A Special Report by the National Center for the Middle Market and Aon

More than a decade of research by the NCMM reveals that middle market organizations prioritize development and consistently surpass smaller and larger businesses in both revenue and employment growth rates. While there are many growth drivers that NCMM has studied over the years, in our latest study, conducted in partnership with Aon, we take an in-depth look at growth drivers related to people, risk management and technology along with key themes related to current state, best practices and challenges in each of these areas.

 

Talent acquisition/Hiring the right people

High-growth middle market companies are nearly two times more likely to assert that their people are a key differentiator in their success – from the innovation that they bring to the creative solutions they develop – these organizations’ commitment to their employees supports the sustained growth they are seeing. Nearly nine out of 10 (88%) of these same companies affirm that they offer extremely/very competitive rewards packages to entice and retain employees. However, 57% of high-growth companies struggle to sustain offering these competitive benefits. This is not unique to high-growth companies, however, as we see 47% of average-growth companies struggling to offer competitive benefits. Additionally, 56% of high-growth and 52% of average-growth companies report difficulties in finding quality talent, and 55% of high-growth and 49% of average-growth companies struggle to retain employees. To sustain their growth trajectory, companies must evaluate the complexities of maintaining competitive compensation, sourcing high-quality talent and ensuring that employee engagement remains high.

Risk management

In parallel, the risk capital and technology landscape presents its own set of formidable challenges, most notably in cybersecurity. As these companies expand, the risk associated with cybersecurity breaches grows, with 70% of high-growth companies having already experienced such incidents. The impact of these breaches can be severe, highlighting a reactive approach to risk management that predominates in the middle market sector. Many organizations strengthen their risk management frameworks only after experiencing a breach. With 89% of middle market firms acknowledging cybersecurity as a substantial challenge, there is a clear imperative to transition from reactive to proactive strategies, thereby safeguarding their business operations against future threats.
 

Key Insights 

People are the differentiator for high-growth companies.

Although most middle market companies perceive their teams as above average, those experiencing rapid growth truly recognize their people as their distinguishing asset. However, there is often a gap between this perception and their actual ability to effectively support and empower their workforce.

Sustaining and nurturing talent presents a variety of challenges.

Effective workforce management is vital for development, yet finding exceptional talent can be difficult regardless of speed of growth. Offering competitive total rewards packages tailored to employees’ evolving needs is essential for attracting and retaining talent.

Workforce-related challenges are managed by engaging workforce improvement efforts.

Middle market companies tackle workforce challenges by refining their total rewards packages, including competitive pay and wellness programs, to attract and retain talent. Although they consider their benefits competitive, these companies still struggle with retention, indicating a possible gap in meeting evolving employee expectations and regional healthcare needs.

Cybersecurity risk escalates as companies grow, and organizations often address it too late.

Increasing digital presence and technological advancements heighten cybersecurity risks, particularly for high-growth firms vulnerable to disruptive attacks. Proactively establishing the right teams and protocols is crucial, yet many companies neglect this until after a breach occurs.

The evolving risk landscape for growing companies demands an anticipatory approach to risk management.

Companies face a range of risks beyond cybersecurity, such as operational, financial, regulatory and competitive challenges that can hinder growth if not proactively managed. Although many middle market firms employ various tools to mitigate these risks, they often overlook their vulnerabilities or underestimate their readiness, particularly when lacking relevant data.

The emergence of artificial intelligence is an exciting yet evolving opportunity.

Middle market organizations are leaders in leveraging AI, using it for talent optimization, customer service and efficient logistics. However, they must manage risks like privacy concerns, biases and the need for transparency. AI’s complex decision-making can also challenge interpretability and accountability.

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About this report

This report explores the themes of talent, risk management and technology in detail. The National Center for the Middle Market (NCMM), in collaboration with Aon, constructed a survey to gather data from middle market leaders on a variety of topics, including performance and growth, human capital, risk management and technology. The questions aim to uncover what successful companies are doing to differentiate themselves in leveraging their people and keeping pace with their changing risk portfolios. The report considers the findings through the lens of geography, industry, company size and growth rate.

How the research was conducted 

The NCMM surveyed 400 financial decision makers at middle market companies across the U.S. and Canada. For the purposes of this study, we established the following key parameters and qualifying criteria for our respondents:

  • Actively involved in financial decision-making for their organization
  • 500+ employees
  • Annual revenue between $50 million and $1 billion

Respondents completed a self-administered online survey fielded between June 27 and July 17, 2024.

How the insights were derived

The companies we surveyed reported an average annual revenue growth rate of 14.2% and a year-over-year employment growth rate of 13.8%, comparing favorably to Middle Market Indicator data. A subset of 96 respondents, identified as high-growth firms, reported 20% or higher annual increases in revenue. These high-growth businesses ultimately behave differently and place more importance and emphasis on the growth factors covered by this study, and the key differences are noted throughout this report. Additionally, where significant differences exist, the report notes distinctions between U.S. and Canadian companies and middle market companies of different sizes.

Watch our webinar recording

NCMM Managing Director, Doug Farren, was joined by Aon experts where they discussed key findings from the report, and practical guidance for middle market leaders on how to harness people, risk and technology as drivers to achieve sustainable growth. Watch now!