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An Eventful Year for Businesses, and Another One to Come

Insights from the ADP Research Institute® annual study of midsized business owners

A lot can change in a year. This has been particularly true of the past 12 months, in which we’ve seen several upheavals and major shifts in business, government and public life.

In 2017, much uncertainty remains. A new ADP Research Institute study,”Midsized Businesses Poised to Lose Balance in Time of Uncertainty,”surveyed 756 midsized business owners, C-suite executives and senior level executives about their experience and plans looking forward. The annual report points to the fact that U.S. businesses staffing between 50-999 workers are still taking a wait-and-see approach to business practices that could, over time, lead to weaknesses in strong or strengthening companies.

Why focus on the middle market? Because midsized businesses play a key role in the economy in terms of job volume and revenue. The Center for Middle Market Research asserts that “if the U.S. middle market were a country, its GDP (gross domestic product) would rank it as the fifth largest economy in the world, just behind Japan but ahead of Germany.”

These unsung heroes of the labor force have their thumbs on the pulse of our country’s economy.

Amid a shrinking talent pool, evolving government regulations, changing technologies and major shifts in policy and politics, the study found that midsized businesses…

…Are Facing More Compliance Issues Amid Changing Regulations

There has been a significant increase of unintended compliance penalties this year. The number of larger midsized companies that cited compliance penalties grew to 51 percent in 2016, up from 40 percent in 2015.

Coinciding with this is a continued decrease in the confidence business owners express in compliance with government regulations. Strong confidence in complying with payroll tax laws has decreased 12 points over the last five years to a low of 44 percent. At the same time, strong confidence in compliance with other government workforce regulations has dropped 11 points to a low of only 38 percent. The current outlook does not suggest a reversal of this trend as government regulations continue to be in flux.

…Have Temporarily Abandoned Employee Engagement

Despite recent economic uncertainty, concern with employee engagement has dropped from 41 percent to 34 percent, an interesting finding considering the battle for top talent remains high. The unemployment rate is at an all-time low, and the annual turnover rate is continuing to increase. It’s interesting to note the ADP® Workforce Vitality Report indicates that almost half of employees are leaving their current positions within two years.

The current research indicates that many midsized organizations don’t have a formal process to measure employee engagement and further, about half of respondents acknowledge the need for leadership and professional development training to keep and grow talent.

This is a signal that companies are losing sight of the bigger picture in a business landscape mired by uncertainty. However, employers should not let their guard down. Assuming employees are easily replaceable is a grave mistake in today’s talent market.

…Are Still Unsure About the Fate of Health Care Reform

Not surprisingly, health care reform remains a top concern for midsized business owners. As a debated issue on the campaign trail, and now on the floor of Congress, health care reform has businesses worried. In comparing the pre- vs. post-election outlook on health care reform, the ADP Research Institute study found that there has been a 13 percent shift among organizations from expecting to “move forward with business as usual” to “not sure” how they will proceed. The current discussions around health care reform show that it’s a high-cost and high-impact variable for employers

So, what’s next, and how should companies attempt to put some guideposts around these variables?

First, it’s important to keep a steady footing while also keeping your knees bent. As regulations continue to change, your business should be able to jump and adjust in any direction. This means developing strategies so that you can stay compliant today, while keeping an eye on the future.

Second, don’t abandon your greatest asset. Yes, uncertainty is an unwanted distraction, but it should not distract from continuing to encourage employee engagement. Now more than ever, companies should be thinking of ways they can codify an engagement measurement system that can provide insight into the best ways to keep talent engaged. In the ongoing war for talent in an age of uncertainty, protecting your people is one of your greatest responsibilities.

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