pulse (n) – the beat of life
Although the Great Recession has left the North Bay economy battered and beaten up, it has not knocked it out. Business still happens in the North Bay, and even if revenues and profits are down, the actions being taken today are setting the stage for our future prosperity. But what actions are actually being taken at the moment? What issues are on the minds of North Bay leaders? What prospects do they see for the future? What opportunities can be seized to make a thriving North Bay a future reality?
What is the pulse of business in the North Bay?
We set out to answer these questions by sending students at Sonoma State University’s School of Business and Economics into the field to meet with leaders of businesses in the North Bay as part of a large research project. We sought to link our students to the “real” world of business and to have them learn important research skills. However, what we learned not only serves to teach our students about the real condition of business, but also sheds some positive light on the steps that can be taken to revitalize our North Bay economy. This article highlights the major findings from this research project, and reveals that there are many inspiring leaders in our local businesses, non-profit organizations, and county/state/federal government agencies working toward a future that includes economic growth and job creation.
How We Conducted the Research
133 business students at SSU were each asked to interview two leaders in the North Bay, encompassing the five counties of Sonoma, Napa, Marin, Mendocino and Lake. One leader was to be from a for-profit business, and the other from a non-profit or government agency. The leader had to have a title of CEO, VP, Director, or general manager within the firm. An interview protocol was developed and the students were trained on how to conduct the 45 minute interviews. Leaders were asked a series of open-ended questions, their responses were sorted and coded into themed categories, and the data was analyzed using descriptive statistics.
About the Organizations in Our Sample
The sample included a total of 263 organizations in the North Bay (3 interviews had to be discarded due to incomplete data sets). Of these 132 were for-profit organizations and 131 were non-profit or state/government agencies. This split was retained in the analyses in order for differences in perception to be compared between the two groups. Table 1 illustrates the types of industries and sectors in the sample by percentage.
Table 1: Industries and Sectors in the Sample
| Industries Represented (For-Profit Firms) | Nonprofits/Government Sectors | |||
| Professional & Business Services | 22% | Nonprofit | 58% | |
| Hospitality & Leisure | 19% | Government: Local | 16% | |
| Retail | 14% | Education | 11% | |
| Consumer Goods | 9% | Other: Not for profit | 5% | |
| Construction | 8% | Government: State | 4% | |
| Winery | 7% | Services: Not for profit | 3% | |
| Manufacturing | 7% | Government: Federal | 2% | |
| Other Business | 14% | Legal: Not for profit | 2% |
The for-profit firms averaged of 35 years in business, 594 employees, and $177 million per year in revenues. The non-profits and government agencies averaged 40 years of operations, 410 employees, and $64 million per year in revenues.
Major Challenges Today
When leaders were asked “what is the largest challenge facing your organization today,” (see Figure 1) the highest rated theme amongst the for-profit companies centered firmly around the Economy at 32%; whereas non-profit/government firms focused on Funding at 44%. These are likely opposite sides of the same problem, as an economic downturn reduces tax revenues and donations, resulting in lack of funding for non-profit/government firms.
Figure 1: Current Challenges for North Bay Organizations
The second and third most important issues from for-profits included increasing Competition (17%) and Employees (16%). As one respondent stated, “In this hard economy our competition stands in our way. We have many competitors who offer a lot of the same products. It’s a dog eat dog world…right now. We are fighting to stay alive.” In terms of Employees, they described issues with lack of skills, motivation, and the high cost of labor. “It is difficult to employ a good, dedicated professional staff,” responded one leader, while another stated, “The cost of labor, insurance, and workers comp is growing faster than sales.”
Non-profit/government agencies added lack of Societal Support and Interest (12%) and Budget Cuts (9%) as major challenges for today. “Getting people to donate to their organization,” is very difficult at this time according to one leader; whereas another said “with all the budget cuts it is a struggle to keep the program alive.”
