1

BUILDING THE TOP TEAMFINDINGS FROM THE NCMM / NOVO GROUP TALENT STUDY

T h o m a s A . S t e w a r t , E x e c u t i v e D i r e c t o rT h e N a t i o n a l C e n t e r f o r t h e M i d d l e M a r k e t

ACG CINCINNATI | NOVEMBER 18, 2015

2

THE NATIONAL CENTER FORTHE MIDDLE MARKET

www.middlemarketcenter.org

ABOUT THE CENTER

Founded in 2011 in partnership with GE Capital and located at The Ohio State University Fisher College of Business, the National Center for the Middle Market is the nation’s first and foremost expert on the U.S. middle market. The Center’s mission is to serve as the leading source of knowledge, leadership, and innovative research on the U.S. middle market economy.

MIDDLE MARKET RESEARCH & DATA EXPERTISE & OUTREACH

EDUCATION

Quarterly Middle Market Indicator

Research and Expert Perspectives

Interactive Benchmarking Tools

Executive Programs

Webinars

Share Research & Discuss Trends

THE MIGHTY MIDDLE MARKET

3

THE MIGHTY MIDDLE MARKET IN OHIO

4

OHIO’S MIGHTY MIDDLE MARKET DEFINED

ANNUAL REVENUE

$10MM—$1BNEARLY

5,400BUSINESSES

MORE THAN

$225BIN ANNUAL REVENUE

REPRESENTS

0.9%OF ALL OHIO COMPANIES

EMPLOYS

28%OF THE OHIO WORKFORCE

GENERATES

19%OF ALL OHIO BUSINESS REVENUE

SOURCE: 2014 D&B DATA

 5

THE MIDDLE MARKET INDICATOR

6

Q3'15 MIDDLE MARKET INDICATOREXECUTIVE SUMMARY

• BY A SUBSTANTIAL MARGIN, THE MIDDLE MARKET CONTINUES TO LEAD THE U.S. ECONOMY IN REVENUE GROWTH AND JOB CREATION; P.E.-OWNED COMPANIES ARE PERFORMING STRONGLY

• WHILE YEAR-ON-YEAR GROWTH IS HIGH AND JOB CREATION REMAINS STABLE, THE MIDDLE MARKET APPEARS TO HAVE ENTERED A PERIOD OF DECLINING ACCELERATION

• EXPECTATIONS FOR GROWTH ARE AT THE LOWEST LEVEL MEASURED IN THE PAST YEAR; INVESTMENT APPETITES ARE MUTED

• CONFIDENCE IN U.S. AND LOCAL ECONOMIES REMAINS HIGH, BUT SOME CAUTION IS EVIDENT

Source: 3Q’15 Middle Market Indicator Report

1

2

3

4

7

Q3'15 U.S. MIDDLE MARKETEXECUTIVE SUMMARY

CAPITAL INVESTMENT

63%WILL INVEST

CONFIDENCE

49%GLOBAL ECONOMY

72%NATIONAL ECONOMY

81%LOCAL ECONOMY

REVENUE GROWTH

7.2%PAST 12 MONTHS

4.7%S&P 500PAST 12 MO.

