Rick Weddle (Site Selectors Guild): Welcome to Site Selection Matters where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of Site Selectors Guild. In each episode, we introduce you to leaders in 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 a deep insight into the best and next practices in our profession.
In this episode, we have as our guest, Bob Hess, vice chairman, Newmark Global Corporate Services and practice lead for its global site selection platform. Today, Bob will talk with us about diversity and inclusion as a business imperative in corporate site selection. Join me today as we welcome Bob Hess to Site Selection Matters. Bob, we hear a lot today about the evolving importance of diversity and inclusion to business. Take a minute or two if you will to describe exactly what’s meant by that when we referenced diversity and inclusion as a corporate concern, and maybe how this issue has evolved over time.
Bob Hess (Newmark): Thanks, Rick. I’ve been looking forward to the podcast today. It’s a topic that’s been part of my business life and my personal life for many, many years, and it has evolved over time. I mean, there’s a really interesting temporal time component to diversity, and it was awareness back in the, I’ll call it ’70s and ’80s more from a business perspective, obviously, the ’60s, you had social moments, you know, to a concern. And then it moved into a business imperative and then action, various levels of action I think that are starting, and, of course, it’s always been about talent, right?
So this evolution diversity has been about talent attraction, development, and retention, but we’ve come at this talent issue from a diversity perspective, you know, many different ways. And one of the issues that I think that’s impacted diversity is, you know, boardroom directors and how important it is there. Back in the ’70s and ’80s, it wasn’t prevalent in the boardroom. It was left to the boards to interpret this, but there really wasn’t a lot of understanding of it in terms of how you measure it. And, of course, fast forward to the ’80s and the ’90s, I was actually part of a diversity initiative, which more than diversity initiatives came into play in the ’90s, when I was at a Big Four firm.
I was actually a new partner and I was asked to lead the diversity initiative for about 2,500 people in a region of the country. It was one of the more wonderful honors of my life to be involved with that. And at that time, it was about, okay, the business case and making people understand the dimensions of diversity, which are beyond, you know, age and race and ethnicity. They get into class and values and even thinking styles and working styles. You know, that was the discussion, and it may be more accelerated for tech firms and other types of firms, public firms, but then the accelerators happened. These speaking of this timeline, these accelerators and catalysts for the last couple of years and recently, you know, the human experience, social justice, obviously Black Lives Matter and other external stakeholders, climate change, politics, and the labor market again, the war for talent.
The war for talent has always been central to diversity and inclusion and even ESG these days. And the last thing I’ll say about, you know, this evolution, even the word diversity has evolved. It was diversity, right, for a while, then it was diversity and inclusion, now it’s diversity, equity, and inclusion. And I think the most important way to look at that is…and I love the quote from a woman named Camille Chang, chief diversity officer at Boston Scientific, ”Diversity is a given, inclusion is a choice, and equity is the goal.” So, hopefully, soon we’ll be into more measurement and activity and actions around the DEI initiative.
Rick: I like the way that sounds. That’s really interesting, Bob. We’ll come back to that, but you mentioned business case and after all, this is about a business imperative. It’s about site location, business investment, but business case. Let’s dive a little deeper in this issue if you can and talk about how it relates to business interests, income, obviously one’s competitiveness, productivity, and other important factors.
Bob: Right. Well, there’s the business imperative and the business case, many dimensions to that, certainly demographic shifts and trends have been part of that. The whole issue of how we look at demographics and cohorts, you know, millennials and Gen-Z and all the different cohorts of demographics have different thoughts and ideas about diversity. The pace of business, I think, is a big part of that too. War for talent has always been part of that. The workplace reality and the workplace experience, the human experience at work, wellness, other factors, they are attached to diversity and inclusion. The global marketplace, we’re in an increasingly global marketplace. We’ve been global for decades, so we’re working with global clients, global stakeholders, global customers. You know, that means you’ve got to understand diverse ideas, thoughts, cultures, and then, of course, it is all of those things are related to productivity and utilization, talent sustainability, and also problem-solving and perspectives, and maybe even how all those things impact innovation, culture, and then, of course, measurement of that.
And a couple of other thoughts on this, there’s things like employer of choice, many of my clients want to look at, you know, diversity, equity, inclusion as a growing element of being an employer of choice. Again, this is about finding the best talent, creating an environment where that talent can think and problem-solve and work together, and having an experience that, you know, sets them apart from the competition and maybe be an employer of opportunity, that might even be different than employer of choice. And lastly, clients want to with companies, you know, that look like them. As an advisor, they want to work with people that look like them and reflect their values. Some say company culture embraces diversity and comparison for others and views of a workplace and tolerance of hostility in linear thinking.
