Virginia will be electing its next governor in a few weeks. Many observers see it as a bellwether election. I think they are correct, particularly for what the election will tell us about entrepreneurs’ attitudes towards government and elected leaders. The job creators of our society have a strong message for our elected officials: tax cuts might be nice to have, but social stability and problem-solving are more important. Let me share some of what I have heard from them. 

Michael Avon, chief executive of ICX Media, a digital video start-up, told me that he has grown tired of partisanship. The current environment makes him “fiercely independent – more so than ever before.” He’s looking for elected officials to focus on “working with others to solve problems.”  

Eric Koefoot, president and CEO of Public Relay, a PR monitoring service, raised a similar concern. He thinks that he and many entrepreneurs are “political unicorns – socially liberal and fiscally conservative.” For him, political extremes won’t get the country to where it needs to be. He fears that the parties have become too focused on running towards their perceived bases – the Republicans becoming “socially backward and fiscally reckless” while the Democrats run the risk of becoming “anti-capitalist.” 

The concern that the GOP is abandoning its conservative roots was something I heard from a number of long-term Republicans. Rob Quartel, chairman and CEO of NTELX, a technology implementation firm, is a lifelong Republican who has run for federal office three times. He is very concerned that “both parties are more factionalized, tactical, more ideological” than ever. However, he has particularly strong words for his Republican brethren, because a focus on populism has made the Republican party “all negative all the time” and unwilling to work to solve problems on issues like immigration, free speech and human rights at all levels. These are all issues on which Quartel believes “real conservatives” can engage Democrats in constructive and respectful conversations. He worries that there are few real conservatives left in his party to work across the aisle. 

Worry about stability is another theme that came up frequently. Ajay Sravanapudi, a serial entrepreneur, finds that the current climate is making him more, not less, political. Although he does not identify with a party, he finds himself “pushed to the left even more.” He added that the “tolerance of the chaos of Trump by the right drives me nuts.” 

There’s one thing that I find truly striking as we head into Virginia’s gubernatorial election: the region’s entrepreneurial community is not choosing sides as much as it is choosing to stand for constructive engagement. For the first time in its history, the Northern Virginia Technology Council did not endorse the Republican candidate for governor, instead commending both Democratic Lt. Governor Northam and Republican Ed Gillespie for their willingness to promote innovation and workforce development. 

Another group of regional CEOs, led by James Quigley, the founder of GoCanvas, a mobile technology firm, delivered to both campaigns a letter asking the candidates for focus on workforce development and support for innovation to grow the economy. Almost uniformly, my entrepreneur friends are telling me that they will support politicians and leaders that are serious about solving problems, whatever their party affiliation. They are dismayed by the messages of division that have emerged as a political strategy. 

Both of the candidates say that it is entrepreneurs who will create the jobs our people need. Statistically, that is absolutely correct. Small and rapidly growing businesses founded by entrepreneurs have long been our national and regional economic growth engine. Since the candidates believe that entrepreneurs are so valuable, then my recommendation is that they listen to what they say are saying. 

Entrepreneurs want a government that works with them and politicians who work together. The politics of distraction and division being practiced by some just won’t get it done. 

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I was fortunate to be the moderator of a discussion with Lt. Governor Northam and Vice President Biden. We talked about how important it is to invest in our people, and take positive steps to create 21st century jobs. I was proud to be with them.

Vice President Biden pointed out that the Lt. Governor is a genuine and authentic man. This is consistent with what I have seen over the last 6 years. Public service is a phrase that has come to carry negative weight from some — but when I am with people like the Lt. Governor Northam and Vice President Biden I am reminded that there are many who try to do the right thing every day. Progress doesn’t happen by accident. It happens with intentionality.

 

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Some people prescribe tax cuts whenever the question of how to accelerate economic growth comes up. But is that prescription right for this region?

I have been immersed for many years in fostering regional economic development sparked by rapidly growing technology businesses. Over the years, I have spoken with a broad range of educators, entrepreneurs, policymakers, economists and other stakeholders in economic development, and I have gathered a pretty comprehensive picture. Let me share some of what I have learned.

