Why Birmingham is not competitive

Daniel Coleman
Daniel Coleman

Today’s guest columnist is Daniel Coleman.

If economic growth comes from increased productivity, where does productivity come from?  Capital and labor.

Capital can come from anywhere. Our issue in Birmingham is with “labor.” We have some great entrepreneurs here, with great ideas, who cannot find the workers they need to build and grow their companies.

The Birmingham workforce lacks both critical skills (data science, programming, artificial intelligence) and corporate experience. We have few employers able to build workforces that are competitive.

Only 2 of our top 25 companies compete out of state

Of our largest 25 employers, few participate in competitive markets outside Alabama.

Our top 25 employers are primarily government entities, hospitals, corporate monopolies, and subsidiaries of companies based elsewhere. Only two companies in our top 25 are based here and compete outside the state: Regions and EBSCO.

About 92% of our top 25 employers do not need highly competitive workforces because they themselves do not have to compete against other organizations around the country. We lack competitive companies to cultivate the skilled labor needed to help start-up companies grow. Our large companies are not creating the next entrepreneurs.

Difficult to hire experienced employees

It is difficult for Birmingham entrepreneurs to hire experienced employees from other cities. When a talented and experienced employee considers Birmingham, they tend not to come. They may like the job and the city, but they believe that if the new job does not work out; they believe that there is no other job here for them to take. They do not risk moving again. Entrepreneurs struggle to hire highly trained inexperienced people in Birmingham as well.

According to the Birmingham Business Journal, the fastest growing company in the metro area is NxtSoft. Founded in 2017, its founder decided in 2018 to put an office on the campus of the University of Central Florida. UCF had 5,000 students majoring in computer science — more than all of the computer science college students in the state of Alabama combined.

Other companies have resorted to hiring talent and allowing them to work and live in Austin, Seattle, or Silicon Valley. But companies in Alabama lose a competitive advantage if they have to pay Silicon Valley salaries. It is hard to grow a cohesive culture when critical employees are rarely in the office.

Frank Stitt

Some small companies are making a big difference in the creation of the entrepreneurial ecosystem in Birmingham. Perhaps the best example of such a company is one of Birmingham’s greatest entrepreneurial successes: Highlands Bar and Grill.

After working under Alice Waters at Chez Panisse in Berkeley and, later, the food writer Richard Olney in France, Cullman native Frank Stitt moved to Birmingham and opened the city’s only high-end restaurant in November 1982. A true entrepreneur, Stitt borrowed money from family to start the venture. Fortunately for our community, he disregarded the advice of friends who said Birmingham would never support a restaurant like Highlands.

Receiving training from some of the top people in his field, Stitt not only opened a great restaurant, to be followed by two more great restaurants, but he also became a mentor to dozens of successful chefs who would become his competitors.

Rather than seeing the restaurant business as a zero sum game, Stitt saw the opportunity to create demand by introducing our state to a great product. He then helped create the ecosystem that would spawn restaurants around the state. Frank brought his world-class skills here and created the only Alabama restaurant to win the James Beard Outstanding Restaurant Award.

Future chefs can benefit right here in Birmingham by working at one of our nation’s best restaurants. Birmingham benefits, too, as many of these chefs will open new restaurants here, adding to our reputation as one of the top dining destinations in the South.

Other small business successes

Another example of entrepreneurial training ground is Daxko. Founded in 1998, Daxko creates web-based software member-management software for YMCAs, JCCs, and health clubs. It has about 50 employees and less than $50 million a year in revenues. From 2003 to 2018, Daxko was run by David Grey.

Starting his career at Grant Thornton in Chicago and later working for Calico Services in Atlanta (now part of Oracle), David learned at large, successful, competitive organizations. When he joined Daxko in 2003, he had 15 years of experience, most of it outside of Birmingham. Like Frank, David did not see business as a zero sum game. He brought in bright, talented people, encouraged them when they worked for him, and supported them when they left.