So, I’m getting into some very strategic and soft factors that are very, very important about what diversity is about and I’ve been thinking about this for many, many years. The bottom line is there is a bottom line about driving better results, return on investment, return on capital deployed. And maybe there’s a new one out there, Rick, in terms of measurements, return on engagement. So I’m not saying I’m an expert on return on engagement, that’s floating around with all these new chief diversity officers and people assigned to make sure these diversity initiatives move into action and measurement.
Rick: You know, Bob, you mentioned this a big issue. It’s finely grained. There’s gonna be a lot to learn as we go forward with it, but let’s go back and unpack a couple of points. You mentioned bottom line. Well, the bottom line always takes me. And you also mentioned in your earlier comments about how you’ve seen it evolve as a location factor over the last few decades, specifically in the boardroom as companies evolve their points of view on this. I’d like for you to maybe unpack that a little bit, as you’ve seen how that’s evolved.
You did mention earlier in an earlier comment, accelerators and catalysts, because, you know, there’s gotta be a fly in the ointment that kind of starts this evolution or this change. And it seems that these accelerators and catalysts are driving customer and stakeholder interest, which is leading to that boardroom awakening. Is that correct?
Bob: You know, I think you captured many of those elements, but it’s a giant algorithm with many other, I’ll call it, variables. And, you know, every time I sit down to read more about diversity and equity and inclusion, the more it becomes better defined and there’s different layers, even diversity can be defined by industry specialization, you know, credentials, functions. I mean, there’s many different layers of diversity.
The boardroom you mentioned too is very important too. Here’s an interesting stat, and I just completed a 15-week board of director training program. Diversity now is almost…even in private companies, usually diversity has been more focused on the public boardroom, public corporations for obvious reasons, and then companies that have missions, you know, around this factor, but now it’s leaking into their private boards, not-for-profit boards, for sure. And as the S&P 500, just in 2019 was the last year that there was not one board that did not have a woman on it.
So it took until 2019 for us to have the S&P 500 actually not be all male. So some said that’s not progress, but again at the board level, there is much more discussion about diversity and ESG and other initiatives, and that they do need to come into place. And so that change, I hope it will be faster and be accelerated. And because of all of these things happening in our society right now, but you know, there is progress, but it could be faster.
Now, when you recognize everything you’ve mentioned, it does impact the location decision. So all these factors are leaking into our location selection algorithm, Rick. And I just interviewed a company last week, a very prominent company that moved from the Bay Area to Texas. And I talked to the chief people officer, He brought up the fact that was part of their decision from the Bay Area to Texas, a part of Texas, where they were allowed to have a broader diverse perspective as they hire in the future versus what they had in the Bay Area.
So this was a very interesting factor in the relocation. That’s not in the newspaper, it was about incentives and the business climate, lower costs in Texas. So, but obviously, when you see a chief people officer talk about that, that’s what we’re seeing right now, Rick. It is coming into the board decisions, location is maybe a weapon. Maybe that’s not the right thing to say, but the location is a variable now that’s going to be attached to diversity more and more of these as we move forward.
Rick: Very, very interesting. You know, some of those, as you say, it’s the big things, the incentives that get the big attention, but these other, maybe subtle is not the right word, but these other less visible or noted factors are really starting to drive parts of decisions. So, let’s see if we can unpack that a little bit, Bob. Do you have some examples that you, I don’t wanna get into proprietary areas, but some examples you might share with us about this? Maybe a couple of specific, you said industry-specific, you know, the technology industry, the life science industry. What are some examples where you see this evolution occurring?
Bob: Well, I will mention a couple of three examples and they’re fascinating. I can’t say the company name, but again, I just learned so much and been so encouraged that in each of these clients, they all had a chief diversity officer or a chief people officer or somebody that was evaluating our reports in terms of how we evaluated this issue. So that was really, really interesting. That’s never happened to me. I’ve been doing this for 33 years. In the last three or four years, I’ve seen that happen occasionally and I’m wondering if it’s going to happen even more again, because of where we’re headed with DEI.
So one thing that’s come up on location factors in the case studies is STEM skills, science, technology, you know, engineering, math. I don’t know if you’ve seen the movie called ”Hidden Figures.” So, this is about the war for talent and getting more people with different backgrounds and perspectives and being open to having people move into STEM in these locations and places.