Maintaining our region’s ability to create high-paying jobs requires that we stay in the vanguard of new industries. The leading edge of what is truly new is where consumers and businesses are most willing to pay high prices and where demand is often the strongest. The combination of high prices and high demand creates businesses that can pay workers well and provide for career advancement. The challenge is that staying at the forefront of innovation requires a willingness to undertake basic research that is often expensive and equally often entails a substantial period where there is no profit opportunity.

Regarding the workforce, it is abundantly clear that already existing technologies are displacing unskilled workers and, to growing extent, skilled workers. Moreover, they do so at an increasing rate. Meanwhile, existing approaches to training and developing talent are not adapting to the new jobs that are being created, thereby creating supply shortages or leaving workers on the sidelines.

Infrastructure is chronically underfunded. We see it in Metro and the roads. Less visible but equally important is how many people lack broadband in our region — either because the infrastructure doesn’t exist or because it is far too expensive to sign up.

These are issues that can only be solved by collective action and substantial investment. We know how to do this. The difficulty is motivation. Solving these problems creates long-term social benefits, which are hard to measure. Financial returns are easy to measure — it’s how much additional money you get from investment. While we sometimes try to measure social benefits in financial terms, the reality is investing for financial profit and investing for long-term broader benefit are different.

The most successful regions in our country have figured out how to balance financial investment with social investment. Those that do it best are the ones that lead new industries. These orchestrated investments can be seen in communities that develop infrastructure (e.g., Research Triangle Park in North Carolina), commit to business attraction and support (e.g., efforts to attract Amazon’s HQ2), support local research institutions (e.g., connecting business entrepreneurs with university researchers) or support an environment that integrates larger and smaller businesses into a single community (e.g., Nashville’s rapidly growing innovation culture around health care). There is no single way, because no two regions are exactly the same.

Which brings us to tax cuts.

I will be the first to admit that tax cuts are a very seductive policy prescription. Who wouldn’t love to have more money to spend? But that is the point.

Historical data show that when tax cuts are targeted at higher income levels, the tax savings goes disproportionately into financial investments. There is no guarantee that the money will be invested in businesses (think of index funds, for example, where no direct investments in companies are made) or even a guarantee that the money is invested in the United States. The greater financialization of our economy may make some investors wealthier but it doesn’t provide for a pool of capital for social benefit.

I believe that right now, the best way to grow our region’s economy is increase social investment. To create a skilled workforce, to develop a 21st century infrastructure and to foster new industries, we need to make long term and considered investments. We need to be both wise financial and social investors.

At a time when objective data show that our overall tax burdens are at historical lows, is putting more money into financial assets what is best for our business and innovation community?

There are times where you can’t cut your way to success. This is one of them.

 

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Looking for opportunities to create economic growth, we should not overlook an invisible export. Media is one of the greater Washington region’s largest industries. News is the reason. 

I discussed this recently on “What’s Working in Washington” with J.J. Green, national security correspondent for WTOP-FM and host of the TargetUSA Podcast, Brian Fanzo, founder and chief executive of social strategy consulting firm iSocialFanz, and Judy Kurtz, In the Know columnist for The Hill.  

For all of them, Washington’s importance as a media center really begins with news. News is different from mere information. News is information that is important and worth knowing. What makes news worth knowing? In other words, what gives news its relevance?  

Green said for him the relevance of news begins with novelty, “News is not what people are talking about; it’s what they don’t know.” This makes Washington, D.C. a generator of lots of news, or as he puts it, “Hollywood when it comes to news.” The confluence of the White House, Congress, the Pentagon and other cabinet departments, courts, diplomats, businesses, professionals, and more ensures that there is always something important happening. 

But it is not just novelty. Information can be novel but trivial. Previously unknown information that can affect a person’s life, situation or prospects is news. Impact – consequentiality — is what separates the newsworthy from the trivial. Much of what happens in Washington, D.C. has the possibility of widespread impact.  

The region itself is a news-generating machine, and its productivity is enhanced by the visits of celebrities. The shared trait of all celebrities is that lots of people pay attention to them and listen to what they say. Kurtz sees how celebrities act when they come to town: they are often star-struck by the politicians and political leaders whom they meet. For many of them, “D.C. is their Hollywood,” a place where they attempt to convert their fame into social good by influencing politicians. And in doing so, they create news. 