4.1%NEXT 12 MONTHS

EMPLOYMENT GROWTH

4.1%PAST 12 MONTHS

3.2%NEXT 12 MONTHS

2.4%SMALLBUSINESS

1.7%LARGEBUSINESS

Source: 3Q’15 Middle Market Indicator Report8

Q3'15 MIDDLE MARKET INDICATORREVENUE GROWTH TREND, PE-OWNED

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%8.5%

9%

8.8%

9%

US MIDDLE MARKET S&P 500 PE-OWNEDSource: 3Q’15 Middle Market Indicator Report

PAST 12 MONTHS

7.2%U.S. MIDDLE MARKET

4.7%S&P 500

9%PE-OWNED FIRMS

1Q '1

2

2Q '1

2

3Q '1

2

4Q '1

2

1Q '1

3

2Q '1

3

3Q '1

3

4Q '1

3

1Q '1

4

2Q '1

4

3Q '1

4

4Q '1

4

1Q '1

52Q

'153Q

'15

8

1Q '1

2

2Q '1

2

3Q '1

2

4Q '1

2

1Q '1

3

2Q '1

3

3Q '1

3

4Q '1

3

1Q '1

4

2Q '1

4

3Q '1

4

4Q '1

4

1Q '1

52Q

'153Q

'150.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.062

0.048

0.0585

0.05

US MIDDLE MARKET LARGE BUSINESSSMALL BUSINESS PE-OWNED FIRMS

PAST 12 MONTHS

4.1%U.S. MIDDLE MARKET

5%PE-OWNED FIRMS

Q3'15 MIDDLE MARKET INDICATOREMPLOYMENT GROWTH TREND, PE-OWNED

2.4%SMALLBUSINESS

1.7%LARGEBUSINESS

Source: 3Q’15 Middle Market Indicator Report10

CAPITAL INVESTMENT CONFIDENCE

53%GLOBAL ECONOMY

64%NATIONAL ECONOMY

77%LOCAL ECONOMY

REVENUE GROWTH

5.6%PAST 12 MONTHS

7.2%NEXT 12 MONTHS

EMPLOYMENT GROWTH

4.0%PAST 12 MONTHS

3.9%NEXT 12 MONTHS

60%WILL INVEST

Source: 4Q 2014 Middle Market Indicator

Q3'15 MIDDLE MARKET INDICATOR -- OHIO

11

DRIVING GROWTH: FIVE WAYS TO TAKE GROWTH INTO YOUR OWN HANDS

Find New Worlds to Conquer

Sharpen Your Innovation Tools

Lift Your Vision Higher

Win on the Basics: Run a Great Shop

1

2

3

4

5

Manage Your Talent Better

12

13

TALENT: THE OVERALL PICTURE

TALENT IS TOP OF MIND FOR MIDDLE MARKET LEADERS

Source: 3Q’15 Middle Market Indicator Report

Short-Term Internal Challenges (Next 3 Months)

Long-Term Internal Challenges (Next 12 Months)

Staff / Employees 49% Staff / Employees 39%

Business Growth 28% Business Growth 16%

Finances 19% Costs 12%

Costs 16% Finances 10%

Government 16% Government 5%

14

OHIO’S MIDDLE MARKETSAYS TALENT IS HARD TO FIND

TAKE CHARGE OF YOUR GROWTH9% 9% 6% 6% 5% 3% 1%

17% 22% 26% 23%14% 19% 24%

30%

47% 38%32%

32% 27% 22%

44%22% 30% 39%

49% 51% 53%

IT Distribution Human resources

Finance Manu-facturing

Marketing & sales

Operations

Extremely Easy

Somewhat Easy

Neither Easy nor Difficult

Somewhat/Extremely Difficult

Ease of Finding Qualified Candidates for Open Positions

1%14%

18%

68%

Source: NCMM Ohio Middle Market Study 201415

OHIO STEM WORKER PROGRAMSWORK BEST AT ADVANCED LEVELS

Source: NCMM Ohio Middle Market Study 2014

TAKE CHARGE OF YOUR GROWTH

8%

4%

21%

16%

31%

38%

34%

35%

27%

42%

30%

14%

Excellent Very Good Good Fair/Poor

K through 12 Schools

Community Colleges

University Programs

Quality of STEM Education in Area Institutions

16

TALENT: BUILDING THE TOP TEAM

17

18

WHEN LOOKING FOR TOP TALENTTHE MIDDLE MARKET IS FEELING THE PINCH

25%

45%

14%

7%

9%

Source: Middle Market Indicator, 3Q2015

Of middle market executives consider the ability to attract, train, and retain talent somewhat/highly challenging.

77%Of middle market executives feel they do not have a sufficient number of people to fill key leadership positions.

49%

Of middle market executives struggle to attract people for top-level management positions.