Major Challenges in Next 5 Years
In terms of the future, leaders in for-profits forecast different challenges, while non-profit/government firms see a partial continuance of the same issues (see Figure 2). Responding to the question, “What do you believe will be the largest challenge in 5 years?” for-profit leaders led with Expansion (12%) – “Expansion in a challenging job market; and continuing to expand and open more stores”– was an example of a common response for this theme. Though challenges to expansion were identified, the fact that there is a strong desire to expand is a clear and positive trend.
Figure 2: Challenges in Next 5 Years for North Bay Organizations
Other themes mentioned by for-profits included Adaptation (12%) and Competition (12%). In terms of Adaptation, this included not only embracing new technologies, but fostering an innovative corporate climate. One leader summed this up by stating: “The largest challenge in five years will be to keep up the momentum as to the business that was lost during the recession. Also to try and keep an open mind and be creative in finding new avenues within to ‘pitch’ the services.” The theme of Competition identified as a current challenge is predicted to continue: “The largest challenge our organization will face in the next few years is staying competitive in the marketplace and keeping our market share.”
Non-profit/government agencies predicted that the Funding (35%) challenges would continue in the next 5 years, as well as Budget Cuts (11%). This is common concern because agencies depending on tax revenues and donations often have a longer recovery time than for-profit firms that are on the leading edge of revenue benefits as economies rebound and consumer spending increases. A positive note is that some of these agencies (9%) identify Expansion as an issue. Though a challenge, it is also a forward move. One leader described this quite well – “The largest challenge in the next 5 years is the question of expansion in the organization. We will need to figure out when is a good time to increase our programs and how to finance them.”
Opportunities for the Future
In a positive look at the future, leaders were asked “what do you believe is the biggest opportunity for your organization?” (See Figure 3) The for-profits led with Growth at 43% of the sample via expansion, diversification, increased market share and other methods. Comments included:
• “The biggest opportunity for our organization is to expand the services we offer to our customers.”
• “With the contraction of the market, a lot of our competition is going out of business. We are still doing well, and since we will survive, we will eventually have a larger market share.”
• “To be able to expand to untapped markets, to other countries that are not yet aware of our services.”
The second highest theme was using Technology (13%) as an opportunity to try new options in the business, and increasing Marketing and Promotions (11%). “Using new technology to do work faster, more correct, and cheaper,” and “Proper advertisements and promotions that will intrigue and keep them coming back,” were two examples of comments from this category.
Figure 3: Opportunities for North Bay Organizations
Leaders from non-profit/government agencies were much more diversified in their responses, and actually identified 12 different themes, ranging from providing more education and awareness to focusing on efficiencies. However, they also identified Growth as the largest opportunity, but at only 23% of the sample. Second highest was doing more Community Outreach at 17% and recruiting more Volunteers at 13%.
Number of New Jobs Forecasted in Next 5 Years
North Bay leaders were also asked to forecast the number of jobs their organizations will create in the next five years. Given the current economy, the numbers were rather encouraging with the for-profits projecting they would hire an average of 42 new employees per organization and the non-profit/government agencies projecting an average of 24 new employees. Taken togetherm the organizations in the sample project hiring 8688 new employees in the next five years.
Figure 4 below highlights the results, and illustrates that 29.55% of the for-profit firms are forecasting to hire more than 100 employees in the next 5 years. This bodes well for the future of the North Bay economy.
Figure 4: Number of New North Bay Jobs Forecasted in Next 5 Years
How to Make the North Bay Thrive
Probably one of the most important questions posed to leaders was “what can you do as a business leader to make the vision of a thriving North Bay Economy a reality?” Responses were inspiring in that for-profits identified Community Support at 25%, followed by Local Focus at 14% as the two most critical actions they could take (see Figure 5). Though similar in concept, the two themes are different in that Community Support had to do with involvement and giving back. As one leader stated, “(We need to) continue to support the community where it is being cut back in non-profit and community organizations.” The theme of Local Focus was a desire to support local business by buying local products and services. “Shop local as much as possible and try to keep profits in the county,” was an example of this type of response.