Fanzo observed that D.C. also creates its own celebrities based on titles and position. As people serve in government as senators, congressman, presidents and judges, they become famous. This makes their words and actions newsworthy. Add to this the leaders of the countless trade groups, not-for-profits, and commercial businesses operating in our region.  

News originated in our region supports a vibrant and dynamic media industry, stretching from traditional media companies to new media startups. It’s an industry that is supported by technology, public relations and advertising businesses. Fanzo, a recent returnee to the D.C. region, has really seen the change and is “beyond impressed in the tech community, entrepreneurship and different brands” that have created exciting business opportunities 

News matters to our region’s economy. 

That is why our region must take so seriously preserving the veracity of news. While other regions of the nation may be concerned about “fake news” as a political issue, our region’s economic health depends upon the objective truth of our news. Without veracity and trust, news loses its value, both politically and economically. For our journalists, veracity and trust in the news is not a theoretical discussion. Nor should it be for those of us concerned with economic development. 

News can drive our region forward. As Green puts it, “the opportunities are just off the charts.” 

At a time where we are looking for industries that can create economic opportunity and jobs, news might be our most meaningful export of all. 

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Do entrepreneurs ever relax? On a Labor Day weekend, I checked in with a number of entrepreneurs to see what they thought. 

Certainly, the idea of relaxation seems to be counter to the image we all have of entrepreneurs – that they are engaged in an all-consuming activity, 24—7, to the exclusion of everything else.

Some of the people I spoke with didn’t think that an entrepreneur could ever relax. Ed Bersoff, chairman of PFF, referred me to the Merrian Webster Dictionary definition of relax (“to relieve from nervous tension”). He didn’t think he had ever found an entrepreneur who truly stopped feeling nervous or worried about their business. “I don’t think that relaxing exists in the entrepreneur’s vocabulary,” was how Bersoff summed up his thinking on the matter. 

This concept of being consistently worried was echoed by many. Being truly off duty was a risky thing – you might miss out on an opportunity for your business if you took your eye off the prize. Lee Weinstein, founder of the digital design firm Brightfind, summed up this conflict in saying, “sometimes it’s good for an entrepreneur to take time off – but not always!”  

Does the constant struggle for success mean that entrepreneurs can never relax? Perhaps the answer is in how entrepreneurs think about relaxation. 

Eric Koefoot, founder of the media monitoring business Public Relay, believes that entrepreneurs approach relaxation differently. In his experience  people who are not entrepreneurial associate relaxation with coasting and not worrying. “This is not a perspective that most experienced entrepreneurs would endorse, because they know that what is termed ‘relaxing’ is really distancing oneself from the daily push and intensity to gather perspectives.” 

This was a recurring theme. Universally the entrepreneurs I spoke with pointed out that for them, relaxation was not the absence of worry – it was an intentional separation from worry and the substitution of a time with a different activity. For these entrepreneurs, this separation occurred within the context of the entrepreneurial journey. Pat Sheridan, founder of Modus Create, an application development firm, explained it as a checkpoint along the way. “It’s important to make sacrifices,” he said, “but keep in mind when it’s time to pay back those debts to yourself.” 

Overall, my entrepreneurial friends all reinforced the importance of self-reflection. Without the external structure of an employer or job description, the entrepreneur needed to find the time to stop. Entrepreneurs relax, but they don’t do it by chance. 

For my part, in case you wondered, I take breaks in my entrepreneurial journey by playing the guitar. Here’s a song I wrote on the topic of entrepreneurial relaxation. I hope you enjoy it. 

Happy Labor Day.

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Power and influence are often described as one and the same, but they are actually very different. My life in business has shown me that if you want to achieve lasting change, you must appreciate that difference.  

When people talk about power, they usually think of it as the power of coercion: the ability to make others do what you want them to do. People are “subordinates,” and they aren’t asked for their thoughts or their consent. They are just told what to do. In this paradigm, power depends on coercion and punishment to ensure that instructions are followed.  

Early in my career, looking at the people around me, I thought that leadership success was obtained through this sort of coercive power. I relied on my position in a hierarchy to get people to do what I wanted, knowing they understood that I had the power to withhold approval and to impose penalties. People followed instructions because they were afraid of what would happen if they didn’t.

