEO’s demographic characteristics produce an interesting picture of DFW’s business leadership: 91 percent male, predominately white (92 percent), and 77 percent are ages 50 and above.  Their educational levels vary. Nineteen percent have high school and associate degrees. Bachelor degrees are held by 48 percent; MBAs were earned by 15 percent; and another 13 percent obtained such advanced degrees as JD, MD, and other master’s and doctorates.  When asked about the disciplines in which they were functionally trained,  “general management” and “sales” topped the list with 24 and 18 percent, respectively. Several other skill areas also had respectable percentage listings: operations, 9 percent; marketing and engineering, 8 percent each; finance, 7 percent; and accounting, 6 percent.

When describing their time in the CEO role, we found some interesting statistics.  Most (71 percent) had held the title for more than 10 years, 17 percent for five to 10 years, and 13 percent for five years or less.

The overwhelming majority of the respondents (89 percent) lead “private” enterprises, with 69 percent of those businesses having fewer than 100 employees, and 23 percent staffing between 100 and 1,000 people.

What industries do these North Texas CEOs lead? Listed in order, the top seven and their percentages are: construction, 15; manufacturing, 11; financial services, 10; professional services, 9; wholesale trade, 7; retail trade, 6; real estate, 5; and energy, health care, and travel and transportation each posting a 4 percent return.

How financially successful are the firms? Revenues between $1 billion-$5 billion were listed by 3 percent, with 51 percent earning less than $10 million. The second-highest category (29 percent) of respondents fell into the $10 million-$50 million range, and 17 percent declared earnings between $50 million and  $1 billion.



CEOs remain bullish on the local economy, but they’re not as sanguine about the national and international picture.


In last year’s survey, our CEOs indicated their top three business challenges were domestic competition, availability of qualified labor, and the need to stay on top of changing customer needs and expectations. This year, the constant drone of negative financial results took its toll. A whopping 33 percent indicate the current economic climate is their No. 1 concern. But when the fear of inflation and the reality of a devalued dollar are added, the tally rose to 47 percent. We believe that while the DFW area has been relatively stable in the current economic flux, the pressure of competing in a nation that is reeling has taken a toll on these chieftains.

However, when asked to provide their economic outlook for the DFW region over the next 12 months, 53 percent continue to believe the “can-do” strength of the DFW business community will produce economic improvement in 2009, while another 36 percent believe the regional economy will stay the same. Despite this level of optimism about the economic outlook of the DFW region, these results represent a drop from the staggering 70 percent of respondents to the 2007 survey that believed the DFW regional economy would improve over the next 12 months.

The projection outside the region is a different story. Respondents to this year’s survey expect continued doom and gloom for the national and global economies. While the responses are closely clustered, 30 percent of the leaders anticipate that U.S. economic activity will stay the same, 34 percent see an improvement, and 35 percent expect further decline. By contrast, approximately 42 percent of last year’s survey respondents expected the U.S. economy to improve.  Globally, the statistics are even more disheartening. A sizable 39 percent expect to see a further decline in the world economy, 31 percent believe it will be stable, and only 25 percent predict improvement. In contrast, 46 percent of last year’s respondents expected the world economy to improve.

Our results also show substantial declines in respondent’s expectations of their organization’s performance over the next 12 months compared to last year. While 65 percent believe their company’s revenues will increase (compared to 80 percent in 2007), 31 percent predict they will either decline or stay the same (19 percent in 2007). Costs are expected to increase (80 percent compared to 75 in 2007), while 55 percent predict profits to increase over the next 12 months (down six percentage points from 2007).  On the flipside, 25 percent of CEOs expect to post declines in profits over the coming year compared to only 15 percent last year. 

