Knowyour The Pulse of Business In the North Bay
Biz
By Liz Thach and William Silver lthough the Great Recession has left the North Bay economy battered, it hasn’t knocked it out. Business still happens, and even if profits are down, the actions being taken today are setting the stage for future prosperity. Students from Sonoma State University’s School of Business and Economics met with North Bay business leaders to ask questions regarding the North Bay’s business climate; this article highlights the major findings from that large research project.
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Major challenges today When asked, “What’s the largest challenge facing your organization today?” the highest-rated theme among for-profit companies was the economy (32 percent); whereas nonprofit and government firms focused on funding (44 percent). These are likely opposite sides of the same problem. The second and third most important issues from for-profits included increasing competition (17 percent) and employees (16 percent). As one respondent stated, “We have many competitors who offer a lot of the same products. It’s a dog-eat-dog world.” In terms of employees, “It’s difficult to employ a good, dedicated professional staff,” responded one leader, while another stated, “The cost of labor, insurance and workers’ comp is growing faster than sales.” Nonprofit and government agencies added lack of societal support and interest (12 percent) and budget cuts (9 percent) as major challenges. “Getting people to donate,” is very difficult at this time, according to one leader; whereas another said, “With all the budget cuts, it’s a struggle to keep the program alive.” Major challenges in the next five years “What do you believe will be the largest challenge in the next five years?” was the next question for-profit leaders, whose answers led with expansion (12 percent). And though challenges to expansion were identified, the fact that there’s a strong desire to expand is a clear and positive trend. Other themes included adaptation (12 percent) and competition (12 percent). Adaptation included not only embracing new technologies but fostering an innovative corporate climate. Nonprofit and government agencies predicted that funding (35 percent) challenges would continue, as would budget cuts (11 percent). This is a common concern, because agencies depending on tax revenues and donations often have a longer recovery time than for-profit firms. Nine percent identify expansion as an issue—and, though a challenge, it’s also a forward move. Opportunities for the future Leaders were also asked, “What do you believe is the biggest opportunity for your organization?” The for-profits led with growth (43 percent) via expansion, diversification, increased market share and other methods. The second-highest theme was using technology (13 percent) as an opportunity to try new options and increasing marketing and promotions (11 percent). Leaders from nonprofit and government agencies were much more diversified in their responses, and actually identified 12 different themes, ranging from providing more education and awareness to focusing on efficiencies. They identified growth as the largest opportunity (23 percent), followed closely by doing more community outreach (17 percent) and recruiting more volunteers (13 percent). Making the North Bay thrive North Bay leaders were also asked to forecast the number of jobs their organizations will create in the next five years. For-profits projected an 154 NorthBaybiz
average 42 new employees per organization and nonprofit and government agencies projected an average of 24. Taken together, the organizations project hiring 8,688 new employees. Probably one of the most important questions posed was, “What can you do to make the vision of a thriving North Bay economy a reality?” Responses were inspiring in that for-profits identified community support at 25 percent, followed by local focus (14 percent) as the two most critical actions. Other important ideas, provided by nonprofit leaders, included an equal emphasis on providing exceptional customer service (11 percent) and expanding their businesses (11 percent). This was followed by a recommendation to continue providing quality products and services (9 percent) and to create more jobs (8 percent). Everyone agreed that promoting more community involvement (19 percent) is the most important action to help create a thriving North Bay community. Other ideas included a continued focus on the mission of their organization (16 percent), providing more community education (11 percent) and promoting more teamwork between nonprofits (8 percent). Job creation (6 percent) was also mentioned, as well as 11 other agency-specific themes. Reaching Goals So what can be done to move from our current economic malaise to this rosier future? We have three recommendations. First, continue investing in your business so you’ll be ready for the healthier climate. Focus on sales and marketing, new paths to growth, employee development and customer service. When budgeting, don’t spread scarce resources thinly by asking how much should be given to each activity. Instead, ask what should be funded fully and what you can cut out. Second, innovate to make your competition irrelevant and to find new ways to engage your customers and stakeholders. Consider the factors on which you compete, then decide which to eliminate, reduce, raise above industry standards or create anew. Third, develop a talent management plan. Attracting and retaining the best talent is still an issue and is projected to get worse. Research shows that pay and benefits may attract people, but the leadership of their boss is the top factor in retaining and engaging them. Too often, we hear there’s a talent shortage in the North Bay—that we don’t have enough professionals willing to make their career here. This isn’t a demographic issue. It’s a leadership challenge. Our research found at least 263 leaders in the North Bay taking this challenge head on. ■
The authors would like to thank and recognize the SSU business students who conducted the interviews, as well as SSU research assistant Stephanie Wilkinson for her assistance in analyzing the data. To view the report in its entirety, visit www.northbaybiz.com. Dr. Liz Thach is a professor of management and wine business at Sonoma State University. You can contact her at Liz.Thach@sonoma.edu or (707) 664-4212. Dr. William Silver is dean of SSU’s school of business and economics. You can contact him at William.Silver@sonoma.edu or (707) 6642220.
North Bay Business Resource Guide 2011