But I saw that when the fear of coercive power lessened, so did the ability to get people to follow instructions without their voluntary cooperation. I saw projects managed through coercive power crumble and fade away as soon as that power to penalize became ineffective.

Once I realized that concrete tasks and achievements created by coercion dissolved when coercion stopped, I wondered how I could ever create lasting organizational change, cultural and otherwise. What I had thought was lasting power was in fact very ephemeral. True power was not “getting” people to do what I wanted. True power was giving them a reason to choose to follow my lead. I needed to share a vision and make it compelling enough that people would want to bring it to fruition. I learned that influence-based power is much more effective than coercive power.  

Influence-based leadership is also much subtler than leadership through coercion. When influence is most effective, people act in concert because they share a vision of an outcome and have a sense of being invested in achieving that outcome. Who had the idea or gets the credit is less important than getting buy-in from the group. 

As I looked around, I saw that the most influential leaders were often not at the head of a parade telling people what to do. Instead, they were spectators along the parade route, happily eating popcorn and enjoying the parade they helped start. They knew that power is not something asserted over others. It is something that people assert for themselves in support of a common vision. When each person is vested in an idea or a mission, each person will defend it and work to realize it, not because of fear, but because of the satisfaction that will come with achieving the goal. 

I believe that this lesson of business leadership should be applied more often to policy making and governance. By focusing on power through coercion rather than influence or consent, many of our political leaders legislate on partisan lines without the support of those holding contrary views.

Perhaps we should respect our history more. Our nation is based on the concept of consensus and getting buy-in from the governed. That is what made it different from the autocracies and monarchies our ancestors came here to escape. Our system works best when we honor its founding principles.  

Business leaders know that lasting change in business only occurs when we effect that change through consent and agreement. It’s a lesson that our current political leaders would be wise to remember as they consider the path ahead.  

Change obtained without consensus is unlikely to last.

 

 

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Our region’s economy is rapidly reaching a crossroads. Many of the problems we face cannot be addressed through blanket policy prescriptions. So how about putting aside our partisan bickering and looking at the tasks at hand?

As a business person, I’d like our politicians to acknowledge that there are no absolutes when it comes to creating conditions for successful economic growth. Every successful business person knows that growing a business is never clear cut. We must listen to new ideas and try new solutions when the old ones aren’t working. Inflexible business owners rarely succeed in the long run because they can’t respond to changing circumstances.

If a dogmatic and inflexible approach doesn’t work for business, what makes us think it will work for the economy? I’ll admit that it’s somewhat comforting to believe that a rosy economic future can be assured if we follow simple policy prescriptions. All would be well if we had a higher minimum wage. Tax cuts are what is needed to grow our small businesses. All regulations are bad. And so it goes. 

Instead of focusing on absolutes, we should acknowledge that our economy is an imperfect amalgam of businesses that historically has grown best when we rely on data to create policies and approaches that maximize economic opportunities. It’s never been effective for us to merely take a set of prescriptions on faith. When we admit that we live in that gray area where outcome matters more than ideology and when we are willing to acknowledge that well-run government coexists with well run businesses, that’s when our economy grows the fastest.

The greater Washington region faces real growth challenges. Our highways and roads are crowded and getting worse. Public transportation is failing, even as we build town centers in reliance upon it. Our local employers need tens of thousands of skilled workers for our most promising new industries but can’t find them. Housing is unaffordable, and young promising workers are moving elsewhere to seek their futures. New technologies are being created in our region and never commercialized. Export opportunities go unmet because our business people don’t know how to seize them.

These are issues that can’t be solved through an invisible hand acting on its own or through blanket tax cuts or cutting red tape. If the only rule that matters is individual profit maximization, then any problem that requires collective investment or burden sharing goes unsolved. Conversely, if the only rule is that government can do everything, then we may lose the dynamic influence of the individual profit motive in creating new solutions to these large challenges. We need a blend of the best of everything, and we need to be willing to accept that growing an economy is messy. None of us will get everything we want and no good solution will be ideologically pure.

As we look at our politicians, we should ask them to demonstrate that they are willing and able to provide specific solutions to the problems at hand. We should demand that their thinking be clear and that proposed solutions be thoughtful and reflect real-world data and facts, rather than talking points tied to ideological purity or warmed up proposals prepared by well financed political action committees.

