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.
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.
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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