Philadelphia 100: Fast growth + historic low unemployment = hiring challenges
Besides some of the region's fast-growing companies, the Philadelphia 100 this year shows how hard it can be to hire.
On a Thursday morning earlier this month, Kevin Kerns was apologizing for the still-moving-in look of the new headquarters for his 5-year-old start-up, Tri-State Training & Safety Consulting. Staff were assembling chairs, Kerns' desk name plate still hadn't been unpacked, and there was no sign out front.
All of it represented good problems to have for the Folsom, Delaware County company. The 3,300 square feet of offices and classrooms and 2,000 square feet of warehouse out back are meant to accommodate more workers, if and when they can be found in a hot economy.
Tri-State, specializing in CPR certification, fire and water safety training, first aid and the sale of medical supplies, reported $6,000 in revenue its first year and $529,097 in 2017.
With a spot on the 2018 Philadelphia 100 list of fast-growing companies, the company of five full-time employees and 8 part-timers is grappling with the same challenge many expanding firms are: finding workers when unemployment is at its lowest point — 3.7 percent — in nearly 50 years. Tri-State has four full-time jobs available: general manager, instructor supervisor, and two instructors.
>> READ MORE: U.S. unemployment falls to 3.7 percent, lowest since 1969
"I get two extremes: I get people who have a drug history and can't find employment … then I get good candidates but I can't offer them the 401(k), the health care, the $20 an hour" some are seeking, Kerns said, echoing the recruitment restrictions cited by many young companies.
The Philadelphia 100 is a project of the Entrepreneurs' Forum of Greater Philadelphia. Researchers at accounting firm Wipfli LLP performed the financial analysis for this year's list. The program was launched in 1988 to highlight the impact of entrepreneurial companies on the region's economy and to develop business acumen locally by sharing success stories.
Because the list is based on nominations, it does not represent the region's economy or capture all of its fastest-growing companies.
But it does serve as a reflection of triumphs and trials facing developing businesses with the good fortune to thrive but are not flush with capital or even the certainty of longevity to lure quality job candidates.
"A lot of institutions and colleges are telling the graduating students "You're worth X," said Michael Petrie, cofounder of Social Detection Inc., a Philadelphia developer of social media-based investigative software. "You know what? They could be, but the problem with a lot of companies and start-ups is we can't just throw money out based on someone coming in and saying, 'I'm worth X.'"
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Coming up on its fourth anniversary in November, Social Detection is on the Philadelphia 100 with revenue of $1.3 million last year, nearly double its 2016 revenue. Most of its 17 employees are in their mid- to late 20s and are adept at finding details about people on the internet. It's a skill valued in a number of professions, including criminal justice and marketing.
"We're competing with a lot of different arenas," said Scott Catron, cofounder and CEO of Social Detection. "We can only pay so much [$15 to $20 an hour]. "One of my favorite interviews was this guy who went with Comcast because they're going to pay him $80,000."
Catron said he asked the candidate if Comcast had another job — for him.
Recognizing the rigors of the moment, Social Detection said it has made hiring a perpetual process.
"The key is continuously interviewing and letting people know we're interviewing," Catron said. "We may not have a spot, but if we find someone that wows us, we'll create a spot. It's good to have people in the pipeline."
At Oat Foundry in Bensalem, makers of split-flap boards similar to the old-fashioned one announcing arriving and departing trains at Philadelphia's 30th Street Station (which Amtrak plans to remove), revenue is on a fast track, growing from $362,500 in 2016 to $857,000 last year. To handle even more expected expansion, the company of seven employees plans to add three to five more over the next year, said CEO Mark Kuhn., one of six founders. As engineering majors at Drexel University when they started the company five years ago, they weren't trained on hiring, Kuhn said.
"You read a lot and ask for advice from people you trust," he said of his hiring self-education. Among those he has consulted is Nick Bayer, founder of Saxbys Coffee and a board member of Drexel University's Charles D. Close School of Entrepreneurship.
Liking the "try-before-you-buy model," Oat has used contractors and interns and now has also brought on its first Drexel Co-op student for a six-month stint, which might lead to permanent employment. Especially important in early-stage companies is "setting expectations from the get-go," Kuhn said. "We tell people, 'We are a start-up. We're not going to be paying astronomical salaries.'"
But what it can offer, Kuhn said, is "a collaborative, friendly work environment" and one where "you'll be heard. The management structure at Oat Foundry is not 'I'm the boss and this is how it goes.'"
At Villanova University, Pankaj Patel teaches entrepreneurship and strategic-management courses and researches entrepreneurs, and family and small businesses. He called the hiring environment "especially challenging" and cited a 2018 report by the National Federation of Independent Business that said the highest rate of small business owners since 1989 — 24 percent — reported plans to raise worker compensation to attract or retain employees. Thirty-one percent reported having raised compensation, the highest reading since December 2000, according to the NFIB.
Beyond offering equity in the company and/or bonuses — which Patel stressed absolutely matters in attracting and retaining employees, but can easily be matched by competitors — he said fast-growing companies can improve hiring by expanding their search beyond the local market (where so many start-ups focus) and to a broader age range.
Start-ups "tend to hire younger employees. I think they may be missing out on the labor pool that is out there that could significantly help them," Patel said.
He issued a caution to companies that lure candidates with the "opportunity to learn" skills that can be leveraged into better jobs within the company or even somewhere else.
"Then the time pressure takes over," Patel said, and the expected learning opportunities don't happen.
He suggested built-in efforts, such as a weekly brainstorming session to solve a challenging problem. He likened it to a dojo, a Japanese space for learning or meditation.
At Social Detection, they call it the morning huddle, where problems are brought to the forefront to be worked on later, Catron said. The process also helps build camaraderie, he said. An in-house library offers books on leadership and self-improvement.
"We want everyone in our office to become what they want," Catron said, even if that means they ultimately leave. "But when you're here, be the best at it."