We don’t run our businesses that way. Why should we ever tolerate such inflexibility and incuriosity in how our economy is grown?

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Military leaders are shaped by the nature of the conflicts they face. When they become business leaders, as they often do, their leadership styles reflect the times in which they served. I was reminded of this when I spoke recently with Chris Fussell, the managing director of a consultancy called the McChrystal Leadership Institute.

Until recently, the prevailing view of optimal business leadership has been a “top-down” approach. Top-down business leadership centralizes decision making and requires concerted actions by subordinates who are evaluated by how well they perform against strictly defined duties and goals.

The top-down approach has been strongly influenced by military experience. Militaries everywhere, including the U.S. military, have traditionally followed a top-down model. The types of wars they fought (or prepared to fight) required highly orchestrated activities of tens or hundreds of thousands of people on a battle front. It also required managing highly complex logistical chains, to support the movement of these large armies.

For this reason, 2oth century experience was that when military leaders entered the business arena, their skills were a good match for prevailing conditions. At that time, the world economy was dominated by large companies making and selling complex industrial products that required strict manufacturing conformity. Success meant achieving economies of scale that would keep costs down and sales high.

By the beginning of the 21st Century, however, the business world was rapidly and irreversibly changing. Companies like Google, Microsoft, Facebook, Amazon and others were disrupting existing business models. Companies based on new technologies in transportation, biotechnology and energy were challenging existing market leaders. Meanwhile, instantaneous communication was changing how people coordinated and interacted around the world. Success in business now required agility. Top-down leadership was often too slow to respond to rapidly changing market conditions.

While this was occurring in the private sector, people like Fussell were coming of age as military leaders. They realized that the trends that were changing business were also prevalent in warfare. Instantaneous communications and the broad availability of technology had created adversaries that used small coordinated groups to act quickly. It was no longer sufficient for the military to prepare to fight wars along a battle front. These adversaries would never fight that way

What was required were “servant leaders,” people who Fussell describes as having the skills to create an organization that combines strategic oversight with small group agility. Servant leaders provide transparency to subordinates. They don’t prescribe in granular detail the “how” to execute strategic vision, but fully express the “why.”

Subordinates are given autonomy to make rapid decisions in the moment, if necessary, to achieve the strategic goals of leadership. But it is not complete autonomy. Servant leaders require accountability against their expressed goals. This ensures that key values such as ethics and compliance with legal and other norms are honored and that the overall strategic objectives articulated by the leader are followed.

For Fussell, the key to servant leadership is that it is “not enough to talk about it. You have to create a process that drives communication with enough speed and transparency.” This allows groups to form and operate with autonomy, but within a structure of accountability. You get people to work together not by telling, but by showing.

Now an organizational expert helping businesses grow, Fussell regularly sees that the skills he and his peers gained through military service have broad application in today’s rapidly changing economy. He has helped many businesses use servant leadership to make a significant difference.

And in the process, he follows in the footsteps of so many prior military leaders who successfully applied their leadership lessons to business.

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Successful entrepreneurs learn from failure as well as success. I was reminded of this last week when I looked into Loci, a start up in the DC region that a growing number of people are talking about.

Loci is a very interesting mash-up of two big market opportunities: intellectual property creation and Blockchain database application. In talking with John Wise, Loci’s founder, I found his journey in creating the business as interesting as the business itself. His story of failure and reinvention is valuable for anyone who either is thinking about starting a business or is mired in the weeds of trying to succeed and wondering if it’s time to quit.

Wise’s vision was to create a marketplace of invention ideas – a place where inventors could see not only what had been patented, but also what had been invented and had not been patented. He believed that a comprehensive catalogue of inventions would dramatically change how inventions were created, protected and sold. The problem was that the technology didn’t exist to implement that vision.

Over time, after a number of failures, he and his team were able to develop a technology approach that supported the comprehensive information collection his marketplace needed. But commercial success did not follow.  There was an unexpected issue: solving the technology problem wasn’t enough.  As Wise learned, “inventors didn’t want to freely share their unprotected ideas.”

What had been a technology challenge became a business model challenge: how to allow inventors to use and benefit from his marketplace without giving up confidentiality. Wise solved this problem by selling his technology to lawyers, who could then remarket Loci’s technology to inventors. Selling the technology in this way, Wise and his team could utilize the confidential relationship that exists between attorney and client.

