Bay Area Business Executives Confirm Downturn, Also See Regional Economy Improving Over Next Six months.

Business/News Editors

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 15, 2002

Companies Boosting Productivity In Down Time By

Dipping Into the Bay Area Talent Pool

While a majority of Bay Area CEOs and business executives report in the quarterly Bay Area Business Confidence Survey that regional economic conditions are worse than they were six months ago, more than forty percent of surveyed business executives expect the Bay Area's economy to improve over the next six months. The survey's Bay Area Business Confidence Index registered a 16 point drop -- from 64 in April 2002 to 48 in July 2002 -- in its quarterly tracking of business confidence in the nation's fifth and the world's twentieth largest economy.

The Bay Area Council developed and manages the Bay Area Business Confidence Survey and Bay Area Business Confidence Index with participating regional organizations. This confidential survey of 372 business executives was conducted July 15 - 31, 2002 across the nine-county Bay Area.

"The current economic downturn resonated throughout the results of the Q2 Bay Area Business Confidence Survey but a large number of business executives expect improvement in the regional economy over the next six months," said Steven Gottlieb, spokesman for the Bay Area Council. "The Bay Area Council is encouraged that locally-based companies are using these 'belt-tightening' times to boost their productivity and position themselves for solid growth when the national and regional economies become more robust."

"Executives are showing cautious optimism and it is clear that they have pulled back from a sense of over optimism in the second quarter," said Lenny Mendonca, a director at McKinsey & Company. "While confidence levels have dropped, many national and local productivity indicators point to real sustainable growth in the near term."

The Bay Area Talent Pool Remains Strong

As part of this quarter's survey, the Bay Area Council asked business executives about their perceptions regarding the status of the renowned local employee talent pool, a key reason many companies chose to station an office or headquarters in the Bay Area. Of the 372 business executives surveyed, 71 percent believe that there is excellent or good availability of talented employees within the Bay Area to fill positions (only 5% reported poor availability). Interestingly, more than a fifth (21%) of respondents affirmed that they have replaced recently laid-off employees with new hires from the pool of highly-qualified employees who have been laid off in the economic downturn in the Bay Area. Nearly three-fourths (73%) of business executives also believe they have excellent or good access to employees with advanced degrees or training, or both, in their industry.

Small Spending Cuts on Employee Training and Perks 

Less than a third (29%) of the business executives surveyed reported a decrease in spending on employee training in general and 58 percent said that they continue to spend the same amount on employee training. When asked to compare their level of employee training spending versus two years ago, 18 percent of respondents said they are spending more today, 28 percent are spending less, and 44 percent are spending about the same amount. While spending on trainings has remained fairly constant, about a third (31%) of respondents confirmed that they have indeed cut back on employee benefits -- or perks -- other than insurance.

Confidence for Industry and the Nation also Fall

Respondents to the survey expressed reduced optimism about the national economy and the industries they lead. Only 22 percent of the survey's participants think the national economy is better now than it was six months ago, but 50 percent expect the national economy to improve in the next six months. Forty-three percent of respondents expect improvement in their industry over the next six months, versus 38 percent anticipating similar conditions for their industry over the next six months.

The Bay Area Business Confidence Survey

The Bay Area Council developed the Bay Area Business Confidence Survey to measure employer expectations of the Bay Area economy. The April survey is the fourth in a series of quarterly measures of business confidence. The next survey will be conducted and reported during the autumn of 2002. Survey findings will be published in an upcoming edition of the Bay Area Economic Pulse and can be accessed from the Business Confidence survey page at www.bayareacouncil.org.

The confidential survey of 372 business executives was conducted July 15 - 31, 2002, by Evans/McDonough Company Incorporated for the Bay Area Council with the assistance of McKinsey & Company. Participating organizations include: Bay Area Council, Contra Costa Council, Contra Costa Economic Partnership, Economic Development Alliance for Business, Oakland Chamber of Commerce, San Jose Silicon Valley Chamber of Commerce, San Francisco Chamber of Commerce, San Rafael Chamber of Commerce, Santa Rosa Chamber of Commerce, Silicon Valley Manufacturing Group, Solano Economic Development Corporation, and Tri-Valley Business Council. All members in the database were invited to participate through the Internet or by fax. The survey results are weighted to reflect the approximate percentage of employees in each Bay Area County.

A key element of the Bay Area Business Confidence Survey is the establishment of a Bay Area Business Confidence Index that tracks changes in business executives' confidence over time. The Index expresses survey results in a single figure based on an average of responses to four key survey questions on the direction of the Bay Area economy. The purpose of the Index is to express the survey results in a single figure that can be related to expected changes in economic performance

The Bay Area Council

Founded in 1945, the Bay Area Council (www.bayareacouncil.org) develops and drives regional public policy initiatives and researches critical infrastructure issues. Led by CEOs, the Bay Area Council presents a strong, united voice for more than 275 major employers throughout the Bay Area region in promoting economic prosperity and quality of life. Sunne Wright McPeak has served as president and CEO of the Bay Area Council since 1996.

About McKinsey & Company

McKinsey & Company (www.mckinsey.com) is an international management consulting firm that helps leading corporations and organizations make substantial and lasting improvements in their performance. With approximately 6,000 consultants deployed from eighty-two offices in forty-three countries, McKinsey has expertise on strategic, operational and technological issues.

Evans/McDonough Company Incorporated

Evans/McDonough Company Incorporated (www.evansmcdonough.com) is a full service opinion research and strategic consulting firm serving a broad range of corporate, political and institutional clients. Founded in 1989, EMC principals have been involved in thousands of public opinion studies, ranging from political and public policy strategy polls to extensive market share and customer satisfaction surveys.

Please visit the Bay Area Council Web site at www.bayareacouncil.org