Episode 12 – Changes and Challenges in Economic Development Today
Rick Weddle: Welcome to Site Selection Matters where we take a closer look at the art and science of site selection decision making. I’m your host, Rick Weddell, President of the Site Selectors Guild. In each episode, we introduce you to leaders of the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession.
Today we’re talking with Jeff Finkel, President of the International Economic Development Council for IEDC, the world’s largest organizations of its kind to service to economic developers. Today, Jeff will talk with us about changes and challenges facing economic developers today. Join me as we welcome Jeff Finkel, to “Site Selection Matters.”
Jeff, today, we hear a lot about change. It seems everything’s changing. There’s a new era of globalization, robots are replacing workers, self-driving cars, unemployment is at historically, almost impossibly low levels, communities are actually paying remote workers to move to their city. The list of change goes on and on. Why do you think this is going on? What exactly does all this mean for economic development, both today and tomorrow?
Jeff Finkel: Rick I think the economic development world is in a real I don’t want to use the word panic, but this change is coming so quickly. Folks are having a hard time putting their heads around much of this. We’re addressing issues at the International Economic Development Council that 10 or 15 years ago; I would have never imagined would be on our agenda. Things like we’re looking at the underserved people who have not been able to have good employment in the past, unemployment rates are so low, that if we don’t figure out how to bring some of those folks into the marketplace, into the labor market, we’re going to miss out on growth opportunities in many of our communities.
We’re looking at issues like diversity, we’re looking at it in terms of the complexion of our country has changed a great deal. Do we have Latinos working in mid-level and upper management? Do we have African-Americans represented? Do we have women represented? And do we have people represented on our boards in ways that we didn’t have them before? So, there’s a whole demographic shift going on that is a major change.
The second, we know these trade wars that we’re having with China and the way the President’s pushing them, not China out of the ballpark right now in terms of a country that would make investments here our workers aren’t up to speed. So, our members are having to learn workforce, we’re having to chase supply chains and try to figure out how we can be competitive with others. And many of our traditional clusters are no longer available here in the United States.
These changes, I would say, on top of how do we address issues like placemaking, making the places where we work more competitive. I would say probably drives, particularly small town or medium-sized community economic developers a little skits of phrenic as they’re trying to put their heads around many of these issues.
Rick: You know, Jeff, when I got into this business back longer ago than I’d really want to comment on, it was largely a transactional business. But listening to you talk about these changes, these shifts, this upheaval underway, it really is moving to a systems-oriented business in it. It’s less transactions, less deals, more systems, and processes.
Jeff: I think its systems and processes there still is transactions going on. If you look at Amazon HQ2 and, you know, the chase for incentives, there’s still a lot of economic tools out there. But beyond that, it’s also some significant policy shifts. Look what happens when some of these states come up with a particular policy direction that is maybe deemed by some to be unfair to the LGBTQ community. Well, all of a sudden, many of the major companies say we’re not going to go there.
In fact, if we announce a recent investment, so to have your best game face on you need to know how to do transactions. You need to know how to do systematic communication strategy around where you’re going, and third, you need to have some policy responsiveness. If your state legislature goes crazy, and that could change the types of companies that might be thinking about coming your way.
Rick: You know, you mentioned policies and I think public officials and early on in the business, you know, they were almost…they never met a deal they didn’t like, but today, the change underway, you know, I hear of communities that actually are opposing growth and opposing new project situations where both citizens and elected officials are pushing back on projects. Is that really happened? Do you see that among your membership?
Jeff: You know, I do see it and I think it’s a reflection of economic good times. You can get away with that when unemployment is low everybody’s feeling a little fat and happy. But you bump the unemployment rates up two or three points, you start to enter a recession, and then people get religion again. And they realize that you can’t afford to chase away jobs. I mean, look what we saw in New York City, as they decided to take on what should have been a big win for them Amazon HQ 2 second location, they effectively chased away what 25,000 jobs and the time has been tougher.
