WHERE ARE ALL THE NEW JOBS COMING FROM?

LOOK ON MAIN STREET!

John Schuetz

OBJECTIVES OF LOCAL ECONOMIC DEVELOPMENT

THERE ARE REALLY ONLY TWO OBJECTIVES IN LOCAL ECONOMIC DEVELOPMENT:

• CREATE JOBS

• INCREASE LOCAL REVENUES

• WHAT IS THE STRATEGY OF MOST ECONOMIC DEVELOPMENT ORGANIZATIONS TO ACCOMPLISH THIS?

1. 90% 0F ECONOMIC DEVELOPMENT EFFORT (AND BUDGET) IS SPENT ON NEW BUSINESS ATTRACTION: – STAFF IS SPECIFICALLY ASSIGNED TO NEW BUSINESS ATTRACTION.

– ECONOMIC DEVELOPMENT WEBSITES ARE TARGETED AT IT.

– INDUSTRIES ARE TARGETED NOT NECESSARILY TO MATCH THE EXISTING WORKFORCE, BUT BECAUSE THEY ARE PERCEIVED TO BE FAST GROWING.

– STAFF MANPOWER IS ASSIGNED TO MONITOR AND MAINTAIN CONTACT WITH TRADE AND INDUSTRY ASSOCIATIONS. IN 2013 THERE WERE 90,908 INDUSTRY TRADE ASSOCIATIONS PER ASAE, THE CENTER FOR ASSOCIATION LEADERSHIP.

– BUDGETS ARE ALLOCATED PRIMARILY TO SUPPORT THE BUSINESS ATTRACTION EFFORT.

HOWEVER… • WHILE EVERY ECONOMIC DEVELOPMENT ORGANIZATION IN

THE NATION IS LOOKING FOR THE “BIG FISH” – THAT “SUBSTANTIAL” (MORE THAN 1,500 EMPLOYEES) CORPORATE RELOCATION - THE NEXT TOYOTA TO PLANO; TESLA MOTORS TO RENO; OR OCCIDENTAL PETROLEUM TO HOUSTON, THE UNITED STATES DEPARTMENT OF COMMERCE IN THEIR 2012 ANNUAL REPORT STATED THAT THERE ARE LESS THAN 200 SUCH CORPORATE RELOCATIONS ANNUALLY.

• WHEN YOU CONSIDER THAT THERE ARE MORE THAN 4,100 ECONOMIC DEVELOPMENT ORGANIZATIONS (2013 IEDC MEMBERSHIP) COMPETING FOR THEM, THE ODDS OF LANDING THE BIG FISH ARE NOT GOOD.

SOMETIMES WE MISS THE OPPORTUNITY RIGHT IN FRONT OF US

LET’S LOOK AT THE SOMETIMES OVERLOOKED “MACHINE GUN”

OF NEW JOB CREATION - RETENTION THE RSH GROUP IS BASED IN IRVINE, CALIFORNIA. RETENTION IS A BIG

ISSUE IN THE “GOLDEN STATE.” AS MANY COMPANIES CONSIDER LEAVING THE CURRENT CALIFORNIA BUSINESS ENVIRONMENT, IT HAS BECOME “GROUND ZERO” FOR MANY EDC’S BUSINESS ATTRACTION

PROGRAMS, OFTEN AT THE EXPENSE OF THEIR RETENTION PROGRAMS.

WHY IS A SOLID MAIN STREET RETENTION PROGRAM SO VITAL TO A SUCCESSFUL ECONOMIC DEVELOPMENT PLAN?

• THE ESTIMATED NEW JOB CREATION IN EXISTING COMPANIES AS A PERCENTAGE OF TOTAL JOB CREATION AS WE EMERGE FROM THE CURRENT RECESSION MAY RANGE AS HIGH AS 63% BY THE U.S. DEPARTMENT OF COMMERCE/SBA. SOME MONITORS OF THE ECONOMY SUGGEST EVEN HIGHER PERCENTAGES.

• THE VAST MAJORITY OF THESE JOBS WILL BE IN COMPANIES WITH 500 OR LESS EMPLOYEES. IN 2013, COMPANIES WITH 200 TO 500 EMPLOYEES ACCOUNTED FOR 48.5% OF THIS NUMBER; 20-200 EMPLOYEES 34.5% AND UNDER 20 EMPLOYEES 17% (SBA Office of Advocacy/U.S. Census Bureau Statistics).

• KEEPING A BUSINESS IN YOUR COMMUNITY IS LESS COSTLY THAN ATTRACTING NEW INDUSTRY. INDUSTRY ATTRACTION EFFORTS MOST OFTEN INCLUDE SIGNIFICANT TAX DEFERMENTS, CASH INCENTIVES AND SUBSTANTIAL INFRASTRUCTURE DEVELOPMENT COSTS. EXISTING BUSINESS MAY SEEK SOME OF THESE INCENTIVES, BUT MORE OFTEN THAN NOT, THE FISCAL COST PER JOB CREATED IS LESS FOR AN EXISTING BUSINESS THAN FOR A BUSINESS BROUGHT IN FROM OUTSIDE.

• MOST BUSINESSES WOULD RATHER EXPAND IN PLACE THAN RELOCATE.

WHAT IS YOUR RETENTION PLAN?

WHILE EVERYONE AGREES THAT RETENTION IS IMPORTANT,IT’S HARD TO GET YOUR ARMS AROUND A PROGRAM THAT DEMONSTRATES TANGIBLE BOTTOM LINE RESULTS TO EXISTING BUSINESS. VERY FEW ECONOMIC DEVELOPMENT ORGANIZATIONS HAVE:

• STAFF ASSIGNED SPECIFICALLY TO RETENTION, NOT AS A COLATERAL DUTY.

