According to the ADP 2015 Midsized Business Owners Study, there are key differences between the concerns of midsized businesses this year, compared to last year. Employee engagement, talent retention and regulatory compliance "emerged" as key trends in this year's study results, whereas in the 2014 Midsized Business Owners Study, the key trends were health care benefits costs and the Affordable Care Act.
The Association for Corporate Growth (ACG) indicates that organizations with 50-999 employees are responsible for 26.5 percent of U.S. jobs, or 48 million in total, and USNews and World Report reports that 78 percent of midsized organizations have "actively planned for expansion" over the past 12 months, indicating that medium-sized organizations are an increasingly crucial part of the U.S. economy.
Here is a brief overview of this year's study, the results on engagement, retention and compliance, and how midsized business owners can prepare for the future.
1. Employee Engagement
At organizations of all sizes, employee engagement has become a topic of focus to aid recruitment and retention during economic recovery. Engagement can be the cornerstone of a talent strategy, but it can also be a crucial tool to increase productivity and innovation.
In the study, 76 percent of midsized business owners have expressed concern about being able to achieve employee engagement, and 43 percent believe that "driving employee engagement" should be a primary goal of human capital management (HCM). The trend is significant, with 40 percent of respondents indicating they are "extremely" or "very" concerned about engagement.
The adoption of smart data initiatives can be a powerful tool for driving engagement. Establishing benchmarks and analytics tools to measure key engagement factors, including "retention rates, turnover and total compensation," can allow midsized business owners to develop competitive engagement strategies.
2. Talent Retention
For business owners having difficulty attracting the right employees in a competitive talent market, retention is a critical focus. By developing competitive strategies to recruit, develop and engage the right workers, midsized business owners could drastically reduce recruitment costs.
Currently, less than 20 percent of midsized business owners feel confident in their tool kits for retention. Additionally, 18 percent believe they have the tools necessary for workforce management, 16 percent believe they have the necessary tools for retention and workforce growth and 15 percent are "completely confident" in their recruitment tools.
Using analytics to take a deep dive into talent management can inform midsized human resources. Cross-referencing retention, turnover and compensation should provide insight into how an organization stacks up against regional and industry averages — as well as provide insight into individual teams and departments. By identifying the greatest turnover risks, midsized business owners can adjust total compensation or offer flexible work arrangements to retain talent.
Changes in regulatory requirements have necessitated an increased amount of resources required to support compliance with the Health Insurance Portability and Accountability Act (HIPAA) and Affordable Care Act (ACA). At midsized organizations, compliance and risk mitigation can have a significant impact on profitability potential.
The study indicates that 41 percent of owners report that regulations are their top concern, and 36 percent faced "unintended compliance penalties" in 2015. Although 79 percent feel that they are compliant with workforce regulations, compliance remains a key area of concern. This issue has diminished slightly in importance over the past year, with 51 percent of owners describing themselves as "extremely or very concerned" in 2014.
Midsized organizations should consider hiring subject matter experts, such as accountants, brokers or advisers, to stay informed of emerging regulatory requirements. Professional and peer groups can provide additional support for a variety of compliance requirements, including regional and industry-specific regulatory guidelines. In addition, working to reduce departmental silos with technology designed for transparency and data accuracy can support risk management efforts.
As midsized business owners enter 2016, the concerns of midsized businesses have shifted from managing the costs of employee health care benefits to keeping employees engaged and retained, with a continued focus on compliance. In an increasingly competitive job market, midsized owners and HR professionals should employ big data analysis and innovative strategies to increase talent satisfaction, prevent defection and remain ahead of regulatory requirements.
Over the next three months, ADP will take a deep dive into employee engagement, talent retention and compliance. Stay tuned for more insights on issues affecting midsized business owners and HR professionals.