What does it take to start, grow and sustain a business in Indiana?  How important is foreign competition?  What’s the state’s role in economic development and what initiatives offer the greatest growth opportunities?

For scholars, executives, elected officials and reporters covering the business community, these questions create a dialogue and a foundation on which we can help build a strategic plan to drive our state’s economy.  It is also an opportunity to hear directly from Indiana executives about their challenges and the issues that impact their businesses, from health care costs and corporate reputation to customer loyalty and retention.

Visit the 2009 "State of Our Business" Web site.

Lee Lurton - – Panel Member at the July 9 CEO Breakfast and Discussion
President, Benefit Concepts of Indiana Inc.

Benefit Concepts of Indiana Inc. is an employee benefits broker/consultant with over 100 small to medium sized clients, mostly in the central Indiana area.  There were several areas of the CEO survey that I found particularly interesting and wanted to comment on in this blog.

Comments Regarding Raising Capital:
More of our clients are in survival mode and trying less to raise capital. Few need additional capital for expansion of their business, and the ones who are in the survival mode do not qualify for bank loans.

Comments Regarding Indiana’s Economic Climate:
Thanks in part to the Indiana Economic Development Commission (IEDC) I believe the problems we have here are smaller than the states surrounding us. Indiana is certainly much more "small business friendly" since Mitch Daniels became governor and appointed Mickey Maurer as the first head of the IEDC.

Comments Regarding Talented Managers: 
In difficult economic times good business decisions are more critical than when profits are good and mistakes can be absorbed with good margins. Even a small mistake (bad business decision) in difficult times can have a catastrophic effect on a small business. Being part of the human resource team, we believe that for most businesses their human capital is their most valuable asset. Talented managers are essential at any time, but critical in difficult economic times.

Comments Regarding the Survey Finding that Large Businesses are Cutting Costs in the Current Economic Climate and That Small Business are Seeking to Increase Revenue: 
Upon getting an advance copy of the survey, I did my own small, informal survey and called a few of our clients. This, in addition to conversations with many clients over the last several months leads me to believe that small businesses are cutting costs, just like the larger firms in the survey. One example is of a commercial woodworking firm who told me that when bidding on a project in the past they would expect to bid against four to five competing firms. Now that number may be as high as 20 competing for the same job. Margins were expected to be three to five percent, now with margins lowered to 0 percent they are winning few, if any bids. As a result, for the first time they have closed their production lines for four weeks this summer. Most of our clients are having a difficult time increasing revenue and have been forced to cut costs. This includes any business related to the construction industry, auto, manufacturing and even the service industries.  The majority are taking a very conservative approach to revenue forecasts and many are deciding what additional cost cutting measures may become necessary if the economy does not rebound in the next two to three quarters.

Robert Mackoy – Panel Member at the July 9 CEO Breakfast and Discussion
Associate Professor of Marketing, Butler University

There have been several common questions about the CEO Survey that have come from attendees of the panel discussion that I would like to address in this blog post.

1.  Was information learned about the impact the recession had on minority-owned firms and how much does this impact the overall economic stability of Indiana?

The CEO survey does not include questions about business ownership, so I am unable to answer this question specifically.  However, the survey does include a question about the ethnicity of the CEO respondent and I am able to examine results based on this variable.  Of course, there are ethnic minority CEOs of publically held companies and of non-minority-owned firms, and there may be non-minority CEOs of minority-owned firms, so the following does not directly address your question.

With the above caveat, it appears that there are only a few significant differences between the responses of minority and non-minority CEOs.  For example, minority CEOs on average rated the importance of “sustained and steady topline growth” and “corporate reputation” more highly than did non-minority CEOs.  They also were more likely to note they are planning to “add jobs” within the next 18 months.  On the other hand, they were less likely to rate the overall business environment of Indiana as an advantage relative to the business environments of neighboring states.

Specifically with regard to the current economic situation, minority CEOs were slightly more likely to agree that “major public works infrastructure projects will help to shorten the economic crisis.”  They were also slightly more likely to report dipping into cash reserves to help deal with the current economic situation.  Other than these two items, there are no differences in the mean responses of minority and non-minority CEOs.

This year’s survey also included an open-ended question which asked what, if any, specific activities “your organization is taking in response to current economic conditions.”  Because the question was completely open-ended, responses to it probably best capture how individual firms react to the recession.  On this question, there were no differences between how minority and non-minority CEOs responded.  Both were equally likely to use cost-cutting and revenue-generating measures and both were equally likely to use any specific measure.

Thus, in summary, it appears that there are many more similarities than differences in CEO perceptions of -- and reactions to -- current economic conditions.

2.  The CEO survey has been administered in Indiana for three years in a row.  Have the same people responded to the survey each of the three years, or are there different people in the sample each year?

This is an important question because we have seen generally consistent responses (across the three years) to “big picture” issues such as CEO priorities, strategic plans, perceptions of Indiana’s economy, etc.  If we are simply hearing from the same individuals year after year, this consistency may be less surprising than if we are hearing from different individuals at different points in time.