31%

IN ATTRACTING TOP TALENTIT’S NOT ABOUT THE MONEY

COMPELLING & ATTRACTIVE COMPONENTS OF COMPANY’S EVP

Source: Building the Top Team

70%

70%

64%

30%

28%

22%

The quality of people within our

company75%

Meaningfulness of work

The culture of our company

74%

73%

36%

29%

33%

The benefits we offer (health, retirement, etc.)

The mission & purpose of our

company

Our base pay & salary structure

Very Attractive Very Attractive/Attractive

Non-financial attributes (such as intellectual and personal growth, cutting-edge and meaningful work) are particularly important to accelerate

innovation and attract “creative-class” employees and candidates19

FEW MIDDLE MARKET COMPANIES HAVE STRONG EMPLOYER BRANDS AND EVPs

HOW STRONG IS

YOUR EMPLOYER BRAND? YOUR EMPLOYEE VALUE PROPOSITION?

25%

45%

14%

7%

9%

We have a clear one that we are satisfied with and that works for us

We have one but it is something we need to continue to work on to make it most effective

We have started work on it but have not yet made much progress

We have not yet started working on it but have plans to do so

We have no current plans to work actively on it

Source: Building the Top Team

23%

42%

14%

8%

13%

20

21

“PASSIVE” CANDIDATES – THE OVERLOOKED MAJORITY

2015 CANDIDATE MARKET

Source: Building the Top Team

Not employed & looking

Not happy with job & looking

ACTIVE CANDIDATES

Happy with job & open to other opportunities

Happy with job & not looking

PASSIVE CANDIDATES

A strong brand and EVP are especially crucial to get the attention of “passive candidates” who are 60% of the potential talent pool.

17%17%

20%

46%

A strong financial offer is usually necessary to attract passive candidates’ attention, but is rarely sufficient

to pry them loose from the jobs they have

ESTABLISHED EMPLOYER BRANDS & EVPS CORRELATE W ITH COMPANY PERFORMANCE

REVENUE AND PAYROLL GROWTH BY STRENGTH OF EMPLOYER BRAND

Source: Building the Top Team

Clear Employer Brand

27%71%

Employer Brand Needs Work

41%55%

Less Developed Employer Brand

45%

20.1%

12.3%

Mean Revenue

GrowthEmploymentGrowth

7.9%

4.4%

Mean Revenue

GrowthEmploymentGrowth

6.0%

3.0%

Mean Revenue

GrowthEmploymentGrowth

REVENUE AND PAYROLL GROWTH BY STRENGTH OF EMPLOYEE VALUE PROPOSITION

Clear EVP EVP Needs Work Less Developed EVP

32% 35%58% 43%46%

17.4%

9.9%

Mean Revenue

GrowthEmploymentGrowth

9.6%

5.5%

Mean Revenue

GrowthEmploymentGrowth

6.5%

3.8%

Mean Revenue

GrowthEmploymentGrowth

22

23

6 STEPS FOR ESTABLISHING ANEFFECTIVE EMPLOYER BRAND & EVP

1. Recognize that all firms have employer brands, whether they know it or not.

2. Brainstorm ways to strengthen and differentiate your brand and EVP.

4. Create an authentic and genuine brand and EVP.

3. Involve your marketing people in the process.

5. Clearly articulate your to all managers and employees internally.

6. Make use of your brand and EVP in your recruiting efforts.

Source: Building the Top Team, 6 Steps To A Successful Employer Brand & Employee Value Proposition

24

TESTING YOUR BRAND AND EVP

TEN QUESTIONS TO ASK YOURSELF

Source: Building the Top Team

1

2

3

4

5

6

7

8

9

10

Do you know what your employer brand is?

Is it differentiated?

Is it strong in your industry? In your region?

Does it map back to your corporate brand?

Does it have a strong element of purpose?

Do you regularly reexamine your employee value proposition?

Does your EVP set your company apart?

Does your EVP appeal to passive candidates?

Would current and former employees validate the authenticity of your brand EVP?

Are you effectively promoting your brand and EVP?

25MIDDLEMARKETCENTER.ORG