Entrepreneurs’ hiring plans increase as their confidence in the global economy holds steady

Mark Weinberger, EY Global Chairman and CEO, said:

“The disruptive force of technology is transforming individual companies and creating entirely new sectors. In this environment, entrepreneurs are pivotal drivers of global job creation, and in some cases are navigating economic and political uncertainty better than established players.

“Technology is also transforming some of the most fundamental aspects of how we do business. This evolution will change what job skills are needed, which new businesses are created, it will impact our education systems and will challenge our regulatory systems.”

Confidence is driving a global appetite to hire

Over half (59%) of the entrepreneurs from 12 key markets surveyed expect to increase their total global workforce in the next 12 months, up from 47% in 2015, a jump of 25% year-on-year. What’s more, the proportion of entrepreneurs planning to hire this year is more than double that of large corporations (28%), according to EY’s latest Capital Confidence Barometer.

Taking into account all anticipated workforce changes for 2016, entrepreneurs expect to grow their overall global workforce by 9.3%, and expect 12% of new hires to be young people in their first jobs.

India, China and Brazil top the leader board in terms of the proportion of their entrepreneurs anticipating growth. Indian and Brazilian entrepreneurs also expect to hire at a faster rate than anywhere else, but China’s rate of growth is slower than the global average (8.5%). France, Canada, the UK and the US follow closely behind in hiring expectations, with entrepreneurs in the UK leading the developed markets by rate of growth, at 10.5%. Entrepreneurs in the Middle East/North Africa (MENA), Japan and Sub-Saharan Africa (SSA) are least likely to anticipate growing their overall workforce in the year ahead (see Figure 1).

This hiring is driven by strong confidence levels in the economic direction of their domestic market and the global economy – up slightly year-on-year at 72% and 67% respectively overall. However, there are interesting variations by country and region. Confidence is up on both counts year-on-year in the US, the UK, Canada, Brazil, France and Australia. Confidence is down in China, India, SSA, Germany and Japan.

Disruption and innovation pay dividends for entrepreneurs and employment

The survey also shows that the more disruptive and innovative the company, the more they hire and the faster they do it.

The most disruptive entrepreneurs – the 17% of respondents who say they have changed all or many of the rules in their sector – are 58% more likely to forecast an increase in their overall workforce in 2016 compared to their more conventional competitors. At 18%, the net workforce growth level of these most disruptive entrepreneurs is twice the average global figure. Even when companies changing only “some” of the rules are added to this, the impact of disruption remains clear: they are 46% more likely to grow their workforce compared to more conventional businesses and, at 12%, net workforce growth is still higher than the global average of 9%. This suggests that any level of disruption has a positive impact on anticipated workforce growth.

Globally, there are more disruptive entrepreneurs in MENA (70%), India (64%), Sub-Saharan Africa (60%), Australia and the UK (both 57%).

Innovative entrepreneurs – those who say they have created an entirely new product or service in the past year – have similar hiring plans. They are 95% more likely to expect to grow their workforce in the next year compared to those who have not created a new product or service. Their net workforce growth levels (at 18%), like their disruptive counterparts, are also twice the global average figure.

Uschi Schreiber, EY Global Vice Chair ‒ Markets, says: “The numbers validate what we have known for some time: the majority of entrepreneurs do well in business by challenging the status quo, asking difficult questions of incumbents and redefining the boundaries of sectors and industries. What is encouraging is that these disruptors are blazing a trail of growth in today’s fast-moving and transformative business environment, spotting opportunities and relentlessly executing on them, very often blind to existing sector or industry boundaries.

“In our view, the findings could be something of a stark warning to businesses that are not embracing innovation, change or disruption, as they risk being left behind by disruptors who, we know from the survey, are laser-focused on attaining the talent that will allow them to attract customers and drive growth. Governments too need to focus on fostering an environment in which innovative and disruptive entrepreneurs can flourish.”

Young entrepreneurs are more disruptive, but older entrepreneurs are more inventive

Youth clearly has a role to play in disruption levels: 65% of entrepreneurs under the age of 35 are “disruptors” compared to just 27% of entrepreneurs over the age of 55. Younger companies are also much more likely to be in the most disruptive category – 59% of entrepreneurial organizations less than five years old identify as disruptive, compared to just 27% that have been in business trading for more than 25 years.

Unlike disruption levels, however, inventiveness and innovation is not linked to youth or tenure of business – in fact, the age group containing the most innovative entrepreneurs is the 65+ segment.

Organic growth will be key to entrepreneurs’ success

Organic growth is seen as key to success with nearly half (46%) of the entrepreneurs reporting growth in the past 12 months saying this was primarily achieved organically.

Rather than focusing on deals, entrepreneurs see generating new business as both their top priority and biggest challenge in the year ahead, with almost half (48%) saying that identifying, attracting and serving new customers is a priority, 27% saying it’s their top priority and 30% saying it’s a challenge for growth. Developing new products and services (34%) and attracting bright new talent (32%) were the next most cited growth priorities. Only 15% see M&A or alliances as a growth priority at all this year, and only 3% see it as their top priority. This is in direct contrast to larger corporates, where half are planning an M&A transaction in the next year and 40% are considering alliances, according to EY’s Capital Confidence Barometer.

Schreiber says: “Entrepreneurs play a key role in helping realize the benefits of disruption through the jobs and wealth they create, the new products and services they produce and in the way they encourage creativity and competition.

“We know from our work with entrepreneurs around the world that they have the best chance of success when they operate inside a healthy entrepreneurial ecosystem. Whether they are targeting organic or inorganic growth, entrepreneurs need an environment where governments, large businesses and entrepreneurs can work closely together to create the right conditions for entrepreneurship to thrive.”

Figure 1: Hiring plans by territory