Though it might seem counter-intuitive, business confidence in Australia is indeed at all-time high levels. You can see from the graphic below since 2012 business confidence has tended to move in a reasonably tight band.
Business Confidence Levels
Unsurprisingly, it fell off a cliff last year.
What perhaps is somewhat surprising is the extent to which it bounced back once it seemed Australia generally had the COVID situation under control. And while there's a strong argument to be made that business confidence will perhaps be somewhat more volatile for as long as we endure COVID related restrictions and lockdowns, it seems we may be learning to pretty much live with that uncertainty.
That said, in some quarters there seems to be a trend toward a degree of over-confidence, perhaps driven by a sense of relief that things didn't get quite as bad during 2020 as we all may have thought. Or maybe there's something else driving the over-optimism.
Whatever the driver or drivers may be, we have some questions for business owners and leaders who share this high level of confidence:
What are you consciously doing to ensure you make the most of that confidence?
What are you consciously doing to ensure that the growth you have achieved this year (and presumably are maintaining for now) is sustainable?
What steps are you taking to protect your business against the very real possibility of the return of difficult trading conditions?
Last, are you verging on being over-confident with no real plan to ensure growth is indeed sustainable over time?
These questions come not from a position of pessimism - at GrowthCatalyst we're among the most optimistic people we know! Rather they spring to mind in light of other factors that point to some real challenges for businesses in the pursuit of sustainable growth.
What are the challenges, and what can business owners and leaders do about them?
Let's start with consumer confidence.
As the chart below indicates, it has moved in a similar fashion to business confidence - within a range over time. However it's also evident that confidence among consumers has always been just a little more volatile than confidence among businesses.
Consumer Confidence Levels
Why the extra volatility? Because individuals tend to look more closely at what's right in front of them - job security, reliability of cash flow, level of personal debt and so on.
Business on the other hand generally (though not always) tends to take a longer term view of things. Decision-making is necessarily focused at least as much on future conditions as it is on what current conditions prevail. To be sure, some businesses are better at this than others.
Fundamentally, the level of consumer confidence evident at any particular time is an indicator of the willingness of consumers generally to enter the market for products and services. Put another way and as we all know intuitively, consumers are fickle and can't be relied on to consistently buy our products or services.
What we also know from the world of behavioural economics is that the myth of the “rational” consumer is exactly that...a myth.
We’d all like to think that our customers buy from us because they’ve done all the research and determined that what we sell is the best of all their options. Research and experimentation by many experts in the field prove this isn't the case at all. Indeed, Harvard professor Gerald Zaltman, in his recent book "How Customers Think: Essential Insights into the Mind of the Market" suggests up to 98% of purchasing decisions are unconscious and driven by emotion.
So put those two factors together - volatility of consumer confidence and apparent irrationality of purchasing behaviour. Logic will tell you there's a challenge in a) attracting and engaging new customers and b) holding on to the ones you have, if all you're relying on is an assumption that whatever it is you sell is best of breed.
To fully engage your customers and prospective customers, the challenge is to win their hearts and minds in a way that connects them to the business on an emotional level.
Again from copious research, we know much about the behaviour of 21st century consumers that strongly suggests businesses that are clear on, and demonstrate a commitment to, a "non-financial" business purpose are the winners on that front. For example, the Cone/Porter Novelli Purpose Study tells us:
79% of consumers are more loyal to purpose-driven businesses;
78% become advocates of those businesses;
77% have stronger emotional bonds with purpose-driven businesses; and
73% will defend a purpose-driven brand if spoken badly about.
We go back to the questions we posed above - what are you consciously doing to create sustainable growth through real customer engagement?
Do you know, for example, why your current customers chose to do business with you? And choose to remain your customers? How confident are you they'll support you when confidence wanes in future (which it undoubtedly will)? How does this information feed into the profile of your ideal customer?
Most importantly, are you and everyone else in your business driven by a clear purpose that creates real customer centricity?
There's plenty of other questions to consider, but you probably get the point.
Engaging and retaining customers is one challenge. Doing the same with employees presents a whole different set of issues.
To get you in the zone, here's some interesting data the Australian Bureau of Statistics in June this year:
23% of businesses expect to increase staff numbers over the three months to September (and probably beyond); and,
27% of businesses report having difficulty finding suitable staff to fill jobs.
Looking into those figures, it's great that the current level of business confidence is flowing into hiring intentions in almost a quarter of Australian businesses. It's really good news for job seekers. It's easy to imagine though, that there's some crossover in the two groups above so there's a strong likelihood there's going to be some pretty intense competition for talent.
And let's not forget that unemployment currently hovers at around 5%, so it's not like there's a surplus of supply over demand at this point.
And there's something else going on....
The Gartner Global Talent Monitor (April 2021) has found that 24% of Australian employees are actively seeking alternative employment. On one hand, that's good news for businesses looking for additional employees - at least there's a quarter of the workforce looking for new roles. On the other hand, some of that 24% are likely to be employees they already have.
And one more thing....
Just 9% of Australian workers are considered "engaged".
We've just thrown a lot of numbers around so let's be clear: if your business is among those looking to increase your employee numbers, you may well have some gaps to fill before you do so and some of your employees will be among those looking to move on. Almost certainly, you're going to have a whole bunch of people working for you who are among the 91% who aren't "engaged".
In short, attracting, engaging and retaining employees is as hard (if not harder) than it's ever been.
So what to do?
We know that these days, employees demand work/life balance and flexibility. According to Gartner it's top of job seekers' expectations. Remuneration has gone from position 6 to position 10 in order of importance.
We'd be surprised if too many businesses now don't offer some degree of flexibility, so let's assume that's largely a given. And since remuneration has slipped down the rankings in terms of attracting potential employees to a business, let's put that to one side (assuming, of course, remuneration offered is market competitive).
So there's something more at play here.
What we know from research and working with clients is that increasingly important for engagement of employees and prospective employees is clarity of your business purpose.
Here's some proof:
employees who see themselves in meaningful (i.e. purpose-driven) work are 1.4 times more engaged than others (McLeod & Moore); and,
50% of employees would sacrifice up to 29% of salary to work in a job they enjoy (i.e. a purpose-driven job).
There's plenty of other statistics we could throw into the mix but again, we think you get the point.
The message seem clear: if you're hoping to recruit to either fill gaps or increase your employee numbers especially in a talent market that's extremely competitive, you're going to have to be clear about your business purpose - the non-financial reason your business exists. Because make no mistake....employees today want to know your business demonstrates a commitment to something other than simply making money.
Oh...and that's just as important if you think your current employees might be among the 91% who seemingly aren't engaged. And really, can you afford to assume anything other than that?
So what's the end game here?
More and more businesses are interested in creating a platform to support growth that's sustainable - reasonably consistent, repeatable and predictable in a range of market and economic conditions. Events during and since 2020 have accelerated this trend, and if you're not already thinking this way, you're going to be very late to the party.
At the core of sustainable growth is:
a steady stream of the right customers buying the right products and services at the right price (with a high proportion of those customers becoming "rusted on" advocates for your business); and,
highly engaged employees delivering discretionary effort and a brilliant customer experience.
Of course you also need a great product and excellent processes and systems supporting the customer experience. But unless you have highly engaged employees servicing engaged (not just satisfied) customers, it's highly likely your business growth won't be as sustainable as you'd like.
How confident are you that your business is well placed for growth that's sustainable into the future?
How well do you really know your customers?
Are your employees among the 91% who aren't "engaged"?
GrowthCatalyst can help address these and other issues.
We invite you to contact us to arrange a conversation, face-to-face or virtual.
Alternatively, you can book a time for an initial discussion here.
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