The optimistic anticipations of last year’s respondents predicted increased capital expenditures, higher staffing levels, and even hefty rises in employment pay. However, for 2009 the vision has grown bleaker. While productivity is expected to increase over the next 12 months, these increases are expected to be significantly smaller than last year’s. Of the respondents to this year’s survey, 40 percent expect to see increases in productivity in their organizations of 5% or more. These results are in stark contrast to last year, when 96 percent of the respondent’s expected similar increases in productivity.

A smaller rise in revenue growth automatically produces smaller capital expenditures. In last year’s survey, 65 percent of the leaders foresaw both capital expenditure and staffing level increases. This year the estimate is more conservative. Only 46 percent predict growth for capital expenditures, and 49 percent expect increases in staffing. Most respondents expect to keep their training budgets flat (47 percent), while 38 percent expect at least modest increases. Interestingly, expectations for pay increases closely mirrored those of last year, with the majority (51 percent) predicting increases in pay in their organizations to be less than 5 percent. However, the percentage of respondents who expected pay increases over the next 12 months to amount to 5 percent or greater dropped from 31 percent last year to 20 percent this year.





CEO perceptions of the DFW work force have improved since last year, with 36 percent of respondents saying its quality is “high.”


Over the past few years the DFW community has grown faster than most other metropolitan areas. With this gain we have outpaced cities like New York, Chicago, and Los Angeles in terms of job growth. Ask recent college graduates who settle here what the attraction is, and they will tell you it’s a great place to get an entry-level job and advance in one’s career. They will then describe a variety of quality-of-life factors that keep them here. The fact is, in 2008 both Forbes and Time listed Dallas as one of the Top 10 best cities for recent college graduates. Both publications highlighted job availability, low-cost apartment rentals, and a large young-adult population as the factors that made the DFW area attractive.

In the SMU Cox CEO Sentiment Survey, we asked respondents to rate a number of factors related to the DFW area including the quality of the work force. In last year’s survey, 62 percent of respondents rated the area’s work force as “adequate,” while 27 percent thought that it was of “high” quality. This year’s survey suggests that perception of the area’s work force has improved, with 36 percent rating the quality of the DFW work force as high; just 7 percent see it as low, and 57 percent see it as adequate. This coincides with recent job statistics showing that more than half the new jobs in America were created in Texas, and DFW is one of three major Texas cities with the hottest job markets in the nation.

When asked about the contributing factors that make up our positive quality of life, the low cost of living was again tabbed by 60 percent of the leaders. As the college-graduate poll cited earlier indicated, low rental costs not only bring qualified young people to our community, but the affordable residential market also pulls executives and their families from as far away as New York and California.

This year’s survey saw a reversal over last year in the two additional quality-of-life areas. The well-developed transportation infrastructure, and ease of travel, replaced weather and climate in the second position of factors contributing to our quality of life. Oil prices have severely impacted some of our local air carriers. Still, Dallas-Ft. Worth International Airport is the third-busiest airport in the nation, and Love Field along with Alliance corporate in Fort Worth make it easy for our executives to move freely around the world. Many corporate moves to Dallas have occurred because companies wanted to be more centrally located.  These companies have also cited DFW Airport as a major reason for relocating into our area.

Still, Dallas-Fort Worth has a variety of things that CEOs would like to see changed in order to further improve the business climate. When asked to rank the top government actions needed, 30 percent of the leaders again agreed that state and local governments needed to provide more financial incentives through methods like tax abatements.  Improving public school education was in second place, at 28 percent.  While some of the DFW school systems have superb programs with national merit scholars, a mid-year article in The Dallas Morning News announced that the troubled Dallas ISD graduation rate was a low 69 percent. However, a variety of DFW suburbs scored very high: Highland Park, at 98 percent; Coppell, 97; Allen, 96; Grapevine-Colleyville, 94; Plano, 92; and Lewisville, 91. Rounding out the top three government actions needed, business leaders responding to our survey cited controlling energy costs as another high-priority area for local governments (selected by 14 percent of respondents). These results parallel those of last year’s survey, suggesting that business leaders perceive little progress is being made in these three areas.