And so, this is now being evaluated in terms of how we’re populating these critical skills into the location decisions. It’s about labor availability, demographics, you know, quality of the workforce. That factor has never changed. Labor is number one in the boardroom. Now we’re adding diversity as one of those sub-criteria. And for this client, and this was a life science client that was doing their first manufacturing project outside of California, outside of Palo Alto, they went to North Carolina, we evaluated some very interesting variables in terms of educational attainment, what’s going on in the schools. You know, obviously, the whole demographic makeup of the area. And, of course, there weren’t quotas or anything, but there was a recognition that we wanted to look at the diversity sub-criteria within the demographic profiles that we did.
The other one is for you know, a very, very large, you know, tech firm, a global firm with operations all over the globe. They hire us every year to look at their portfolio of real estate and to check things in terms of the diversity of that area and if they’re making progress because it’s part of the mission of the company. So it’s a big…as my colleagues would call it, “Oh, we’re doing a labor market study.” We did a labor market study, but we had different variables in terms of skillsets STEM, you know, how, you know, schools, economic development groups, community colleges, universities are working together as issue, which is really interesting.
And then the last one I thought was just fascinating. I worked for a head company headquartered in New York, that had a New York brand, and, of course, New York has been relocating and carving out, I’ll call it, back-office operations for decades and looking at lower-cost solutions. By the way, COVID-19 has accelerated that trend, you know, from some of the tier one higher cost metros to tier two and tier three. The Guild actually noted that in our survey.
And this client was called Project Piano. The finalist locations were Dallas, Charlotte, Atlanta, Nashville, and this was a New York company. And the financials looked great. All the typical location algorithm, the cost, the conditions, the financial model, everything looked great. But at the end, the chief diversity officer and HR stepped in and said, wait a second, this is going to be a risk for some of my people who I want to relocate from New York that might have a different perspective about DEI in these places that I listed. Bathroom bill in North Carolina, flag issues, you know, laws being passed.
And again, I’m not being political here, but it was brought up in the boardroom and we had to do a study. We had to stack up red, yellow, green, look at these 10 variables and what’s going on. So, we had to find really interesting sources of this data. The economic developers didn’t necessarily have the data. So we had to find comparative data that would actually measure DEI inclusiveness type issues, including things like LGBTQ, you know, and how that’s recognized legislatively, etc., within that state and region.
Rick: Wow. That’s powerful. You know, a couple of things come to mind, just listening to you talk through this last question. One is you mentioned chief diversity officer. For those of us on the economic development side for the last 30 or 40 years, we’ve always wondered and wanted to know who are the key decision-makers on any given project? And we’d look at finance officers and CEOs and all that. So that’s a new name. EDOs out there, chief diversity officers, those are people that are going to start to factor into these decisions going forward if I’m believing and hearing what you’re saying about that. I think that’s very interesting.
So let’s take that a little bit and let’s talk about the economic developer’s side of the equation. So how do you see this new interest in diversity and inclusion changing what’s really expected from EDOs or the people on the receiving end of your corporate RFIs? You mentioned 10 variables, you mentioned new measures in those things. Do you have thoughts on how this tight labor market is maybe causing those clients to look at talent in different ways and what does the EDOs need to be doing to respond to that? That’s I know that’s a big mouthful of a question, but let’s take a run at it.
Bob: Yeah. So you know, I think there’s a lot of great EDOs out there that recognize the importance of this issue under the concept of talent and labor and demographics, some more so than others that might be recruiting firms that are more mission-aligned with these tech firms, life science firms. I mentioned this financial services client. And then, of course, I’ve seen many activities. I’ll point out the Atlanta Chamber, you know, that have actually looked at how they evaluate this issue, the information they have, how we go back and forth on things. You know, do they have affinity groups? Do they have, you know, awareness platforms within the local economic development groups? But it all gets back down to leadership in the communities and how they, again, assess is this like a public company, a private company, a not-for-profit how important it is to them.
So if you have an area that’s, I guess not diverse from a typical definition of diversity, this is something you can’t change overnight, but you just have to be aware that creating an inclusive, welcoming environment, you know, for new clients that look global and they need to go local, you have to think about all of those elements from people to cost of living, to quality of life. Even community attractiveness and placemaking are parts of this to make sure that you know, the workforce of the future is going to be, you know, considered in this whole DEI, you know, location factor.
