SMALL BUSINESS ATTITUDES TOWARD THE EMPLOYER/EMPLOYEE RELATIONSHIP AND E-COMMERCE
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1 SMALL BUSINESS ATTITUDES TOWARD THE EMPLOYER/EMPLOYEE RELATIONSHIP AND E-COMMERCE 177 East 87th Street, Ste 301 New York, New York Tel Fax East Fifth Avenue Scottsdale, Arizona Tel Fax
2 PREFACE Smaller entrepreneurial companies are becoming a more and more important factor on the American business scene and yet their voice is not being heard in proportion to their importance. At the same time sea changes are taking place in the way business is being conducted. Two areas where changes are having a profound effect on small business is the shifting relationship between employers and employees and the Internet/e-commerce. Advantage Payroll Systems,a leading outsourced payroll administration firm focusing on employers with 100 or fewer employees,commissioned McBain Associates to conduct this survey. The purpose of the survey is to help provide the business and legislative communities with the opinions of smaller entrepreneurial businesses on the ways in which the employer-employee relationship and e-commerce are affecting the way they do business. The survey was conducted by mail during April of PAGE 2
3 EXECUTIVE SUMMARY A. The Employer/Employee Relationship 1. A substantial majority of small businesses say that the employer/employee relationship hiring,retaining and motivating quality employees is more difficult today than it was five years ago. 2. Overwhelmingly,the key issues continue to be health care benefits, opportunity for advancement and performance incentives and bonuses. Also coming into play are flexible hours,stake in the company,vacations and the extent to which e-commerce is a large part of the company. 3. As to the state of the employer/employee relationship,small businesses paint a dismal picture from the employers point of view. Overwhelmingly small businesses say that recruiting employees takes more time than ever,costs more than it ever did and that employee loyalty is becoming weaker. Prospective employees seem to be deciding among more job options than they used to have, and are more difficult to negotiate with than ever before. Not surprisingly,employers say that recruiting through the Internet is growing dramatically and that outsourcing or employee leasing is becoming more and more attractive to smaller companies. 4. While a little more than half feel at a disadvantage to large companies when it comes to recruiting,over 40% of smaller businesses feel they have an advantage, essentially because they can move faster and make quicker decisions. 5. Improved health care plans,affordable 401(k) retirement plans and stock options/profit sharing plans will help enhance small businesses abilities to recruit and retain employees. B. Perceptions Of E-Commerce 1. Small businesses appear to be moving into full-fledged e-commerce at a relatively slow rate. Almost three-quarters say that 20% or less of their business is conducted over the Internet. Some 42% expect their Internet business to increase by 20% or less in the next five years. PAGE 3
4 2. When they use the Internet in conducting business,80% say they use it in marketing,69% say they use it in purchasing and 57% use it in recruiting. However,almost half,in each case,expect that usage to grow 20% or less. 3. Three-quarters of small businesses say they have a corporate Web site and most of those Web sites are essentially corporate brochures describing the companies and what they do. 4. Even so,73% believe that e-commerce has dramatically changed the way most companies do business though 65% also say that the Internet is perceived as being more important than it really is. PAGE 4
5 DETAILED FINDINGS A. THE EMPLOYER/EMPLOYEE RELATIONSHIP 1. Difficulty Of Employer/Employee Relationship The substantial majority of small businesses believe that the employer/employee relationship is more difficult today than it was 5 years ago. On the Overall measure,70% said the employer/employee relationship is Much more or Somewhat more difficult than it was 5 years ago. Hiring 79%,is considered more difficult than Retaining employees at 69% and Motivating employees at 65%. (See Table 1 for details.) Much/Somewhat More Difficult Overall 70% With respect to hiring 79% Retaining employees 69% Motivating employees 65% PAGE 5
6 2. Factors Important In Hiring Employers Overwhelmingly, Health care benefits, Opportunity for advancement and Performance incentives/bonuses are the top-rated factors (Much/More Important) in hiring employees 88%,84% and 83% respectively. Fully 76% rated Flexible hours as an important factor in hiring employees followed by Stake in the company such as stock options or profit sharing, 71% and Vacations, 69%. By a 57% to 39% majority,the Extent to which e-commerce is a large part of the company, is also considered an important factor more important than the Ability to work from home (47%) and the Size of the company (25%). Much/More Important Health care benefits 88% Opportunity for advancement 84% Performance incentives/bonuses 83% Flexible hours 76% Stake in the company such as 71% stock options or profit sharing Vacations 69% Extent to which e-commerce is a 57% large part of the company Ability to work from home 47% Size of company 25% (See Table 2 for details.) PAGE 6
