United States

RSM Survey Reveals Middle Market Continues Adapting to COVID-19 Disruption

Midsize businesses found new uses for technology in response to the pandemic but some capabilities at smaller firms lagged behind their larger counterparts



RSM US LLP (RSM) – the nation’s leading provider of audit, tax and consulting services focused on the middle market – today announced results from its RSM US Middle Market Business Index (MMBI) Special Report, Reopening the Middle Market, Part Two. The report found middle market companies have been adapting to the pandemic by moving to remote work and leveraging new technologies to continue operations, but many anticipate they’ll have to continue operating this way until a vaccine for COVID-19 has been widely adopted. In a survey fielded piror to vaccine approvals, 82% of business leaders reported they don’t expect a full reopening of the economy until the development of a vaccine. A further 79% say any reopening will depend, to at least some extent, on a significant percentage of the U.S. population being vaccinated.

“Distribution of an effective vaccine, and peoples’ willingness to get the vaccine, will be a major determinant of how quickly the U.S. economy will be able to accelerate into a recovery period,” said RSM US Chief Economist Joe Brusuelas. “While this survey was conducted before the vaccine announcements from Pfizer, Moderna and AstraZeneca, which might impact middle market leaders’ future expectations, we still have a long way to go before a majority of the population receives the full vaccine. In the meantime, middle market companies must continue to adapt by making strategic decisions about investments and using technology in new ways to drive efficiencies.”

Using Technology in New Ways Has Helped Companies Manage Disruption

Middle market business leaders report they have implemented new ways of utilizing technology during the pandemic, though a divergence in how that technology is used could indicate smaller firms have had to play catchup to their larger counterparts.

Almost half (49%) of middle market businesses reported they were implementing technologies in ways they hadn’t prior to the pandemic; 49% say the new uses included facilitating remote work and collaboration while 46% say they used new customer-facing technology. However, smaller middle market businesses – those with revenues of $10 million to $50 million – had to play catchup to their larger counterparts – those with revenues of $50 million to $1 billion – when it came to enabling remote work for their employees. Fifty-seven percent of smaller firms said they leveraged technology in new ways for remote work while just 42% of larger firms reported the same.

Remote Work Might Become a Permanent Option

A majority (60%) of MMBI respondents said COVID-19 concerns would prevent a full reopening of the economy for between six months and a year, meaning remote work will stick around for some time. Sixty-five percent of middle market businesses now have employees working remotely who weren’t doing so prior to the pandemic, with smaller firms reporting 57% of their employees are remote while 72% of larger firms say the same.

"Significant levels of remote work are going to be around for the next one-and-a-half to two years,” said Geoff Hopkins, RSM principal and lead of the firm’s Microsoft Office 365 practice. “Just based on the logistics of vaccine deployment, and prior to the pandemic, the trend was overwhelmingly moving toward remote work flexibility and flexible work options.”

With the investment in remote work increasing, the MMBI found the way businesses have approached the practice has further evolved. Thirty-eight percent of smaller middle market firms and 43% of larger middle market firms report they were making remote work a permanent option for some employees on a fulltime basis, extending the practice even after the pandemic ends. Some businesses are going a step further and rethinking the role of physical offices or other workspaces (37%) or reducing their total volume of physical office space or workspace (31%).

Business Concerns Increase as Employees Stay Remote

As middle market businesses continue exploring their relationships with remote work, business leaders report having a remote workforce has also created new sets of security, business operations and employee engagement challenges. Four of the top six ways companies adapted to the pandemic were strategies related to technology or IT, and 31% of leaders with longer-term remote work say they have enhanced IT security during the pandemic.

Additionally, business leaders have expressed some concerns about the potential side effects of remote work on their employees such as supervising those not in the office (71%), impediments to continued training and development (68%), difficulties maintaining culture (68%) and mental health issues for remote workers (56%).

“It’s important that business leaders maintain contact with their teams to sustain productivity in this remote environment,” said Jen Busse, national leader of RSM’s human capital practice. “We’re seeing clients move to daily standups, while others are holding check-ins at morning, lunch and evenings just to continue progress and foster one-on-one time. The key is to be extremely intentional about those touchpoints.”

 To stay informed with the latest insights, ideas and countermeasures to minimize the outbreak’s negative effects as well as prepare for future emergency events, visit RSM’s COVID-19 Resource Center. Watch for our next report on how the middle market is addressing IT and data security, due to publish in early 2021.

The MMBI Special Report, Reopening the Middle Market, Part Two data was gathered between October 5 and October 23, 2020. 

About the RSM US Middle Market Business Index
RSM US LLP and the U.S. Chamber of Commerce have partnered to present the RSM US Middle Market Business Index (MMBI). It is based on research of middle market firms conducted by Harris Poll, which began in the first quarter of 2015. The survey is conducted four times a year, in the first month of each quarter: January, April, July and October. The survey panel consists of 700 middle market executives and is designed to accurately reflect conditions in the middle market.

Built in collaboration with Moody’s Analytics, the MMBI is borne out of the subset of questions in the survey that ask respondents to report the change in a variety of indicators. Respondents are asked a total of 20 questions patterned after those in other qualitative business surveys, such as those from the Institute of Supply Management and National Federation of Independent Businesses.

The 20 questions relate to changes in various measures of their business, such as revenues, profits, capital expenditures, hiring, employee compensation, prices paid, prices received and inventories. There are also questions that pertain to the economy and outlook, as well as to credit availability and borrowing. For 10 of the questions, respondents are asked to report the change from the previous quarter; for the other 10 they are asked to state the likely direction of these same indicators six months ahead.

The responses to each question are reported as diffusion indexes. The MMBI is a composite index computed as an equal weighted sum of the diffusion indexes for 10 survey questions plus 100 to keep the MMBI from becoming negative. A reading above 100 for the MMBI indicates that the middle market is generally expanding; below 100 indicates that it is generally contracting. The distance from 100 is indicative of the strength of the expansion or contraction. 

About The U.S. Chamber of Commerce
The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. For more information, visit uschamber.com.

The U.S. Chamber of Commerce is committed to helping American businesses respond to the coronavirus so they can support their employees, customers, and communities. Our members and the state and local chambers, who are on the front lines of this pandemic, need us now more than ever to help them through this significant disruption. We will continue working every day to help our country’s people, businesses, and economy weather this storm and emerge stronger—just as we have at other challenging times in our nation’s history. Visit uschamber.com/Coronavirus for more information. 

RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.

RSM US LLP is the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with 51,000 people across 123 countries. For more information, visit rsmus.com, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.