You know, one thing that I do want to bring up is that on the economic development side, I’m seeing in some of our incentive compliance projects and applications where this topic has come up, there’s questions around it, and they ask about, are there initiatives in place for the company that they’re attracting? And I’m not going to say what states, but we have seen that come up a couple of times. And, you know, I think that’s encouraging. I don’t say it’s a knockout factor for both entities, but they’re having a dialogue, right, around this topic and recognize that it’s important to companies and their missions, and it should be for a community and a region also to receive that company and make sure it’s a good fit and a good match.
Rick: That’s a great run-through set of factors there for EDO’s perspective. You know, there’s the old saying about, “What gets measured gets done.” It could be now that how these things get measured determines what you get too. As you look and evolve these new metrics, don’t you see these metrics becoming…it’s going to take a while for it to all settle down to know exactly how you measure diversity and how a community can do that. I mean, you know, how to measure electrical power, you know, there’s a lot of things we’ve learned how to really measure with great specificity, but this has been moving from more subjective now to more objective, I think, do you agree with that?
Bob: Well said, and that doesn’t mean that there’s going to be legislated metrics, you know, at the public sector level, you know, to receive a company. I don’t think we’ll see that for a long time, but what we’ll need to see is things like platforms and initiatives that preach to a company that you’re doing whatever you can to build the right pipeline, bring more people into STEM, you know, build that fundamental base that keeps companies competitive, right, keeps, you know, the walls full of wonderful people that allow them to innovate and be competitive and be profitable. This is still about profitability, the business case, right?
And then that could be things like, well, how are you working with intercity colleges? Actually, the CEO of our company is working with intercity colleges in the New York area as a source of labor. Traditionally, we haven’t tapped that. People go into intercity colleges and make them aware of opportunities. Our economic development groups go into traditional places to spend time with people and show them these opportunities. That could be black colleges, you know, minority areas, inner-city areas. So it’s the actions, Rick, that I think will go a long way to demonstrate that we’re bringing diversity, equity, inclusion together with communities and corporate clients with things like that, as opposed to like, you know, legislative metrics, which, you know, actually might even have the opposite effect.
Rick: Interesting because it’s going take a while to get this right as everybody works to figure it out correctly. Let’s turn back a little bit though because you mentioned bottom line earlier and boardroom and what gets the attention of companies and they’re always the big factors like basic costs and basic fundamentals of site selection, you know, the factors that you’ve always looked at. Despite that evolving importance of these new metrics, those old basics still remain important and they’re likely to do so for some time. Is that right?
Bob: Yes, Rick. You know, after doing this for over 30 years and, you know, almost 300 times in 20 countries and if I can be as humble as to speak for my colleagues and the Site Selectors Guild, there’s still basic fundamentals about critical location factors, industry fit, supply chain and logistics, everything that’s going on right around our economy, the next war for talent sites, buildings, you know, the industrial site, they’re disappearing overnight right now.
So all of these things enable a business to get in, produce, make product, be profitable, satisfy customers. But within that context, you know, there’s just an enlightenment and a necessary enlightenment that we have to, you know, be more inclusive about the people that can benefit from these site select decisions. And it’s only gonna, again, increase innovation and, you know, a good broad thought within companies and, you know, allow everybody to experience what’s good in our economy and what’s gonna be good economic impact for all stakeholders. So, and again, the boards and the executives really have to drive a lot of this because the employees are gonna demand it if not command it. And I think we all can play a role in that. We’ll call it bottom line plus, and I hope diversity, equity, inclusion is a big part of that plus
Rick: Bob, you’ve given us a lot to think about, I like that idea, bottom-line plus. What a great conversation? But really that’s all the time we have today. So, I’d like to say thanks to Bob Hess, vice-chairman of Newmark for talking with us today about diversity, equity, inclusion and the business imperative associated with that on this episode of ”Site Selection Matters.”
Bob: Thank you, Rick. Take care.
Rick: Thanks for listening to this episode of Site Selection Matters, and thanks to Bob Hess for helping us get inside and better understand the evolving importance of diversity and inclusion as a business imperative in site location. What an informative discussion and one that leaves us with a lot to think about? Again, I’m Rick Weddle, president of Site Selectors Guild.
This podcast episode presents my views and the views of my guests and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. We hope you’ll subscribe to the Site Selection Matters podcast on Apple Podcasts, on Stitcher, on Spotify, or wherever you listen to your podcasts. We look forward to bringing you some great discussions in the year ahead. Until next time, good day.