CEO Survey 2014

According to the latest SMU Cox poll, DFW business leaders are anticipating continued improvement in the local and U.S. economies.

The results are in and, for the third year in a row, Dallas-Fort Worth business leaders expect continued improvement for the North Texas and United States economies. They also are extremely optimistic about the outlook for their own businesses. However, they are a bit gloomier about the outlook for the world economy and see a number of challenges in the year ahead. These are the findings of the 2014 SMU Cox CEO Sentiment Survey, now in its eighth year. Through the ups of the pre-recession boom and the downs of the economic crisis, the survey has served as a window into the mindset of our area’s leaders.

THE WORLD GETS MURKIER

It’s sometimes difficult to appreciate how difficult it is to steer a business through the turbulent waters of a changing business environment. On the one hand, the economy in Texas continues to outpace that of the rest of the country, which also seems to be gaining steam. Companies continue to relocate to our state, bringing with them thousands of new jobs. At the same time, the boom in oil and gas production is creating countless more jobs, and there is even talk of the United States becoming an oil exporter in the near future. To top it off, the U.S. unemployment rate has dropped below 6 percent for the first time since 2008.

Against that backdrop of positive developments, geopolitical conflict in the Ukraine and the Middle East, as well as fear of an Ebola epidemic, dominate the news. In addition, the European Union seems poised for another recession, and the once-roaring economies of countries like China and Brazil seem to be cooling. Unfortunately, our political class seems incapable of coming together to solve the big challenges of our day. This year’s survey results seem to mirror this complexity, and how our leaders plan to steer their organizations through these potential minefields.

TOP BUSINESS CHALLENGES

Business Challenge % Selecting
Changing Customer Needs/Expectations 18.8
Regulation/Legal Issues 18.4
Labor Availability 16.0
Domestic Competition 11.1
Current Economic Climate 10.1
Employee Attrition/Turnover 3.8
Geopolitical Instability 3.5
Value of US Dollar 2.1
Foreign Competition 1.7
Inflation 1.0
THE ECONOMIC OUTLOOK BRIGHTENS

Given this business context, it’s no surprise that respondents felt much more positive about the economic outlook closest to home compared to the world at large. When asked how they thought the world economy would perform, only 17.7 percent thought that it would improve and 38.7 percent thought it would decline. This is in contrast with the U.S. economy, where 45.7 percent expect an increase and only 14 percent anticipate a decline. 

Expectations for the DFW economy are at the most optimistic level since we began this survey, with 78 percent anticipating improvement and only 1 percent thinking the local economy will decline.

LAST YEAR WAS GOOD, BUT THIS YEAR WILL BE GREAT

The year 2013 was a good one for businesses in North Texas, with 78 percent of CEOs reporting that they either met or exceeded their revenue expectations. An almost similar percentage (75 percent) either met or exceeded their growth goals for the year. After trying to hold the line on costs, the bottom-line profit goals were met or exceeded by 76 percent of respondents. Amazingly, more than 14 percent of respondents reported exceeding their profit goals by more than 10 percent.

Looking ahead to the coming year, our CEO respondents were even more optimistic about their prospects going forward. An incredible 82 percent of them expect their revenues to increase, with 31 percent expecting those increases to surpass 10 percent. The plurality (41 percent) expect to hold costs to the same level as last year, but a little more than a third (36 percent) think their costs will increase during the next 12 months. On net, however, the bottom line is looking very much in the black, with 73 percent of respondents anticipating profits to increase.

CEOs also expect to keep investing in their businesses to take advantage of future opportunities. Capital budgets are expected to increase for 44 percent of our respondents and remain flat for 42.8 percent of them. CEOs’ plans for their training budgets are to maintain or increase budgets in the year ahead (91.8 percent). Staffing levels are also expected to hold steady or increase, according to 91.2 percent of respondents. With all the talk of flat wages in the United States, a majority of CEOs (79.5 percent) expect wages to increase in their organizations. But continuing a trend from previous years’ surveys, respondents (68.3 percent) anticipate that productivity in their organizations will continue to increase in the coming year.

CHALLENGES AND OPPORTUNITIES IN THE YEAR AHEAD

Given the headwinds facing the rest of the world, it is not surprising that our respondents see opportunities for growth in the year ahead to be closer to home, including DFW (34.3 percent) and other regions of the U.S. (23.4 percent). Their challenges in capturing this growth include the changing needs and expectations of customers (18.8 percent), an uncertain regulatory environment (18.4 percent), labor availability (16 percent), domestic competition (11.1 percent) and the current economic climate (10.1 percent).

Personally, CEOs are concerned about sustaining their organizations’ competitive advantage (56 percent), attracting and retaining top talent (37.1 percent), and developing leaders (27 percent).

WHAT IS WORKING AND NOT WORKING IN DFW?

Fortunately, our region is well-positioned to address some of these challenges. For example, our respondents rate the labor force in DFW to be adequate (49.5 percent) or of sufficient high quality (43.4 percent) to meet their needs. They also rate the quality of leadership bench strength within their own organizations as either good (54 percent) or excellent (28.1 percent). A low cost of living continues to be the top competitive advantage of our region (64.3 percent), followed by the quality of our transportation infrastructure, which includes Dallas-Fort Worth International Airport (12.7 percent).

To help improve the local business climate, the top actions by government as recommended by respondents were improving public education (38.9 percent) and increasing financial incentives for businesses (34.3 percent).

WHO RESPONDED

This year brought an increase in the number of respondents, with 307 surveys submitted. The vast majority (83 percent) led private organizations; 11.3 percent were heads of public companies with the balance (4.5 percent) heading up nonprofits. The top industries represented were: financial services (13 percent); professional services (11 percent); and construction and manufacturing (both 10 percent). In terms of size, 67 percent of respondents led organizations with fewer than 100 employees, 20 percent between 100 and 999 employees, and 10 percent between 1,000 and 10,000 employees. 

Organizational revenues for 48 percent of the respondents are less than $10 million. Another 27 percent had revenues of $10 to $50 million, and 10 percent were with organizations that had $100 to $500 million in revenue. A large 85 percent have been in DFW for more than 10 years, with another 12 percent for 5 to 10 years. A larger 86 percent of the companies started in DFW, while 14 percent relocated here. Most, 98 percent, have no plans to relocate out of DFW, while 2 percent are considering that move. Most of the respondents were male (89 percent), Caucasian (94 percent), between 50 and 69 years of age (70.3 percent), and have been in their current roles for more than 10 years (59.5 percent).

CONCLUSIONS

We are fortunate to live in a metropolitan area with a vast and increasingly diversified economy. The results of this year’s survey mirror that reality, and the results are evident in the performance of our local businesses. 

To the extent that world events such as a deep downturn in Europe or an acceleration of the Ebola epidemic do not overtake us, we can look forward to another great year. Capitalizing on great opportunities while keeping an eye on threats over the horizon is the hallmark of great leadership. We will see if our respondents are up to the challenge.   

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