Other important ideas provided by non-profit leaders included an equal emphasis on providing exceptional Customer Service (11%) and Expanding their businesses (11%). This was followed by a recommendation to continue to provide Quality products and services (9%) and to Create more Jobs (8%) in the North Bay.
Figure 5: For-Profit Leader Ideas to Create a Thriving North Bay Region
Non-profit and government leaders agreed with for-profit firms on the need to promote more Community Involvement (19%) as the most important action they could take to help create a thriving North Bay community. “Participate and be involved;”…..”Encourage generosity and volunteerism,” were common sentiments for this category. (See Figure 6)
Other higher scoring ideas included a continued focus on implementing the Mission of their specific organization (16%). Since the agencies interviewed ranged from non-profits dealing with child and animal care to police services, the variety of organizational missions was quite diverse. Providing more Education (11%) to the community and promoting more Teamwork (8%) between non-profits were two other ideas. One leader described this as, “working together with more non-profit organizations and to develop a better balance of where the funding is going between non-profit organizations. Creating more cohesiveness.” Job creation (6%) was also mentioned as well as 11 other themes that were more specific to certain agencies.
Figure 6: Non-Profit/Gov. Leader Ideas to Create a Thriving North Bay Region
Conclusion
Thousands of jobs created; a focus on future growth – This research suggests that the pulse of business in the North Bay economy is growing stronger. What can be done by businesses and organizations to move from our current economic malaise to this rosier future? We have three recommendations based on the findings from this research on the economic, competitive, and talent issues confronting North Bay organizations.
First, during this down cycle make sure you continue to invest in your business so that you will be ready for the healthier climate that is emerging as the economic pendulum swings back. In times of economic stress some organizations will focus exclusively on cost cutting, and spending from reserves to cover revenue shortfalls. While these tactics may be prudent at times, they can create a "death-spiral" situation where cuts in services leads to revenue loss which leads to further cuts in services which leads to further losses, and so on. Focus instead on sales and marketing, new paths to growth, employee development, and customer service. When budgeting, do not thinly spread scarce resources around by asking how much should we give to each activity. Instead, ask what should be funded fully and what should we not be doing at all?
Second, innovate to make your competition irrelevant and to find new ways to engage your customers and stakeholders. In their best selling book Blue Ocean Strategy, Kim and Mauborgne (2006) recommend four actions to help organizations simultaneously pursue lowers costs and higher differentiation in the marketplace. Consider the factors on which you compete for either customers (for-profits) or societal support (non-profits). (1) Which factors are taken for granted that you could eliminate? (2) What factors should you reduce well below industry standards? (3) Which factors should you raise well above industry standards? (4) Which factors could be created that the industry has never offered?
Third, develop a talent management plan of action so that you will have access to the best human capital that is available. Although the unemployment rate is high, our research found that attracting and retaining the best talent is still an issue for organizations, and is projected to get worse as the economy recovers. What is your talent plan? How do you acquire good people? How well do you manage their performance? What do you do for employee education and development? What is your employee value-proposition (i.e., Why would someone come work for you)? Research shows that pay and benefits may attract people to a job, but the leadership of their boss is the number one factor in retaining and engaging them. Too often we hear the refrain that there is a talent shortage in the North Bay – that we do not have enough professionals willing to make their career here. This isn’t a demographic issue. It is a leadership challenge.
Our research found at least 263 leaders in the North Bay, taking this challenge head on.
The authors would like to thank and recognize the SSU business students who conducted the North Bay interviews, as well as SSU Research Assistant, Stephanie Wilkinson, for her assistance in analyzing the data and creating some of the charts included in this article.
Dr. Liz Thach is a Professor of Management and Wine Business at SSU and may be contacted at Liz.Thach@sonoma.edu; 707.664.4212. Dr. William Silver is the Dean of SSU’s School of Business and Economics and may be contacted at William.Silver@sonoma.edu; 707.664.2220.