You know, the legitimate politician would have been run out of town on rails for chasing off those types of jobs. And I think it’s cyclical, excuse my pronunciation that’s going on right now, but you can’t do that in bad times.
Rick: Yeah, you know, you can’t really have an economic development conversation today as you talk about these. The environment we’re in the projects that get done without some conversation around financial incentives. What are you seeing develop in the world of economic inducements, and incentives? And whether any of that’s new today.
Jeff: So, you know, IEDC has never taken a position on incentives. So, a part of what I’m about to say is probably just Finkel’s personal opinions not those of the organization. But I’ve been watching incentives for 25-30 years and, you know, we seem to get to a high point every now and then, and we think they can’t go any higher. I remember when many of us were shocked at the size of the Mercedes Benz Sport Utility Vehicle Assembly Facility in Alabama. And, you know, it was about that same time, we realized that many communities had not thought about recisions, clawbacks if they put money out on the table.
Today, we’re at multiples of what we put into Mercedes Benz. It seems to me that these things tend to be more political statements than economic statements sometimes. Was Wisconsin’s deal with Foxconn the right price? You know, I haven’t done the numbers, but it seemed awfully high, you know, our communities going to the table and putting too much on the table when and not getting enough back. And we’re seeing new record sizes of some of these deals.
I’m encouraged; however, I don’t know if you saw the Business Roundtable just came out with a statement within the last 10 days that said companies shouldn’t look at three things in the future. One, certainly return to investors but that has been the only thing they been focused on in the past. But they’ve also said they think they ought to be looking at care of their existing workforce and making sure that they are paying fair wages and benefits.
And third, they’re talking about return of investment to the community. Well, that mean it change in this incentive game that we’ve gotten so zealous at maybe. I’m not going to hold my breath right now, but I did like the turn of words that the Business Roundtable used with by some of the largest corporations in the world and saying that they’re now going to look at three bottom lines it’s not just one.
Rick: Yeah, I think that’s important. That’s very important glad you brought that up. When we both got in this business years ago publicly traded companies talked about their stakeholders and their stakeholders were their investors were the shareholders, their stakeholders were their employees, and their stakeholders were the community in which they went into. So, it’s kind of maybe it’s deja vu all over again, that we’re finally waking up and realizing that companies need to look at this in a much more holistic way as we go about it.
I used to always tell my elected officials, that my job as an economic developer was to help them understand where the business deal stopped, and the political deal began when they were negotiating incentives. And as long as we made it a good return on investment, I was comfortable with that. Sometimes, though, I have to say, they went a little further in their zeal to win a project and you can’t dial them back once… but you can give them that information and if they want to go further, it’s up to them.
Jeff: And some of them view that as their political legacy. I was the person that brought XYZ Company to our community, no matter what the cost.
Rick: Yeah, absolutely. Hey, Jeff, let’s turn now to the profession of economic development, not just the business of our economic development. What changes if any, do you see on the horizon for economic developers themselves and the profession that we work in called economic development?
Jeff: Well, the first thing I’ve seen is, you know, we have in this business, a fair number of baby boomers. And, you know, baby boomers are starting to depart the field. And so, we’re watching transitions across the country. I mean, Rick, you were a full-time economic developer. You are now, you know, working with the Site Selection Guild, more of a consultant and, you know, you were big shoes that had to be filled. Michael Langley recently left he’s now doing consulting, big shoes to fill. Ronnie Brian has left big shoes to fill. And we’re seeing some of that all around the country. So, the world’s… we are starting to see I suppose we could call it economic development leadership 2.0 as we watch who starts to fill many of those jobs.
Second, the business was different before, I’m not to say that all three of you guys were big-game hunters. I think that would be trivializing what you did, but it was you understood your markets, you understood the type of companies that would most likely come there. You know, as I said, a few minutes ago, economic developers need to understand talent attraction, they need to understand different tools to talk to companies about, how many welders do you have in your community?