7 3. The State Of the Employer/Employee Relationship Small businesses paint a rather bleak picture of the state of recruiting employees. Overwhelmingly,small businesses believe that Employee loyalty is becoming weaker and that Recruiting employees takes more time than ever before, 86% and 87% respectively Agree Strongly or Agree Somewhat. Close behind at 82%,small businesses also agree that It cost substantially more to recruit an employee than it ever did. A substantial majority of more than three-quarters of small businesses (78% and 77%) agree that Prospective employees seem to be deciding among more job options than they used to and Prospective employees are more difficult to negotiate with than ever before. With respect to possible approaches for alleviating the recruitment challenges,a 63% majority agrees that Recruiting through the Internet is growing dramatically relative to traditional methods such as newspaper advertising or using a recruiter. When it comes to practice,however,only 38% agree with the statement, At our company,we are looking for electronic (Internet) services to access a steady stream of applicants and to expedite the review and approvals process. 58% also agree that Outsourcing or employee leasing is becoming more and more attractive to smaller companies. Only 28% agree that they often lose out to dot.coms in our efforts to hire desirable prospects. Agree Strongly/Somewhat Recruiting employees takes more time than ever before 87% Employee loyalty is becoming weaker 86% It costs substantially more to recruit an employee than it ever did 82% Prospective employees seem to be deciding among more job options than they used to 78% Prospective employees are more difficult to negotiate with than ever before 77% The more ambitious,motivated employee finds smaller 63% companies more attractive Recruiting through the Internet is growing dramatically relative to traditional 63% methods such as newspaper advertising or using a recruiter Outsourcing or employee leasing is becoming more and more 58% attractive to smaller companies We often lose out to the dot.coms in our efforts to hire desirable prospects 28% (See Table 3 & 8 for details) PAGE 7
8 4. Advantages and Disadvantages of Being a Small Company In the Competition for New Employees. By a relatively slim 52% to 43% margin,small businesses feel they are at a disadvantage in the competition for new employees. Small businesses believe they are at a disadvantage for a variety of reasons. The vast majority say the following factors are important in putting them at a disadvantage to larger companies: Very/Somewhat Important They can offer better benefits 93% They are usually better known than a small company 91% They can offer better salaries for equivalent positions 89% They can provide stronger employee training programs 81% They are thought to provide better job security 79% They have more flexible job growth paths 73% Those who believe that being a small business is an advantage rate the following factors as important: Very/Somewhat Important We can move faster in making a decision 97% We can offer better and faster employee 91% growth as a result of employee merit We can tailor our offer to the candidate 89% more easily than a large company We are better able to make allowances for 80% employees with off-beat employment records We are better able to accommodate an employee s 78% special needs such as special hours,the need to work form home some of the time etc. (See Tables 4,5 & 6 for details.) PAGE 8
9 5. What It Will Take To Enhance Small Business s Abilities To Recruit and Retain Employees Improved health care plans lead by a long shot this list of things small business believes will enhance its abilities to recruit and retain employees. Affordable 401(k) plans are next,followed by stock options/profit sharing plans Sizeable majorities do not see Section 125 pre-tax plans,employee information meetings,providing employees with home computers or payroll deductible insurance products as being helpful in recruiting and retaining employees. Improved health care plans 82% Affordable 401(k) retirement plans 65% Stock options/profit sharing 61% Section 125 pre-tax plans for items like health 35% care and child care Regular employee information meetings 30% Provide employees with home computers,23% printers and subsidized access to the Internet Payroll deductible insurance products 16% such as home owners insurance and automobile insurance (See Table 7 for details.) PAGE 9
10 B. SMALL BUSINESS PERCEPTIONS OF E-COMMERCE 1. Proportion of Business Conducted Over The Internet Small business has yet to move to the Internet in a big way. Fully 71% say that 20% or less of their business is conducted over the Internet. Moreover,42% nearly half expected the Internet portion of their business to increase only 20% or less. An additional 28% expect it to grow 21 to 40%. Business Conducted Over The Internet 20% or Less 71% 21 to 40% 13% 41 to 60% 5% 61 to 80% 7% Over 80% 4% Expectation Of Internet Business Increase 20% or Less 42% 21 to 40% 28% 41 to 60% 16% 61 to 80% 7% Over 80% 6% (See Tables 9 & 10 for details.) PAGE 10
11 2. Business Areas In Which The Internet Is Used While small business conducts only a small portion of their business over the Internet,a full 80% say they use it in marketing,69% indicate they use the Internet in purchasing and 57% use it in recruiting. Use the Internet in: Marketing 80% Purchasing 69% Recruiting 57% Small businesses have only modest expectations for increased use of the Internet in marketing,purchasing and recruiting. Marketing: Purchasing: Recruiting: 48% expect Internet usage to increase 20% or less 21% expect Internet usage to increase 21% to 40% 44% expect Internet usage to increase 20% or less 28% expect Internet usage to increase 21% to 40% 51% expect Internet usage to increase 20% or less 32% expect Internet usage to increase 21% to 40% (See Table 11 for details.) PAGE 11