• HAVE A SECTION ON THEIR WEBSITE EXCLUSIVELY FOR EXISTING BUSINESS DEVELOPMENT ASSISTANCE.

• TARGET EXISTING INDUSTRIES FOR EXPANSION, NOT JUST RETENTION. THEY ARE YOU BEST SOURCE FOR NEW JOBS IN THE SHORT TERM.

DEVELOP YOUR PLAN YOU CONTROL LOCAL RENTENTION AND EXPANSION, AND THE SUBSEQUENT JOBS. TO QUOTE JIM CLIFTON, CEO OF GALLUP, “IT IS WRONG TO IMAGINE THAT WASHINGTON HAS THE JOBS SOLUTIONS. JOB CREATION IS A CITY PROBLEM. THERE IS A GREAT VARIATION IN JOB CREATION BY CITY IN THE UNITED STATES. SAN FRANCISCO AND SILICON VALLEY KEEP PUMPING AWAY WHILE DETROIT ISN’T. AUSTIN’S CART WORKS WHILE ALBANY’S DOESN’T. CITIES NEED TO LOOK INWARDLY AND SAY “WHAT CAN I DO TO CREATE GREAT ECONOMIC ENERGY, TO BRING CUSTOMERS FOR ALL EXISTING COMPANIES AND START UPS?”

WHAT CAN YOU DO • ADD THAT DIRECTOR OF BUSINESS RETENTION STAFF MEMBER.

• MAKE BUSINESS RETENTION ON YOUR WEBSITE MEAN SOMETHING TO LOCAL BUSINESS: – LIST ALL AVAILABLE PROGRAMS AVAILABLE FOR EXPANSION ASSISTANCE

TO LOCAL INDUSTRY IN YOUR STATE, AND LOCALLY, ESPECIALLY THOSE THAT HAVE RETROACTIVITY FOR EXISTING BUSINESS SUCH AS ENTERPRISE ZONES.

– DEVELOP PROGRAMS THAT PROVIDE CAPITAL AND CASH FLOW ASSITANCE TO EXISTING BUSINESS WITHOUT EFFECTING LOCAL TAX REVENUE. BELIEVE IT OR NOT, THEY’RE OUT THERE AND AVAILABLE, AND TAKE IT TO THEM, DON’T WAIT FOR THEM TO COME TO YOU.

– MAINTAIN PHYSICAL CONTACT WITH C-SUITE EXECUTIVES OF THE MAJOR EMPLOYERS IN YOUR AREA. SATISFIED EXISTING BUSINESSES CAN NOT ONLY BE THE COMMUNITIES BEST AMBASSADORS TO AN INDUSTRY, THEY CAN TELL YOU WHEN THEY MAY BE EXPANDING, OR WHO IN THEIR INDUSTRY MAY BE EXPANDING.

• IF AN EXISTING BUSINESS IS A THRIVING AND GROWING CONCERN, AND FALLS INTO AN INDUSTRY CONSIDERED HIGH GROWTH, THEY WILL BE THE TARGET OF RECRUITMENT ACTIVITIES BY OTHER COMMUNITIES, ESPECIALLY IF YOU ARE LOCATED IN WHAT IS CONSIDERED A HIGH RECRUITMENT AREA SUCH AS CALIFORNIA, ILLINOIS OR NEW YORK. THESE COMPANIES SHOULD BE GIVEN PRIORITY TREATMENT. IT’S HARDER, AND MORE EXPENSIVE, TO REPLACE A COMPANY THAN TO KEEP THE ONE YOU HAVE.

• AS A RESULT OF THE RECENT RECESSION, AMERICAN BUSINESS IS SEEING A RECORD NUMBER OF MERGERS AND ACQUISITIONS. WHEN A COMPANY IS ACQUIRED OR MERGES MANY TIMES IT IS QUICKLY FOLLOWED BY A CONSOLIDATION OF FACILITIES AND SUBSEQUENT JOB LOSS IN THE “LOSING” CITY. IT IS VITAL TO YOUR ECONOMIC DEVELOPMENT PLAN THAT YOU HAVE A RELATIONSHIP WITH EXISTING C-SUITE MANAGEMENT OF YOUR EXISTING COMPANY BASE THAT SHOULD THIS OCCUR, YOU ARE AWARE OF IT BEFORE IT HAPPENS AND YOU CAN TAKE A PROACTIVE APPRAOCH TO PRESENT YOUR CASE VERSUS COMPETETIVE LOCATIONS FIRST. THE PARENT COMPANY IN THE ACQUISITION WILL UNDOUBTEDLY ENGAGE A STUDY OF CONSOLIDATION LOCATIONS. HAVE YOURS THERE FIRST. “BUSINESS FRIENDLY” GOES A LONG WAY.

• YOU SHOULD DEVELOP A RELATIONSHIP WITH A LOCATION MANAGEMENT CONSULTANT GROUP THAT CAN PROVIDE BOTH A NEUTRAL THIRD PARTY ANALYSIS OF COMPETING LOCATIONS, AND CAN ALSO MAKE ANY NECESSARY FACE TO FACE CONTACTS NEEDED IN DISTANT LOCATIONS TO REPRESENT YOU. THIS CAN BE DONE ON A CONSERVATIVE BUDGET ON A PER CONTACT BASIS.

• THERE ARE 5,930,132 COMPANIES CURRENTLY IN THE U.S., 1,268,303 HAVE 100 OR MORE JOBS (U.S. Census Bureau) REPRESENTING 58% OF ALL NEW JOB CREATION . THEY ARE ALL LOCATED ON SOMEONE’S MAIN STREET. MAKE SURE YOU KEEP THEM ON YOURS.