Business Forum: We should pay more attention to firms on rise

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Recently we've seen several local economic pundits wring their hands in news media over the recent U.S. Bureau of Labor Statistics report showing that from February 2012 until February 2013, the Pittsburgh region had the slowest rate of job growth of any of the 40 largest metropolitan regions across the country.

Typically after conveying the dismal news of a mere 2,100 net new jobs created in the region over the past year comes prescriptions to improve the business climate in the area.

But instead of looking at what's wrong with the region, maybe we should be looking at what's right about the companies that have managed to grow and create jobs. And while firms that are generating jobs are in the minority, there are still plenty of them around.

Nonetheless, only a small proportion of Pennsylvania and Pittsburgh businesses are responsible for creating an overwhelming number of new jobs. In fact, the top 1 percent of companies in terms of job growth created 195 percent of all new jobs in the commonwealth from 2005-10, according to a recent study by the Team Pennsylvania Foundation. The remaining 99 percent of all Pennsylvania companies actually lost jobs.

The study creates a group it labels "higro" companies, firms that experienced two growth spurts over the past five years. By the way, the study found more of these higros in Allegheny County than in any other county in the commonwealth.

Looking at how these higros differ from the remainder of Pennsylvania businesses can teach companies what they can do to grow, while it teaches business associations, economic development organizations and government entities what we really should be doing to promote robust job growth in the region.

Here are some of the major differences: Higros tend to have a wider market scope than other companies. Their ownership tends to be more diverse. The fast-growing companies are slightly more likely to be manufacturing companies. Lastly, higros are twice as likely to change their primary industry code, which suggests strongly that they are more likely to continue to evolve to meet new market conditions.

Over the years, many of the businesses that are involved with my organization, the Institute for Entrepreneurial Excellence, have been dedicated to maintaining a high growth rate, so almost every day I see proof that the companies that thrive are different from other firms. They do tend to reach outside our regional borders to grow their market, and certainly manufacturers are the ones adding the most jobs recently.

But I want to focus on the fact that higros are twice as likely to change their SIC code than other businesses. That fact speaks loudly to what I believe separates high-growth companies from others: the ability to change the business model, the business structure, locations, even the product and service line. It is in the nature of "entrepreneurism" to be open to change and seize upon the opportunities change produces.

Perhaps the best thing we can to foster job growth in Western Pennsylvania is to create a culture in which change is respected and supported.

It starts with opportunities for the leaders of closely held companies to learn how to confront and manage change. It is also important to create learning opportunities for entrepreneurs to meet and interact with other entrepreneurs to create a "change buzz." Finally, when an entrepreneur gets a great idea and a solid business plan, the funding for implementation has to be there.

As it turns out, we're doing these things already in Western Pennsylvania. We just have to do more of it.


Ann Dugan is the founder of the Institute for Entrepreneurial Excellence at the University of Pittsburgh's Katz Graduate School of Business.


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