A firm of only 50 people but one that competed nationally, Daxko helped train the founders and/or CEOs of Fleetio, Wyndy, Airship, Boulo, and Quanthub. The firms that came out of Daxko now employ more than five times the number of people who work at Daxko today. None of these firms compete directly with Daxko in the member-management software space. Together with Daxko, these firms are helping to create a growing ecosystem of technology workers, entrepreneurs, and start-ups.

Great entrepreneurs cornerstone of growing economy

Great entrepreneurs who create highly competitive businesses are the cornerstone of a growing economy. By taking personal risk and creating value for themselves when they are successful, entrepreneurs like David and Frank drive economic growth. Well-intended efforts that lack entrepreneurial drive tend to vacuum up capital and then fail. Had there been a public-private partnership for restaurants in 1982, I expect that we would have created more Britling’s or Morrison’s Cafeterias and fewer truly fine dining options.

There is nothing more important to our growth than successful entrepreneurs. There is nothing more important to successful entrepreneurs than talent. Talent is honed in competitive environments. Capital will always follow talent. Unfortunately, our focus, our policies, and our institutions in our city and state continue to operate with a zero-sum game mentality.

Only through competition will we create great companies. Only these companies will create a great workforce. Only through competition will our economy grow.

This is the 3rd of a 5 part series by guest columnist Daniel Coleman on fundamental issues that make Birmingham different and why Birmingham is not competitive.

  1. Man wakes from 35 year cryogenic freeze to find a new Birmingham
  2. Birmingham’s Colonial economy

Daniel Coleman, a Birmingham native with more than three decades of experience in finance, is Birmingham-Southern’s16th president. Coleman, who was CEO of the global financial services firm KCG Holdings until its 2017 sale, earned his B.A. in English at Yale University and his M.B.A. from the University of Chicago.

David Sher is the founder and publisher of ComebackTown.  He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

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Invite David to speak for free to your group about how we can have a more prosperous metro Birmingham. dsher@amsher.com.

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7 thoughts on “Why Birmingham is not competitive”

  1. Like Frank Stitt, and the Bruno patriarchs before him, as well as generations of Greek entrepreneurs who opened and started restaurants and chains, they are enterprising individuals who “do” something and make it work.

    They do not wring their hands and woebegone give up on Birmingham’s bad image or reputation. They make it happen.

    I fear that today’s “young” people just want to go to Austin, Asheville, Charlotte, Huntsville, Nashville, or wherever the surge seems to be happening. But Jim and Nick Pihakis and Bill and Pete Koikos put down roots in a foreign land and made it work. Not to forget Jeffrey Bayer and others who have made Birmingham their operating base.

    We are surrounded by immigrants from many ethnic cultures who have made an everlasting footprint in Birmingham. Our “millennials” do not seem to have the same drive for success to dig in and make it.

    Will “The World Games”and the USFL make it? We’ll see how the next six months play out and whether Birmingham rises above the ordinary.

  2. Mr. Coleman is pretty much on target.
    He does mention problems with our “policies “…. but I would have called it “our politics”! As I see it, our representatives are more concerned about how “conservative “ they can appear to voters than about “business “!
    But, not all of them….a few even agreed with one of our Presidents”…it’s the ECONOMY, stupid”! Yes, Alabama needs a lot to become more competitive…including a political leadership with a burning desire to attract more business.

  3. Our political ads consistently make reference to what candidate is more Christian than the next as they ONLY speak as to how they will make certain they control our social values and our second amendment rights ! Has anyone provided a blueprint of growing the economic opportunities for our citizens ?

    No , our governor’s last ad pulls a gun out of her purse!

  4. Yet another article on this site about issues in/around Bham without any plan to address the issues. Talk is cheap!

    Why haven’t Mr. Sher or Mr. Coleman put a plan together and presented to metro area leaders (Business alliance, chambers of commerce, county & city councils, and mayors offices?

    This site has been live for 5+ years but where is an actual plan to do anything? Where is the legislation proposals? Having an opinion is only as good as having a plan to address the issues/concerns raised by that opinion. I would LOVE to see David and his guests include a plan of corrective actions if you will in each article written. State the issue, define the root cause of the issue, and then present a plan to correct the root cause(s).

