Business Automation: Charting a course into unknown territory

Businesses have been battling an extraordinary business environment for the past three years, and now even more uncertain times likely lie ahead. Since 2020, companies have dealt with the fallout from the pandemic and the resulting shift to remote and hybrid work environments, the Great Reshuffle, retiring baby boomers, more job specialization and major supply chain disruptions. While these challenges don’t look to be going away, businesses now also face inflationary pressures and slower economic growth.

In some ways, the challenges have been even greater for middle market businesses than for any other sector. They have had to compete for talent against large enterprises, and many have not prioritized technology investments that can help offset the skills gaps and current business climate.

Here we examine the macro conditions that make the current environment challenging and create uncertainty for the foreseeable future:

• The underlying workforce trends that were making it difficult to find and keep talent under normal circumstances
• The effects of the pandemic response that exacerbated those talent woes
  
• The likely economic ups and downs in the face of continuing inflation and potential recession

Finally, we’ll look at how middle market organizations can prepare for these uncertain circumstances with a sound business automation strategy.

Course corrections are already underway

Middle market businesses find themselves fighting for talent

Even before the global pandemic hit, middle market businesses struggled to keep up in the talent wars, facing competition for talent from large enterprises with bigger budgets and more opportunities for advancement. The Great Retirement among the baby boomers also created a knowledge gap in the workforce. The insurance industry, for instance, has the oldest workforce today within financial services. According to the U.S. Bureau of Labor Statistics, about 20% of executive-level employees will be leaving in the next two to three years. 

An aging workforce isn’t a problem limited to white-collar jobs. Many older blue-collar workers who kept plants or manufacturing lines running for decades are also retiring. If the business hasn't automated its production lines and something breaks down, finding someone who knows how fix it becomes an enormous struggle. As a result, what used to be fixed in an hour could now take days. Meanwhile, the company is losing revenue.

Increased specialization adds to these challenges. It’s no longer enough, for example, to have an IT generalist who does everything. Businesses must find IT people with certain areas of expertise, such as cloud infrastructure or cybersecurity. A similar issue applies to the tax function at many middle market organizations, where the complexity of compliance and planning needs commonly outpaces employees’ bandwidth to meet them on time and without error. But most middle market businesses can’t afford to hire in-house talent with all these specialized skills across the organization.

The pandemic arose almost overnight

With all these ongoing challenges, the global response to the pandemic hit in 2020. It created massive shifts in the economy and the workplace almost immediately. Many employers moved to an entirely remote work structure initially, with many continuing to maintain a hybrid work environment.

With the disruption to normal life, many workers began to reassess their lives and career goals. Combined with the flexibility of work-from-anywhere options, worker expectations changed dramatically.

In a recent RSM US LLP report about the talent gap, Natalie Runyon, director of enterprise content, talent, inclusion & culture, market insights at Thomson Reuters, describes this new state: “Workers have new expectations around remote work flexibility, work-life balance and career development, including training, transferrable skills and new experiences. And if they don’t get these things, they’re moving on.” Added to this is a reluctance to do highly manual, low-value tasks.

The Great Reshuffle that continues today is one result of this workplace disruption. While many businesses are having workers return to the office, other businesses have made alternative work arrangements more permanent.

This not only changes how people work but also the role of technology in enabling that work. Applications need to be available in the cloud so workers have anytime, anywhere access. Employers, meanwhile, must track their employees’ locations so that they can comply with tax laws in various jurisdictions.

Inflation will hit employment hard

Beyond the workforce challenges, businesses must now contend with uncertain economic forces. Inflation continues to affect businesses and consumers alike, and the U.S. Federal Reserve continues to try to gain control over it through interest rate hikes and monetary tightening.

Economic conditions have influenced staffing plans for many companies, with many organizations slowing hiring initiatives, at least temporarily, and an increasing number planning to reduce head count.

Challenging conditions lead to a mixed business response

Across the business world, slower growth, rising labor costs and other economic uncertainties are leading to hiring freezes and layoffs.

