People No. 1 challenge for companies

by 16 Oct 2007

PEOPLE ARE now the number one concern for private companies, ranking before growth and profitability, according to recent research.

Despite a belief by private companies that the Australian market is teetering on the crest of the boom and that interest rates are on the way up before the end of the year, business confidence is high – the only blip on the horizon is the shortage of qualified people.

“While we’re at near full-employment, the war for talent will be ongoing and unrelenting for private companies,”said Don Abell, a partner in the middle market advisory practice for KPMG, which conducted the research.

More than 45 per cent of companies surveyed noted that the strength and ability of their management team were key to the success of their business to date. In addition, 36 per cent of companies noted that the talent and commitment from their employees were key to the success of their business.

The survey of 469 CEOs and MDs also found that having the right people is a strong competitive edge, with 29 per cent of respondents indicating quality of customer service is key to their competitive advantage and 26 per cent nominating the skills of their management team.

More than 47 per cent of companies surveyed viewed attracting suitably-qualified employees as their major challenge and 19 per cent found retaining staff a major challenge. Also topping the list of challenges was achieving sustainable growth and maintaining profitability against increasing local competition.

Private companies are not taking the skills shortage lying down, according to Abell, and many have shifted their focus to compete in the war for talent.

“Employers have become more sophisticated in the past three years in the way they engage with employees and are making substantial changes to reward, recognise and therefore keep their employees,” he said.

“A large number of businesses surveyed have introduced rewards and annual salary reviews for exceptional performance and over a third of businesses are paying their employees an annual bonus.”

As well as financial incentives, employers are becoming more flexible with nearly half of businesses allowing employees to work from home where appropriate or permitting greater flexibility in the hours that employees work.

In addition, Abell said nearly half of employers have become more inclusive by regularly keeping employees informed of the company’s progress, while nearly two-thirds have started advertising vacancies internally before going to the market.

Companies consider people to be on par with competitive pricing as the most important factor in achieving revenue growth (each 30 per cent), according to the survey, closely followed by the introduction of new products and services.

And while 47 per cent of companies surveyed see the expansion of emerging markets as a major opportunity, and “entering new geographic markets” as the second most important factor for achieving revenue growth in the next three years, around 30 per cent of companies saw themselves as able to compete in the Asia-Pacific region.

“Considering that sustainable growth is seen as the second biggest challenge to private companies and they believe the Australian economy has reached its peak, it is very surprising that 43 per cent of companies said they ‘didn’t know’ if they were competitive with their Asia-Pacific competitors,”said Abell.


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