Who Creates Jobs? Growth Companies Do!

January 27, 2010

In this guest post, Steve Hartkopf, shares some insights on Job Creation and Growth Companies.

The respected MIT professor and lead researcher at Cognetics David Birch is a true pioneer when it comes to statistical analysis of growth firms. Birch defines growth firms as companies with $100,000 in sales that grow an average of 20 percent or more over for a four-year period, which means they basically double in size over the four years. Does that sound like a major accomplishment to you?

The facts indicate it is tremendous accomplishment. By Birch’s count, only about 352,000 companies qualify, fewer than 2 percent, of America’s roughly 20,000,000 firms make the grade. Most of these companies are small to midsized and only 5 percent of them employ more than 100 people even after their four-year growth surge.

So one could ask, if true growth firms represent such a small portion of our nation’s total population of companies, why should we care? The answer may surprise you and it holds the key to evaluating the success or failure of our current economic policies and job-growth initiatives. It is this small band of exceptional companies that lead the entire U.S economy in employment and innovation.

Large companies and mom-and-pop outfits don’t create jobs. Between 1989 and 1993, a time of relative little to no economic expansion, growth firms added 4.4 million jobs. Similarly, between 1994 and 1998 growth firms accounted for about 95 percent of the total job growth, adding 10.7 million of the 11.1 million new jobs.

To paraphrase Birch, “Small companies can change direction and react to market forces and large companies can’t.” Adaptability and flexibility are key attributes for success and growth. Success and growth require more people to do the work.

If we want to know whether our government’s economic policies and “Job Initiatives” are working all you have to do is watch the growth firms. I have a better idea, maybe we should listen to them too.

Steve’s firm, Aligned Marketing,  is a marketing consulting firm with core competencies in strategy development, communication planning and technology solutions.  You can reach Steve via his website at www.aligned-marketing.com or via email at shartkopf@aligned-marketing.com.

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