Tuesday, September 13, 2011

Young firms create jobs

I lived for more than three years in Kansas City where the renowned Kauffman Foundation is based so my eye was drawn to the quotation as part of the special report on the 'Future of Jobs' in this week's edition of The Economist.

"Research funded by the Kauffman Foundation shows that between 1980 and 2005 all net new private-sector jobs in America were created by companies less than five years old." Take note of that little word, 'All.'

The crude explanation is given by Carl Schramm, the Foundation's president, saying, 'Big firms destroy jobs to become more productive. Small firms need people to find opportunities to scale. That is why they create jobs.'

Certainly this chimes with my own experience. I had seven years with IBM and saw how (at that time) those of us on 'Permanent' headcount were semi-safe because the company could manage its demand for overall employment by changing its demand level for temporary contract workers.

Since then I've mostly worked in small business, including a couple of brand new startups, and know how everyone involved has to roll up their sleeves to get the job done, learning lots of additional skills, until such time as a co-worker can be brought on to the team.

The challenge remains, especially in these straightened times, funding the working capital to make confident investment decisions. We've got a great product, and great demand building in the marketplace, but it's hard to make those investment calls when the economic outlook is so challenging.
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