12 3. Corporate Web Site Descriptions Corporate Web sites among small businesses appear to be little more than window dressing at this point. The majority of small businesses (61%) say that their corporate Web sites are Essentially corporate brochures describing our company and what it does. One quarter (25%) of small businesses indicate that they do not have a corporate Web site. Approximately one in five (22%) say that their Web sites can be used to Contact and communicate with people in our company. Less than one in five say People can use it to submit job applications and only 12% say Customers can use it to submit orders for product,track the progress of orders,etc. Essentially a corporate brochure 61% describing our company and what it does Contact and communicate with people 22% in our company People can use it to submit job applications 17% Customers can use it to submit orders for 12% product,track the progress of orders,etc. Do not have a company Web site 25% (See Table 12 for details.) PAGE 12
13 4. Small Business Opinions About E-Commerce And The Internet Strong majorities of small businesses believe that E-commerce has dramatically changed the way most companies do business (73%),that Without a Web site,a company is seriously hampered in the way it does business (65%) and that In 5 years, most business documentation and agreements will be executed over the Internet (67%). Half (51%) agree that The Internet and e-commerce has had a huge impact on my company. Having said that,however,a two-thirds majority (65%) agrees that The Internet is perceived as being more important in business that it really is and only 29% agree that The Internet is more important to smaller companies than to the large companies. Agree Strongly/Somewhat E-commerce has dramatically changed 73% the way most companies do business In 5 years,most business documentation and 67% agreements will be executed over the Internet Without a Web site,a company is seriously 65% hampered in the way it does business The Internet is perceived as being more 65% important in business than it really is The Internet and e-commerce has had a 51% huge impact on my company The Internet is more important to smaller 29% businesses than to the large companies (See Table 13 for details.) PAGE 13
14 5. How Small Businesses Use The Internet Nearly one-quarter (24%) of small businesses say that the phrase Our Web site is a bona fide e-commerce site describes them. Communications uses are the most frequently mentioned as describing small businesses use of the Internet: We have an Intranet which is used for most of our internal communications (41%) and Most all of our business communication with customers is via the Internet (34%) Interestingly,29% say that the phrase More and more we are using the Internet for business documentation including agreements,sales contracts,business correspondence,etc., describes them. Only 13% say We ask our customers to order from us over the Internet as much as possible describes them and just 11% say that We use the Internet to manage our company s investments describes them. Describes Us Well/Somewhat We have an Intranet which is used for 41% most of our internal communications Most all of our business communication 34% with customers is via the Internet We do most of our purchasing over the Internet 31% More and more we are using the Internet 29% for business documentation including agreements,sales contracts,business correspondence,etc. Our Web site is a bona fide e-commerce site 24% We ask our customers to order from us over 13% the Internet as much as possible We use the Internet to manage our company s 11% investments (See Table 14 for details.) PAGE 14
15 SMALL BUSINESS ATTITUDES TOWARD THE EMPLOYER/EMPLOYEE RELATIONSHIP AND E-COMMERCE TABLE 1 1. In your view,to what degree is the employer-employee relationship more difficult today than five years ago: Base: Much Somewhat Not Much Not At All All More More More More No Resp. Difficult Difficult Difficult Difficult Ans. Overall (141) % With respect to hiring (141) % Retaining employees (141) % Motivating employees (141) % TABLE 2 2. Compared to 5 years ago,how important would you say the following are when it comes to hiring employees: Base: All Much More More Less Much Less No Resp. Important Important Important Important Ans. Stake in the company such as (141) % stock options or profit sharing Vacations (141) % Size of company (141) % Health care benefits (141) % Opportunity for advancement (141) % Performance incentives/bonuses (141) % Flexible hours (141) % Ability to work from home (141) % Extent to which e-commerce is a (141) % large part of the company PAGE 15
16 TABLE 3 3. To what extent would you agree or disagree with the following statements about the state of the employer-employee relationship? Base: All Agree Agree Disagree Disagree No Resp. Strongly Somewhat Strongly Somewhat Ans. Employee loyalty is becoming weaker (141) % Recruiting employees takes more (141) % time than ever before It cost substantially more to recruit (141) % an employee than it ever did Prospective employees are more difficult to (141) % negotiate with than ever before We often lose out to the dot.coms in our (141) % efforts to hire desirable prospects Prospective employees seem to be deciding (141) % among more job options than they used to The more ambitious,motivated employee (141) % finds smaller companies more attractive Recruiting through the Internet is growing (141) % dramatically relative to traditional methods such as newspaper advertising or using a recruiter Outsourcing or employee leasing is (141) % becoming more and more attractive to small companies PAGE 16