The simple answer is that “we don’t know exactly.”  The survey respondents are always anonymous to us, so there is no way we can track respondents over time.  We guarantee anonymity so that respondents are more likely to be completely candid in their responses.

Our sample frame, that is the listing of individuals we invite to complete the survey, grows each year.  Many of the same individuals are invited to participate annually, so there is likely to be some overlap each year.  On the other hand, the total number of respondents has grown from 210 in 2007 to 225 in 2008 to 360 in 2009, so we know that we are capturing the thoughts and opinions of at least some new respondents each year.

Finally, one should note that the survey has an exceptional response rate of over 21 percent.  In addition, our respondents mirror the profile of all Indiana firms in terms of industry classification and firm size (both revenue and number of employees), though firms based in central Indiana are slightly over-represented.  Thus, we believe that the thoughts and opinions captured in the CEO survey are generally representative of the thoughts and opinions of Indiana CEOs as a whole.

Niel C. Ellerbrook – Panel Member at the July 9 CEO Breakfast and Discussion
Chairman and CEO, Vectren Corporation

I very much enjoyed participating on the CEO Survey panel which discussed the survey results on the state of our Indiana business climate.  What I found particularly interesting from the survey overall was that results didn’t significantly differ from the prior year.  I expected to see greater variation, given the fact that we have been in the midst of the most significant recession since the Great Depression for the better part of a year.  I am anxious to see what the survey results show next year although by the time next year rolls around we will hopefully be emerging from the recession.

I also found it beneficial to talk a little bit about the possibility for climate control (cap and trade) legislation and its potential impact on Indiana.  As everyone knows, Indiana is very heavily coal dependent for electric generation with approximately 95 percent of total generation being supported by coal.  As a result of the extremely high use of coal, we do produce and emit substantial quantities of CO².  CO² is a significant greenhouse gas and likely the most significant manmade contributor to global warming.  The stakes are high for the potential implications of sustained higher temperatures and one only has to look at Venus in our solar system to get a sense of the implications of rising CO².  The atmosphere of Venus is 96 percent CO² and the atmospheric temperature is hot enough to melt lead!  So I don’t argue the need to do something to control CO² but the potential economic impact on Indiana residents from imposing controls will be very significant.  I think all of us need to send the message to our congressional representatives that we need free emission allowances for a sufficient period of time to allow technology to develop that will permit the targeted reduction in CO² emissions to be achieved.

As an example, carbon capture and sequestration has promise but it is not commercially achievable yet.  We need to provide time for these technologies to develop so that customers are not unnecessarily burdened with costs that they cannot afford to pay.  We also don’t want to see more Indiana jobs lost because our industries are overburdened with energy costs and uncompetitive as a result.

In closing, the panel was a lot of fun for me, but if I get another chance to participate, I intend to follow my friend Bill Corley’s casual dress code.

William Corley – Panel Member at the July 9 CEO Breakfast and Discussion
President, Community Health Network

During the panel discussion there were several questions written by attendees that I wasn't able to answer because of time.  I'd like to address those now.

1.  If the numbers are correct, there are about 47 million uninsured in the U.S.  How does the cost of the current proposal really come out favorable over an expansion of Medicare/Medicaid or other existing programs?

With nearly 47 million Americans without insurance the Obama administration has proposed a universal health care insurance plan.  This would require all Americans to be covered by a health insurance plan much like automobile insurance.  The cost of this health care reform plan will cause health care cost to increase.  Much like the state of Massachusetts plan enacted in 2006.  The cost of this plan has exceeded estimates by 300 percent.

Signed into law on April 12, 2006, Massachusetts health care reform launched the effort to reach near-universal coverage of the state’s population.  Currently, Massachusetts is looking for ways to reduce the cost of care.  Since 2006, the increase in demand for health care services in Massachusetts is associated with the shortage of primary care physicians (internists, family medicine and pediatricians) and has caused many people to seek health care services in emergency rooms—driving up the cost of care.

My recommendation is that if you do not have a primary care physician that you seek one before the Obama universal health insurance plan is enacted.  There are insufficient numbers of primary care physicians in Indiana.

2. With the potential for universal health care on the horizon and the implications of rampant cost increases due to lack of primary care physicians, shouldn’t the providers provide more alternative avenues of service for non-life threatening emergencies such as expanded med-check facilities and the use of nurse practitioners?

Community Health Network is implementing more health care access points to try to improve access to health care services in central Indiana.  We have over 200 primary care physicians, six MedChecks for non-appointment health care, nurse practitioners through Wal-Mart stores and Infinity where we provide employer health clinics and wellness coaches to improve the health and wellness of Hoosiers.

3. Health care represents 20 percent of our GDP.  If not universal health care, what is the solution?

We believe that universal coverage is one answer but it must be linked to an increased number of primary care physicians, nurse practitioners and physician assistants to improve the access issue.  Also all Americans should be provided a small incentive to take responsibility for maintaining healthy life styles of eating right, exercising and reducing stress levels.