That was always a part, but right now it’s a greater factor than, necessarily what’s the property tax in your community? Or how close are you to the airport? In addition, many of our members are having to understand international trade, they’re having to understand linkages with their local university. Now you worked with the Research Triangle Park, you got that and when you were in Phoenix ASU was a huge player in your world. But NUCF probably was in Orlando, but that’s not many economic developers understood how to work with their…or understand how to work with their universities or their community colleges. These are new relationships, new skill sets.
April Young said to me many, many years ago, she’s a past chair, economic developers have to work in a world of a non-hierarchical environment. And what she was saying by that is that there is not necessarily a clear hierarchy in economic development, you have to be able to talk to the publisher, you have to be able to talk to the city council, you need to be able to talk to the bank presidents. And you’re out there kind of on your own and these are skill sets that many people have to work very hard to try to build.
Rick: I think you’re right, Jeff, I always like to kind of frame that in the way of thinking about the difference between span of control and sphere of influence from an economic developer’s perspective. Most of us would run very small, relatively small organizations and have a very limited span of control. But if they had those relationships, and could work with all those different constituencies, the economic developer had a very large and extended sphere of influence. And that could enable him to work in these different ways and be able to be successful over the longer term.
Let me ask another question and I don’t want to put you on the spot, but as CEO of the world’s largest Economic Development Association, what are your priorities over the next couple of few years? And also, as a follow up what if anything keeps you up and awake at night?
Jeff: So, I’m going to do the second one first, what keeps me awake at night? And what I think we have learned, and maybe it’s just having been in this job for 33 years, the world changes very quickly. If we think about how quickly that recession hit us in 2007, 2008 you know, we went from relatively good times to, you know, massive unemployment and financial institutions, not lending, and overheated mortgage market which crashed and burned very quickly.
If we go back to 2001, when September 11th there, you know, our tourism market crashed and burned very quickly. Planes weren’t flying and then when they were flying, again, they were flying almost empty in many cases. What happens in this Chinese trade issue that we’re dealing with now certainly has kept wage levels from growing and that’s been true for quite some time as we learned the words outsourcing and offshoring. What’s next, you know, what can cripple this economy next or harm it? And how do… and what role do economic developers play in those recovery periods?
I think what we constantly need to be thinking about is understanding what the economic developer role is when we get into these difficult situations. In terms of the future, for IEDC and what I would like to say, you know, one of the things that we keep learning is that many of our public economic developers are concerned about how much do their city councils, county government, county government leaders, know about economic development? How can we influence their educational process in the future? How can we train boards of directors to understand what are the issues that they deal with in the economic development space? And how do we train better leaders in this field of economic development?
I mean, those are top of mine. Those are issues that the board has wanted us to deal with. One of the issues that IEDC has moved out on for quite some time, and you’re very much aware of this record since 2005 after Katrina hit the Gulf Coast. IEDC has been helping communities deal with the economic recovery after a disaster. At this point, that is not a science, it is still an art, but we need to help communities get better and more resilient, both in terms of thinking how they harden their infrastructure, because they’re many communities that aren’t going to get hit.
And they probably know they’re going to get hit at some point and they still act like they’re unprepared when they do ultimately have a tornado, hurricane, flood, you name it. And then second, we need to get both as a nation and as regions better equipped to recover quicker when those things do hit.
Rick: Jeff, you’ve really given us a lot to think about in our conversation today. You’ve hit the high points of current issues. You’ve taken us deep and you let us peer into your crystal ball what a great conversation. But that’s really all the time we have. So, let me say Thanks, Jeff, for talking with us today on this episode of Site Selection Matters.
Jeff: Thank you, Rick.
Rick: Thanks for listening to this episode of Site Selection Matters. And a special thanks to Jeff Finkel for helping us pull back the curtain. Take an inside look at the changes and challenges facing economic developers today, but an informative discussion, and one that certainly leaves us with a lot to think about. Again, I’m Rick Weddell, President of the Site Selectors Guild. I hope you’ll subscribe to the Site Selection Matters Podcast on Apple Podcasts, on Stitcher, on Spotify, or wherever you listen to your podcast. We look forward to bring you some great discussions in the year ahead. Until next time, good day.