17 TABLE 4 4. In the competition for new employees,is being a small company: Base: All A Decided Somewhat of an Somewhat of an A Decided No Resp. Advantage Advantage Disadvantage Disadvantage Answer (141) % GO TO Q5 SKIP TO Q6 TABLE 5 5. How important are the following factors in giving you a hiring advantage over larger companies: Base: Adv. In Very Somewhat Somewhat Very Q.4 Important Important Unimportant Unimportant We can tailor our offer to the candidate (61) % more easily than a large company We can offer better and faster employee (61) % growth as a result of employee merit We can move faster in making a decision (61) % We are better able to make allowances for (61) % employees with off-beat employment records We are better able to accommodate an (61) % employee s special needs such as special hours, the need to work from home some of the time etc. TABLE 6 6. How important are the following factors in putting you at a disadvantage to larger companies: Base: Disadv. In Very Somewhat Somewhat Very Q.4 Important Important Unimportant Unimportant They can provide a stronger employee (73) % training program They can offer better benefits (73) % They are thought to provide better (73) % job security They are usually better known than a small (73) % company They can offer better salaries for an (73) % equivalent position They have more flexible job growth paths (73) % PAGE 17
18 TABLE 7 7. Which of the following do you think would enhance your ability to recruit and keep good employees? Total Base: All Respondents (141) % Improved health care plans 82 Affordable 401(k) retirement plans 65 Stock options/profit sharing 61 Section 125 pre-tax plans for items like health 35 care and child care Regular employee information meetings 30 Provide employees with home computers,23 printers and subsidized access to the Internet Payroll deductible insurance products 16 such as home owners insurance and automobile insurance Other 3 No Answer 7 PAGE 18
19 TABLE 8 8. To what extent would you agree or disagree with the following statement: At our company, we are looking for electronic (Internet) services to access a steady stream of applicants and to expedite the review and approvals process. Base: All Agree Agree Disagree Disagree No Resp. Strongly Somewhat Strongly Somewhat Ans. (141) % TABLE 9 9. About what proportion of your business overall,is conducted over the Internet? Total Base: All Respondents (141) % 20% or Less to 40% to 60% 5 61 to 80% 7 Over 80% 4 No Answer - TABLE In the next 5 years,how much do you expect that portion your business conducted over the Internet to increase: Total Base: All Respondents (141) % 20% or Less to 40% to 60% to 80% 7 Over 80% 6 No Answer 1 PAGE 19
20 TABLE a. In your business,do you use the Internet in marketing,recruiting,purchasing? b. By what percent do you expect that to increase? Total Total Total Base: All Respondents (141) (141) (141) % % % Marketing Base: Use Internet For Marketing (113) For Recruiting (80) For Purchasing (97) % % % 20% or Less to 40% to 60% to 80% Over 80% No Answer TABLE Which of the following statements best describes your Web site? (CHECK ALL THAT APPLY) Total Base: All Respondents (141) % Essentially a corporate brochure 61 describing our company and what it does Contact and communicate with people in 22 our company People can use it to submit job 17 applications Customers can use it to submit orders for 12 product,track the progress of orders,etc. Do not have a company Web site 25 No Answer 6 PAGE 20
21 TABLE To what extent would you agree or disagree with the following statements about e-commerce and the Internet? Base: All Agree Agree Disagree Disagree No Resp. Strongly Somewhat Somewhat Strongly Ans. E-commerce has dramatically (141) % changed the way most companies do business Without a Web site,a company is (141) % seriously hampered in the way it does business The Internet and e-commerce has (141) % had a huge impact on my company The Internet is perceived as being (141) % more important in business than it really is In 5 years,most business (141) % documentation and agreements will be executed over the Internet The Internet is more important to (141) % smaller businesses than to the large companies PAGE 21
22 TABLE Please indicate how your company uses the Internet professionally. Base: Describes Does Not Does Not All Describes Us Describe Us Describe No Resp. Us Well Somewhat Very Much Us At All Ans. We do most of our purchasing over (141) % the Internet We ask our customers to order from us (141) % overthe Internet as much as possible Most all of our business communication (141) % with customers is via the Internet We have an intranet which is used for most (141) % of our internal communications Our Web site is a bona fide e-commerce site (141) % More and more we are using the Internet (141) % for business documentation including agreements,sales contracts,business correspondence,etc. We use the Internet to manage our (141) % company s investments PAGE 22
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