Help wanted: Entrepreneur-led companies expand workforce by 16%

Other businesses may be struggling to create jobs in a challenging market, but entrepreneur-led companies bucked the trends and expanded their workforce by an average of 16% in 2011, according to research by Ernst & Young.

Ernst & Young surveyed over 400 entrepreneurs from 35 countries about job creation and found despite tough global economic conditions, over two thirds of them expected to hire more employees in 2012.

The jobs created are not temporary or low quality jobs either. In Australia, 81% of jobs were created at an “experienced hire” level and require university degrees or substantial experience.

Ernst & Young partner Bryan Zekulich told SmartCompany the trend of entrepreneurs engaging experienced hires was at odds with “conventional wisdom” that entrepreneurs were always looking for new ways of doing things.

“It is interesting that they are hiring more experienced people,” says Zekulich, the leader of Ernst & Young’s Australian Entrepreneur of the Year program.

“Entrepreneurs used to do it all themselves and get young people in to help them out and never really got out of being the sole person responsible. But the new evolution is that they invest in more senior hires to drive business and operations for them and to give them someone to rely on.

“People have realised they do need more quality to support them so they do not become beholden to the business, and if you have more experience you can check ideas and road test them.”

Of the entrepreneurs surveyed, 68% anticipated increasing their workforce in the country where their company is headquartered in 2012.

Zekulich says this growth is very positive in terms of the confidence entrepreneurs are showing in Australia.

“That growth is always positive and it is stark in comparison to the two-speed economy we are running, clearly the acceleration of confidence is greater in our entrepreneur group than the general market,” he says.

When asked for more details about their recruitment strategies, entrepreneurs confirmed that “growth in their product and service markets” was the main reason for expanding their headcount, followed by “technological and innovation improvements”.

Increasing their workforce outside of their headquartered country was also on the agenda for 44% of those surveyed.

When asked to name the countries where they anticipated creating the most jobs – the US, China, the UK and India were the most commonly selected.

When asked why they were recruiting outside their national market in 2012, 74% of entrepreneurs said it was to help them enter new markets.

Only 14% said they were recruiting internationally to “take advantage of lower labour costs” and only 8% said they wanted to benefit from “better government incentives” in other countries.

Zekulich says the Australian figures are consistent with growth overseas.

“91% of Australian entrepreneurs are talking about new markets, but they are not really focused on moving to a low cost environment, but more about market expansion,” he says.

“That has been facilitated by shoring up their background in their home country a bit quicker than they are used to.”

When the entrepreneurs were asked in the survey which factors in their domestic market could potentially impact their bullish 2012 hiring plans, government policies and a negative regulatory climate came on top.

Government support for entrepreneurs in Australia has been broadly positive, according to Zekulich. But he warns there are signs it is getting more restrictive, with venture capital support gone and more red tape for applications for development, trademarks and GST compliance.

“We are starting to see government support get more complex for people with small business. It is creating more of a red tape effect on businesses starting up or looking to grow quickly.

“For us, it is a really good message for government to rethink how they incentivise this group of people.”

Zekulich says that initial funding for start-ups in Australia should be increased and he is concerned that, as a general rule, the government has not sponsored the growth in venture capital that Ernst & Young would like to have seen.

“Notwithstanding that, entrepreneurs have still been able to grow their business much more quickly than others,” he says.