Canadian private companies have had a reality check and are getting back to
business basics: PwC study

TORONTO, Oct. 8 /CNW/ - The PricewaterhouseCoopers (PwC) Business Insights(R) Survey 2009 reveals that the majority of Canadian private companies have fared better over this past recessionary year than one might have expected and are well positioned for the future. Many private companies entered the recession well managed and capitalized, with minimal debt, and were able to weather a market correction.

    
    -  Nationally, 58% of respondents are planning for growth and expansion
       in the coming year, 14% are planning to consolidate, 2% are
       stabilizing, and only 1% of companies surveyed were planning an exit
       in the coming year. In BC 56% of respondents reported growth as their
       top strategy for the coming year, in Alberta 57%, in Ontario 55% and
       in Quebec 52%.

    -  To achieve growth, respondents across the country plan to improve
       their sales and marketing programs (82%), gain market share (75%) and
       develop new products and enter new markets (72%). Only 18% are
       counting on a buoyant economy to help them achieve their goals.

    -  The economy (49%), competition (30%), and currency (27%) were private
       companies' biggest challenges over the past 12 months. While
       profitability dropped off as one of the top three concerns during this
       time, when looking to the next 12 months, they once again have their
       eye on profitability (31%), which is tied with finding new clients as
       the number three challenge.

    -  The economy remains the top challenge (53%) with competition as the
       number two issue (33%).
    

"Companies have fought through the recession and are now looking at new opportunities to grow their business," says Eric Andrew, Partner and National Leader of the Private Company Services (PCS) practice at PwC. "We are seeing a bounce back from last October, which was a low point in terms of confidence for the future. Now, almost 60% of companies see growth ahead for themselves and that's a good sign."

Back to business basics

The recession has been a time for introspection for leading private companies. Nationally, the majority of private companies surveyed are using this time to catch their breath, look inward, clean house and find efficiencies. In fact, 59% are reducing their cost of operations, 51% are improving processes, 48% are focused on better targeting of customers and 45% are improving staff skills.

When asked what steps they were taking to protect their company from future recessions, 75% said they are better managing cash flow and forecasting and 70% said they were diversifying their customer base.

A new approach to the war for talent

For the first time in three years, labour was not among the top three priorities for Canada's private companies in the past 12 months, nor in the coming year. Understandably, this year's survey results revealed companies shifted their attention from the war for talent to cost reduction in light of the recession.

It's unlikely these companies have lost sight of the fact that the labour shortage is a long-term issue that will return. Instead, they are dealing with the most immediate pressures of the recession which have included layoffs. Still, for companies in survival mode, 60% cited staff reduction as part of their plan in the coming year, compared to 84% citing the reduction of overhead expenditures and 82% citing improving staff efficiencies. The overwhelming majority of respondents, 92%, reported identifying and eliminating redundant positions as their top strategy for reducing staff and 87% cited eliminating low performers as their top strategy, indicating a very clear need to hold onto their best people.

The top three measures for staff loyalty and commitment reported in this year's survey are: evaluation of performance (79%), staff turnover levels (71%) and absence rates (64%). Just over 50% of respondents use exit interviews as a measure of engagement. Alarmingly, only 3% of respondents surveyed used day-to-day staff interaction and ongoing communication between supervisors and staff to measure engagement. Sixty-three per cent of companies that plan to improve staff engagement are investing in training and education.

"The relationships between staff and supervisors are the most essential relationships that companies can use for tapping into their employees' discretionary effort - which is something they need to do in order to retain a competitive advantage," says Andrew. "However, their investment in training and education is a more positive sign that when things do start to improve, private companies will be much more efficient and competitive."

Focusing on the future

The challenges going forward for many companies will not be very different from those they were facing a year ago, including increased competition, globalization, and climate change. But the survey reveals that the recession has given companies a chance to look at their business with a fresh set of eyes and that will have ongoing benefits as they face these challenges.

"There is a silver lining for a lot of businesses. They are trying to be more strategic about their important customers, suppliers and key people in their organizations. Companies have refocused and that is a significant by-product of the last 12 to 18 months," says Andrew. "Some businesses are going to come out stronger."

The importance of innovation

Eighty-two per cent of respondents said they are taking steps to encourage innovation. The top three strategies being used by those companies to encourage innovation: capturing employee suggestions (84%), fostering a culture that encourages employees to try new things (77%) and leadership communicating a focus on innovation (77%).

"People drive innovation and as the economy ramps up, innovation will become even more important," says Andrew. "Private company leaders are planning to gain market share and develop new products. We know that in order to successfully develop those products you need to be innovative and have the best people."

For more information on the Business Insights(R) Survey 2009, including a copy of the full report and executive summary, please visit http://www.pwc.com/ca/businessinsights.

Methodology and demographics

The fifth annual Business Insights Survey examines issues affecting Canadian private companies. In May and June of 2009, 466 business leaders from across Canada completed the survey from a broad range of industries of various sizes and locations. The survey sample is concentrated around four provinces - British Columbia, Alberta, Ontario and Quebec.

About Private Company Services (PCS)

More than 65% PwC Canada's clients are private companies ranging from owner-managed family businesses to large, professionally-managed businesses. PwC's Private Company Services (PCS) group is a dedicated team of business advisors who help privately-owned company owners to help them resolve day-to-day business issues and achieve long-term success. PCS offers the perspective of a third party with specialized industry knowledge, business advisory, tax and accounting expertise.

For more information about PwC's Private Company Services, please visit www.pwc.com/ca/private.

About PricewaterhouseCoopers LLP

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 155,000 people in 153 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 5,200 partners and staff in offices across the country.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

SOURCE PwC

For further information: For further information: Kiran Chauhan, (416) 947-8983, kiran.chauhan@ca.pwc.com; Nina Godard, (416) 941-8383, x13520, nina.godard@ca.pwc.com

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