Those are among the most interesting findings generated by the Coopers & Lybrand Trendsetter Barometer surveys so far in 1996. The Trendsetter Barometer regularly interviews the chief executive officers of more than 400 product and service companies identified as the fastest growing U.S. businesses over the last five years. The surveyed companies range in size from about $1 million to $50 million in annual revenue or sales.

Over the previous year, the companies interviewed used supplemental workers at a rate equal to about a 14% increase in their full-time employee roster, the survey found. At that same time, these firms, which are growing at an annual rate of 27.9%, said they were planning to increase their permanent workforce by more than 15% over the year ahead.

"For these rapidly growing companies, temporary part-time or contract employees represent a bridge to future full-time hirings," says George Auxier, national director of Entrepreneurial Advisory Services for Coopers & Lybrand L.L.P., an international professional services firm.

Growth companies in the product sector employed more temporary part-time or contract help than their counterparts in the service sector, adding outside workers representing 16.4% of their permanent work force, in contrast to 10.8% among service firms surveyed.

As might be expected, the smallest companies surveyed (those with fewer than 50 employees) said they rely on part-time and contract labor most heavily, supplementing their work force with the highest percentage additions to their permanent employee team, 26%. Mid-size companies (50 to 99 employees) added the equivalent of 17.6% to their permanent staff, and large companies (100 or more employees) added the equivalent of 12.4%. "Smaller companies have less extensive resources and a smaller base upon which to build, so it stands to reason that they would show the greatest need for outside help," says Auxier.

Only three in 10 growth firms surveyed (29%) include a group of regular part-time employees within their permanent work force. Service firms are more likely to do so, with permanent part-timers representing the equivalent of 5.1% of their work force, compared to 2.5% among product firms. "As long as skilled, trained part-timers are readily available on the outside, Trendsetter companies appear to see little reason to add part-time workers to the ranks of permanent employees," notes Auxier.

CEOs at those companies expect to sustain their rapid pace of growth in the year ahead, despite moderated optimism about the overall economy and concern over legislative and regulatory pressures. While plans for major new investments of capital remain steady, CEOs anticipate slower growth of permanent new jobs.

SERVICES GROW FASTER

Companies in the service sector maintained a faster growth pace than those in the product sector in 1995, 30.5% versus 26%. Looking ahead through the end of 1996, growth company CEOs expect similarly rapid overall revenue growth: a 28% composite increase, with 30.9% in the service sector and 25.9% growth in the product sector.

"In the face of economic and federal budgetary uncertainty, America's fastest-growing companies report they feel they can maintain or slightly exceed 1995's growth rate this year," says Auxier. "But a substantial proportion of product sector firms and many bellwether service companies are less optimistic about the economy than a year ago. They see slack market demand and other prospective barriers as spoilers." While remaining bullish about their own 1996 prospects, growth company CEOs are significantly less confident about the economy in 1996. Only 60% are optimistic, compared with a high of 77% a year earlier--a decline of 22%.

These CEOs see major barriers to future growth. Lack of market demand was cited by 43%, a sharp jump from 33% a year earlier. Product sector firms were most disaffected (49%), while only 35% of service sector businesses felt the same.

The No. 1 barrier to growth, however, continues to be legislative or regulatory pressures, mentioned by 53% of growth company CEOs, up two percentage points from a year ago. Second is availability of skilled, trained workers, noted by 50%, up six points. Also growing in importance is concern about profitability, cited by 29%, up three points.

On balance, growth company Ceos plans for major new capital investments in 1996 are at 1995 levels. Nearly two-thirds (65%) plan new capital investments this year, off two points from last year. In composite spending, CEOs expect to invest 13.6% of their revenue, slightly more than the 13.4% invested last year.

"While fewer product sector firms are planning major new capital investments in 1996--61%, compared to 70% for service firms--their planned level of expenditures is higher than among service firms," notes Auxier. "Product firms plan to invest at 14.1% of revenue, a slight increase, despite their lowered revenue growth expectations. Service firms, however, are off marginally in composite investment plans (to 13.1% of revenues), in line with their slightly reduced growth expectations."

Two-thirds (67%) of Trendsetter CEOs report they plan to make major new investments in information technology this year, up seven percentage points from last year. New product development is a distant second, with 51% planning major expenditures (down one point), followed by sales promotion at 48%, down two points. Advertising saw the greatest cutback, with only 38% planning major new investments, down six points. At 35%, research and development was down five points.

HIRING PLANS

On the hiring front, 79% of growth company CEOs plan to add new workers in 1996, down one point from a year ago. However, planned hirings are the equivalent of 15.1% of the present work force, 16% less than a year ago when that figure stood at 18% of the present work force. Service firms plan to maintain their same strong rate of new hirings (an 18.2% increase), but product firms expect only a 12.5% increase in new hires, 33% lower than their service counterparts.

In today's business environment, nearly half of growth company CEOs (49%) rate competitor information as a critical or very important competitive tool. In contrast, only 14% rate competitor information as not particularly important to their business growth.

"This 49% of growth companies at which competitor information is highly valued are clearly the most successful," comments Auxier. This segment of the survey sample grew nearly 200% faster than their peers who rated competitor information as only somewhat important or not important to their business growth. Those who value information as a competitive tool most highly are also larger (80% higher revenues) and have greater productivity (33% higher) than the other surveyed companies.

Companies at which competitive information is most valued expect to grow faster (21% faster) and have more extensive plans for major capital expansion in 1996 (45% higher investment levels planned). They also have more recent bank financing activities (21% more bank loans).

"Companies that most value competitor information share several other business concerns," Auxier reports. "They are more concerned than their counterparts about profitability and decreasing margins (67% more), and they fear that lack of capital may inhibit their growth (54% more). They are also more concerned (60% more) about their ability to manage or reorganize their own operations."