Now that Wise had solved the technology challenge and the customer adoption impediment, he had created something that all entrepreneurs dream of: a successful business model that matched his technology with paying customers.

Yet he was still not satisfied, and he asked himself how he could grow his business more quickly. Was there a way to make his marketplace large and complete his original business vision? How could he protect an invention’s confidentiality without using lawyers as intermediaries?  

The missing piece was Blockchain, a rapidly emerging data storage methodology. Blockchain is becoming widely known in startup circles as the backbone of Bitcoin and other cryptocurrencies, but it has broader application. Wise and his team were drawn to its permanence and to the inherent confidentiality of a Blockchain database, features that made it very attractive as the last piece of the puzzle.

Applying this last insight, Wise believes that after a number of failures, he and his team have learned and positioned his business for rapid commercial growth. He views the growing interest in his company and its approach to inventions as validation for his vision and is excited for Loci’s future. But he doesn’t ignore how far he has come, finding recent workdays “almost a lucid dream.”  

Moreover, Wise believes that his experience dealing with prior adversity makes him more confident and prepared. He says that “a year ago I would be freaking out. Instead, today I propose a deal” when he gets calls from much larger potential partners.

Having gone through his startup experience, what advice does Wise give to other entrepreneurs? For him, it is essential to embrace failure and learn from it. It’s an inevitable part of being an entrepreneur, and you “must accept and understand that you are never right, and there is always a better way to do it.”

His conclusion? “Everyone has the will to succeed, but few have the energy.”

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Our snobbery prevents us from adequately training our workers. It’s time we get real about focusing on skill development to grow our economy.

Like it or not, technology and efficiency are changing the types of work available for people to do, and also expectations employers have for the people they hire.  There is less and less tolerance for allowing people to “learn on the job.”

An employer’s need to be confident that a new hire will hit the ground running creates a significant challenge for both employer and job candidate. How do you demonstrate that a person has the right skills?

These days a growing number of employers are unwilling to just assume that the last job the applicant had will have given her the right skills. Eric Friedman, Chairman and CEO of eSkill, a company that specializes in employee skills assessment, points out that employers don’t just rely on a person’s last job description or title, since “the same title can mean very different things across various organizations.”

The value of a good degree from a four-year program may also be decreasing. Bill Phelan, CEO of CollegeFactual, is in the business of matching students up with university choices to create marketable skills. He sees employers relying less and less on where someone goes to school. Instead, they are increasingly focused on applicants’ verifiable skills to “predict the roles a person might play today as well as to predict the roles they might play tomorrow.”

Unfortunately, our attitudes towards worker training have not yet caught up with these changing realities. When it comes to assessing potential hires, or supporting employees’ career development, our snobbery may be holding us back. By looking back at metrics of achievement that are becoming less relevant, we are unwilling to change. So long as we over rely on a “four-year degree” or a job title as the primary measurements of expected competence in a new job, we frown on skills development as something that is necessary only for people who aren’t “smart enough” or willing to incur crushing student debt.

We must get beyond this comfort with the familiar. It prevents us from cultivating people who can be successful in the new economy. Skills training must become a focus of all our educational institutions, including universities, community colleges and high schools. We must teach students not only facts and figures, but how to demonstrate their ability to apply learned skills. And, we must acknowledge that nontraditional sources of learning have a critical role to play.

In addition to embracing skills attainment in our education, we must also expand our willingness to create new avenues for workers to demonstrate competency. A new generation of businesses has been launched that provides employers with assessment tools they can use to evaluate the skills of potential employees. Emerging acceptance of certification of skill attainment is allowing people with diverse educational and work experiences to fill high paying jobs in IT and cyber security. These are some examples that demonstrate the potential for measurement and assessment to match up with skills development.

It’s time for our view of worker training and assessment to change for the better. Alex Murphy, CEO of EmployZone, a job search and skills development business, put it this way: “As our economy becomes more complex, the need for greater clarity on what skills a worker has and what skills they have the aptitude to develop increases.”

Skills based training and assessment will create a workforce that can compete for jobs on the basis of what they know. Who would argue against an economy based on merit?

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