As labor costs boom and talent remains—at least for now, at least in many industries—scarce, more companies than ever before are looking to Invest in technology and automation—especially at the front line.
But when it comes for reaching for new solutions to augment human workers and keep operations flexible and flowing, new research by Chief Executive Group finds a widening gap between larger companies and their smaller rivals. It’s a disconcerting trend for CEOs at those small and mid-sized companies, one worth watching if they are to remain competitive in the decade to come.
According to fresh data from Chief Executive’s annual research on the compensation plans and strategies of over 1,800 U.S. private companies, the largest, most comprehensive survey of its kind done in America each year, some 36 percent of all companies are now or are in the middle of large-scale automation projects.
But, our survey also found, there is notable correlation between revenue size and the proportion of companies investing in tech. The higher the revenue, the more likely companies are to direct funds towards tech/automation to reduce their headcount.
Only 28 percent of companies with under $10 million in revenues are investing in tech/automation at the front line, compared to 50 percent in companies with $1 billion plus in revenues. In the back office, the difference is even more striking. 59 percent of companies with $1 billion plus in revenues are making the investment while only one quarter of companies with under $10 million in revenues are doing the same.
The reasons are familiar to all CEOs: Smaller companies often don’t have the capacity to invest in long-term automation projects—and many don’t have the need. But large companies, where, of course, their largest cost is labor, have both the capital and need invest their funds in tech/automation to reduce headcount.
But the increasing investment in technology and automation is likely to do far more than just reduce labor costs, and allows for new business models, faster scaling and a host of other long-run benefits. It could fuel yet another wave of big-get-bigger business, making larger, more automated firms even more competitive versus their smaller rivals.
Aside from revenues, industry can play a large role in whether a company invests in tech/automation to reduce their headcount. Many industries don’t have conventional front line employees whose tasks can be automated. However, with technology growing increasingly complicated and capable, data shows significant proportions of companies in industries without conventional “front line” staff are choosing to make the investment.
Advertising/marketing is generally not an industry where there is a conventional front line staff, yet 41 percent of companies in this industry are making the investment. This speaks to companies searching for more ways to automate, such as email messages or research, maybe even copy. Of course, manufacturing and wholesale/distribution are investing in front line tech/automation at the highest rates, due to having many tasks involving manual labor and difficulties hiring and retaining employees.
Looking at back office automation, the data shows that 56 percent companies in healthcare services are investing in back office automation, the highest proportion of all industries, and no surprise given the skyrocketing costs and shortages of labor and materials, especially in the healthcare sector. Healthcare services also tops the charts in the proportion of companies investing in mid manager automation at 26 percent.
Should you be investing in automation to get ahead of the labor market? More detailed information on strategies and wage changes for all titles in 2022 by ownership type, EBITDA, revenue growth rate and more is available as a bonus report included with the purchase of a 2022-23 CEO & Senior Executive Compensation Report for Private U.S. Companies.
For more information, go to: ChiefExecutive.net/CompensationReport.