Perhaps reflecting the tempestuous times, CEOs say that sound decision-making is the key skill required to achieve success.


In addition to gauging DFW area leaders’ outlook for the coming 12 months, the SMU Cox CEO Sentiment Survey also seeks to determine the key ingredients of successful leadership. We asked CEOs to identify the top three skills to which they attribute their successful achievements. In 2007 strong ethical behavior topped the list at 73 percent, with sound decision-making in second place at 68 percent. This year their focus was on the tools that allowed them to maneuver through these tempestuous times. Sound decision-making topped the list at 63 percent, while a strong ethical constitution moved to second place (57 percent), and the critical necessity for strategic thinking rounded out the list (50 percent).

Recognizing that our world is facing economic challenges, and that 2009 may prove to be extremely difficult for our leaders, we asked respondents to list their top business challenges. As we expected, the current economic climate was at the top of the list (33 percent). In second place was that critical need for a qualified and available labor supply (11 percent). Rounding out the list were domestic competition (8 percent), changing customer needs or expectations (8 percent), and inflation (7 percent).  By contrast, last year’s respondents rated domestic competition as the top business challenge (selected by 22 percent of respondents).  We then directed the question to the challenges they personally face as CEOs. Consistent with last year’s results, DFW area business leaders cited sustaining competitive advantage as their top challenge as CEO (68 percent). Attracting and retaining good employees (51 percent) and developing leaders (38 percent) rounded out the top three challenges.

We were also curious to find out who business leaders turn to in dealing with these challenges. When asked to identify those individuals they consider to be their top confidants, their spouse took the first position (74 percent), followed by a friend (53 percent), and the chief financial officer (34 percent). These results are identical to those of last year’s survey. We then asked them to identify the person most influential in helping them achieve their success. Again, the spouse was placed first (26 percent), parents  were second (25 percent), and a professional mentor came in third (18 percent).

Are DFW business leaders satisfied with their jobs? In responding to this question, 85 percent confirmed that they were either very satisfied (62), or somewhat satisfied (24), with their position. This was down just four percentage points from 2007. We also asked CEOs how secure they felt about their jobs. We were expecting that the recent economic turmoil had resulted in a decrease in perceived job security compared to last year. In 2007, nearly 80 percent of CEOs felt either very or somewhat secure in their jobs. Contrary to our expectations, only a slightly smaller percentage of CEOs (78 percent) declared himself or herself very or somewhat secure in their jobs.

While seeing one’s name and title at the top of an organization implies success, we asked our leaders how they personally measure their success. Seventy-three percent said they only feel successful if their company has also achieved success. Another 60 percent interpret their success by the impact they have on the lives of their employees and customers. Finally, relating back to spouse, parents, and friends, 44 percent said they measure success by the amount of time they can spend with their loved ones. These are the same three measures that last year’s respondents cited as the top three ways they measure their success.



The Bottom Line

Last year we sought to put our finger on the pulse of the DFW area business community by launching the SMU Cox CEO Sentiment Survey.  Our inaugural survey revealed the optimism and can-do attitude of DFW business leaders, identified the factors that make our area a magnet for employees and businesses, and caught a glimpse of the leadership challenges CEOs face.  This year’s results show that the economic slowdown has slightly dampened our area’s business leaders’ optimism.  However, CEOs still remain fairly optimistic about our area’s future relative to that of the U.S. and the world. In fact, considering all that has happened in our economy, it is amazing that over half our respondents still expect the DFW area’s economy to improve over the next 12 months.  We look forward to next year’s survey to see how resilient these leaders are to the uncertainties and inevitable setbacks that are expected over the coming year. NOTE: If you are reading the results of this survey and were not one of the participants, we invite you to be a part of next year’s survey audience. E-mail your name, title, and both physical and e-mail address to [email protected], and we will add you to the list to receive the 2009 Cox Leadership Survey. We promise that your information will be used for no other purpose.