    1. John, I couldn’t agree with you more. ComebackTown was born 10 years ago to begin a conversation about regional collaboration. Great progress has been made from Mayors signing an agreement to work together. https://comebacktown.com/2021/06/08/jeffco-mayors-endorse-agreement-that-is-a-minor-miracle/; City Counsellors creating a group to work together: https://comebacktown.com/2022/01/25/how-were-overcoming-the-distrust-that-has-suppressed-birmingham/; The Birmingham Promise: https://comebacktown.com/2014/10/14/our-next-superintendents-not-going-to-save-birmingham-schools/‘; A major study by Greater Birmingham Community Foundation that has lead to significant improvement in collaboration: https://www.cfbham.org/together-we-prosper/ Actually it’s quite remarkable how far Birmingham has come in the past 10 years–hence the name ComebackTown. Have patience with Daniel Coleman. He is a well respected and prominent business man and he is setting the stage to make a difference for our community.

  5. I would love to be the change I want to see in Birmingham, and be one of the contributors to OUR community’s success.

    OUR community that does not grant my wife full rights to her body to make her own health decisions, regardless of the health or economic ramifications.

    OUR community that does not guarantee that my wife or myself can take the time off work needed to raise our child after they are born, and still have a job to come back to.

    OUR community where I can be targeted and shot at a grocery store, or in traffic, or in the wrong neighborhood, because of the color of my skin.

    OUR community where I can send my child off to public school, and not feel safe that they’ll return home at the end of the day.

    OUR community where if my child doesn’t fit in with the other school kids, the school that I can send them to is the target of political smear campaigns.

    OUR community that has no minimum wage except the national one that hasn’t been raised since the last recession 13 years ago, where I struggle to pay my bills in the midst of inflation that hasn’t been seen in 40 years, where somehow I am still able to take personal capital risks and focus on my entrepreneurial drive.

    OUR community that values freedom from inconvenience over the health of our neighbors.

    OUR community that doesn’t ask itself, “Am I the problem?”

    OUR community that doesn’t want take ownership of its past and how it systemically applies to our present, in order to create a more successful future for those who have been disenfranchised, and actually be the rising tide that raises all ships.

    OUR community, where every success story listed above in both the article and the comments, were made by men who are, for all intents and purposes, white.

    OUR community, where if I struggle to assimilate into the monoculture that is predominant in every facet of our daily lives, I am “labeled” with “stereotypes” that call me out as being a “young” “millennial” that doesn’t have the “drive for success” to “dig in” and “make it.”

    OUR community, that competes with all its suburban areas, to rob Peter to pay Paul.

    No, no. I don’t want to leave Birmingham for more forward thinking and progressive cities where I have greater economic opportunity, community support, and competition on a national level, so I can focus on creating a lucrative business here.

    No, I enjoy assimilating into southern white male dominated culture while my very talented coworkers get passed over for advancement opportunities because they are a woman, are from a different culture, have a disability, are from a different faith, or have darker skin.

    No, I would like to stay in our community where leaders focus on culture wars, controlling our social values, and pull a gun out of their purse to prove they’re on my side, instead of providing a blueprint for economic opportunities that would make our community more economically competitive.

    Yes, I would like to take the risk on my life, the life of my family, and my personal capital, in favor of entrepreneurial drive to create value for our community that has my best interests in mind because, as we all know, well-intended efforts that lack entrepreneurial drive tend to vacuum up capital and then fail.

    Yes, I believe in our community business leaders that are privileged and tone deaf, showing just how collaborative they are with the majority of people in this community to know what is holding us back from entrepreneurial success.

    Yes, Birmingham needs to compete at a national level to achieve a great workforce and economic growth. But I absolutely do NOT think we should reach outside of the established success bubble to see what’s holding the rest of our community back from being able to make that happen.

    Yes, all one has to do to be a successful entrepreneur is to pull their self up by their bootstraps and have the right amount of drive to make it.

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