For example, many tech companies have been in the spotlight for significant layoffs in 2022 and into 2023. In that sector alone, Crunchbase News reported that U.S.-based public and private companies cut more than 140,000 jobs in 2022 and another 94,000 workers were laid off as of early March 2023.

Many of RSM’s middle market clients are moving ahead cautiously and looking for ways to reduce costs. The paths these businesses are taking varies. Some are moving ahead with the expectation that inflation will ease and a recession will be short-lived. Some RSM clients are also projecting that the labor market will “normalize” giving employers the upper hand once again. Still others are preparing for future contingencies by establishing hiring freezes and laying off workers—they’re battening down the hatches.

Are the expectations realistic? The signals are mixed, and a cautious approach is advised. There are several factors that point to the need to remain optimistic but prepare for the worst.

The bottom line is that businesses need solutions to overcome these challenges. In many cases, organizations turn to outsourcing some functions to reduce the number of full-time employees. However, another solution that can provide significant relief is business automation.

Business automation can help businesses skirt the challenges ahead

Middle market companies must respond quickly to market changes in order to stay competitive and profitable. Using outdated, inefficient processes will lead to lost productivity when workers leave; those skills and knowledge also walk out the door with the people.

One key to increased efficiency and protection against lost productivity is business process automation. Business automation uses technology to reduce the time, cost and risk of essential business processes. 

• It enables process efficiency that greatly reduces the time needed to complete processes. When data is automated, it can facilitate quicker and better decision-making.
• It can help eliminate the need for humans to do repetitive manual tasks. This allows businesses to reduce the number of full-time employees and their associated costs and gives them the ability to attract needed highly skilled talent, especially younger workers who want more high-value work and don’t want to do low-level tasks.
• It makes the business easier to work with for customers, vendors and service providers, creating a better experience for all. For example, using an automated document tool makes contract approvals quick and easy, eliminating sending PDF files back and forth.
• Automation solutions can help keep the knowledge around processes so that when an employee leaves, there’s no disruption. The processes reside in the technology, not in someone’s head.
• It reduces the introduction of inaccuracies and errors into processes, issues that can ripple through the organization and become costly from a time, money and compliance standpoint.

Despite its proven benefits, middle market businesses have not adopted business process automation to the extent that larger enterprises have. They feel they may not have the budget or simply don’t know where to start. This creates risk—the potential that those businesses slow to adopt business process automation are getting left behind by their competitors.

What middle market businesses need to do now

The reality is that many businesses may have already waited too long to automate. Others that have postponed automating can still catch up, but they cannot afford to wait any longer. What do middle market businesses need to do now to incorporate automation into their organizations? The number one piece of advice: Just get started. But where to start?

Take a holistic approach

When looking to improve a business function, it’s easy to focus on an automation solution that addresses the single process that’s causing problems. Gathering tax data, for example, may take too long and involve a repetitive task that’s too manual and error-prone. By only treating the symptom, businesses can miss the systemic cause of the problem and not get the value from solution adoption.

A better approach is a holistic one that starts with identifying the root cause of the inefficiencies and then builds an automation solution that takes the broader business factors into consideration to maximize the overall business value. For example, tax data in disparate sources may require a long time to compile and be susceptible to human error. Both vulnerabilities could undermine the data’s value in providing leaders or investors with insights needed to guide the business. By automating data inputs, the business could not only reduce the time, cost and risks of getting the job done but also extend the benefits across the organization.

Work with an advisor

With so many automation solutions available in the market today, there are so many potential places to start with a pilot project. It can be a daunting initiative to undertake solo.

Working with an advisor typically makes sense for middle market businesses. An advisor will take an objective look at current processes and start at the highest level: putting the challenges in the context of the overall business strategy and determining where and how the right automation technology will affect the business upstream and down and have the highest ROI.

Charting a course for the future

One thing that seems certain is that uncertainty lies ahead. Using business automation, middle market businesses can gain the resilience and flexibility to handle any challenge. Automation technology can free employees to focus on complex and challenging work while helping to ensure that routine processes are completed quickly and accurately, adhering to all business policies and regulatory guidelines. With the right business automation strategy, businesses can not only stay the course but also chart a course that keeps them ahead of the competition.