4. Primary care physicians have had major shortages for 10 years or more.  What is the solution for this shortage?

We need to provide financial, and other, incentives to induce people to become primary care physicians.

The below article was written by William O'Donnell, director of graduate programs, Butler University College of Business.

The 2009 "State of Our Business" survey contained interesting information on how CEOs view Indiana's economy in the midst of the current recession.  Particularly noteworthy was the viewpoint that there is an oversupply of qualified workers out there, waiting to be called back to work when the economy improves.  In addition, when asked to rate their level of concern with several issues related to their organization and its workforce, the executives showed a general decline in concern from a year ago.  One can see the logic behind these opinions.

We continue to read daily of plant closings, layoffs and the continued rise in unemployment.  Logic would tell us that there must be a pretty good stockpile of talented people out there and that when the economy turns around, they will be there for the choosing.  But are they the right people?

Read the entire article.

The below article was written by Kevin Alerding, partner, Ice Miller LLP.

For many business owners, the hardest part of succession planning is change.  And change is perhaps the only certainty in a business succession plan.  No change, no succession.  You can read books, pay advisors, study techniques. But if you cannot change, then it will all be for naught.

Although it has dropped in importance since the first Indiana CEO survey, succession planning continues to be an issue among the CEOs surveyed as part of the third annual CEO survey.

Read the entire article regarding business succession planning.

The below article was written by Chris Harlow, associate director, Butler Business Accelerator.

At a dinner last fall, a local business leader asked me to explain the difference between a recession and a depression.  I had to admit that I didn’t know so of course it was the next thing I searched online.  I could find no clear delineation between the two – some sources say a percentage decline of this or a long-term reduction of that.  What I’ve started to realize is that maybe a depression is when the general populous gets a case of the blues.

Read the entire article.
 

The below article was written by Gerry Dick, host of Inside INdiana Business.

Perspective. Opinion. Outlook.  During the best of times we’re all looking for information that can provide an edge in growing our business or organization.  During these difficult economic times, an insider’s read on key business issues can take on an added significance.

This year’s findings offer insight into the mindset of Hoosier executives, who are clearly focused on survival in this brutally challenging economy.

However, while the recession has taken a toll on countless Hoosier companies and communities, there is a perception among CEOs surveyed that the business environment in Indiana is improving, as it relates to our neighboring states.  It is a sentiment that is perhaps bolstered by initiatives aimed at embracing technology-based jobs.

Read the entire article.

For the first time since administering the CEO survey, the perceived availability of jobs in Indiana exceeds the perceived demand for all types of workers. Given the state of our country's economy, with the United States dropping 467,000 jobs and unemployment at 9.5 percent, this perception is no surprise.

However, another issue addressed in the questionnaire surveyed Indiana's relative advantages and disadvantages when compared to neighboring states.  Five of the eight characteristics observed were significantly higher than the 2008 results.  Several of those increases include "education system," "economic incentives for business," and "overall business environment;" indicating that Indiana is perceived to be slightly ahead of surrounding states.  This prompted the question of whether the increase in numbers is a result of improvements on Indiana's part or a result of relative declines in surrounding states.

According to the Bureau of Labor Statistics, Indiana and neighboring states all currently have similar unemployment rates – each one exceeding the national average at over 10 percent with Michigan taking the lead at 14.1, a good 3.5 percent higher than Indiana.

In addition, respondents felt in general, that Indiana's cost of living is once again viewed as a strong advantage over surrounding states.

Hopefully, with this silver lining, Indiana is able to celebrate our state's successes proudly, despite nationwide difficulties.

Due to economic challenges, many CEO decisions may be attributed to companies adopting a "maintenance" mentality as opposed to previous growth mentality strategies.

In the 2009 CEO survey, significant decreases in ratings from last year were observed for several issues which include: "sustained, steady top-line growth" and "employee retention and recruitment."  Similarly, "customer loyalty and retention" saw a slight increase of importance; emphasizing the new strategy of strengthening current resources in order to maintain and grow in the future.

Not surprisingly, within the next 18 months, the priority of adding jobs decreased since the previous 2008 results, while the prospect of reducing jobs increased.  Succession planning dropped significantly in importance.  "Customer loyalty and retention" and "corporate reputation" continue to be main concerns of CEOs.

When asked what specific activities organizations are taking in an effort to deal with the economic situation, larger firms were more likely to resort to cost-reducing activities, with the most frequent being "reduction in staff" (24.0 percent) and "salary reduction/freeze" (17.5 percent).  Furthermore, smaller firms were more likely to mention revenue-generating activities, the most frequent responses being, "more/different marketing activities" (14.2 percent) and "expand markets" (7.7 percent).

The decision made by many CEOs and their organizations to invest in maintaining their existing business will hopefully facilitate a stable recovery and lead back to a strategy focused on growth.