News & Views

Episode 56: Talent is the New Currency of Economic Development (And Other Insights from the Site Selectors Guild)

In the world of corporate location decision making, The Site Selectors Guild Annual Conference is a “not to be missed” event. So we took “The Project” on the road to Salt Lake City, Utah to sit down with ten Guild members for a discussion about a single topic: Talent. Here are key insights from our interviews with Darin Buelow (Deloitte Consulting LLP), Dennis Donovan (Wadley Donovan Gutshaw Consulting), Deane Foote (Foote Consulting Group), Jay Garner (Garner Economics), Larry Gigerich (Ginovus), Jeanette Goldsmith (Strategic Development Group), Chris Lloyd (McGuire Woods Consulting), Seth Martindale (CBRE), Mike Mullis (J.M. Mullis) and Rajeev Thakur (Newmark Knight Frank) all distilled into an 18-minute episode.

Andy Levine (DCI):  In corporate location and economic development circles, The Site Selectors Guild Annual Conference is the Super Bowl. The conference sells out within an hour of the registration opening up. This year, 51 of the world’s top site consultants and 300+ economic development and investment promotion professionals come together for two days of presentations, discussions and networking.

Last year, I got to attend the conference in Cincinnati so this year it was Andy’s turn. Over the course of two days, he interviewed ten consultants from ten different consulting firms.

Patience Fairbrother (DCI): Last year, I got to attend the conference in Cincinnati so this year it was Andy’s turn. Over the course of two days, he interviewed ten consultants from ten different consulting firms.

Andy: We focused on a single topic – talent. With a tightening labor market and companies across the USA concerned about workforce, we wanted to better understand how this was impacting the site selection world. So armed with a digital recorder and two microphones, I boarded a plane for Salt Lake City, the location of this year’s conference.

So welcome to episode 56 of “The Project: Inside Corporate Location Decisions.” I’m Andy Levine of Development Counsellors International.

Patience: And I’m Patience Fairbrother, also with DCI and Andy’s co-host of “The Project.” So Andy what were the big takeaways from the Conference this year?

Andy:  It was a terrific conference with quite a bit of news.

  • The Guild hired its first-ever executive director, Rick Weddle, who has a long and successful history managing economic development groups across the U.S.
  • They also added nine new members bringing the total to 51 location strategists. So the club is getting bigger.
  • Finally, the most anticipated session of the conference was a fireside chat with Holly Sullivan, the leader of the Amazon HQ2 project and Stephen Moret of the Virginia Economic Development Partnership and the successful suitor of Amazon HQ2. Mark Williams, who we’ve had on the podcast before, did a great job facilitating this standing room only session.

And of course, everyone kept asking, “Where’s Patience?”

Patience: I understand there was a dinner-dance with a Motown group. Do we have to worry about any video of you dancing up a storm at the conference, Andy?

Andy: Luckily, there is no evidence of that.

Patience: Since there was so much content out of these ten interviews, we decided to break this up into two podcast episodes. The first one which we’ll share today is titled “Talent is the New Currency in Economic Development.” And that’s a quote from Darin Buelow, Principal of Deloitte Consulting.

Andy: Here’s our first of two reports from the 2019 Guild Meeting. So I started out each interview with a simple question:

“Over the course of your consulting career, can you share how “talent” has changed as a factor in site selection decision making?”

And not surprisingly, the consultant’s responses started to sound like a broken record.

Dean Foote (Foote Consulting Group): Well, there’s no question it’s become more important and it’s probably the most important factor that we look at for site selection.

Jeanette Goldsmith (Strategic Development Group): It is much harder today to quantify and qualify a talent pool than it ever has been before.

Dennis Donovan (Wadley Donovan Gutshaw Consulting): It is by far and away the number one consideration for shaping location decisions.

Darin Buelow (Deloitte Consulting): Talent has always been important in site selection, but it’s especially so now.

Mike Mullis (J.M. Mullis Inc): Changed…not a realistic statement but 1,000%.  It’s not that much.  It’s that dramatic. We now have a team that…all that they do is labor workforce analysis.

Patience: As we dug in deeper, a theme that emerged was that talent has shifted from a “cost” factor to a “can we actually find a suitable workforce here?” factor?” Seth Martindale, Senior Managing Director at CBRE, offered this perspective.

Seth Martindale (CBRE): Talent has always been a factor no matter what. I think the way companies are looking at it has changed quite a bit though. I would say predominantly when I first started, it was more about cost of labor. How much is it going to cost? How much money could I save if I’m exiting an expensive market to a less expensive market? What does that mean for the overall revenue of the company? As the labor market has gotten increasingly, increasingly more competitive and unemployment has gotten very, very low, cost is not always but much less of a factor.

It’s more so depth. How deep is that labor market? If we actually employ people there, can we hire the people that we need to? How much competition are we’re going to face, are other companies going to be in our backyard, stealing our talent? I think, for the most part, companies are willing to pay up a little bit more for the talent as long as they have sort of ready access to it. I think that’s a big change because cost is no longer the number one priority anymore.

Patience: On a related front, Chris Lloyd, Senior VP at McGuire Woods Consulting that companies are taking a much longer-term view of the workforce.

Christ Lloyd (McGuire Woods Consulting): I think what you’re seeing, this shift that has occurred within the past few years, past three to five years in talent, is around two fronts. And that is the flexibility of talent. And what I’m seeing all across our client base is people are wanting to know, is the talent that is in the marketplace now, are they trainable and can they shift to respond to changes in product mix and changes in production technology?

Because with technology changing so rapidly, they want to know it’s not that we have the same workforce that’s going to do the same task for the next 40 years. It’s, can that workforce evolve and change? So that’s what clients are looking for.

Second, I think what clients are looking for is, what do we need to do to retain talent? And that had become, I think, a much more important factor within the past few years, is that retention of talent.

Patience: Finally, Rajeev Thakur, Executive Managing Director of Newmark, Knight, Frank spoke about the transition from the word “labor” to the word “talent” and the new role which technology is playing in nearly every job in America.

Rajeev Thakur (Newmark, Knight, Frank): So, as we’ve seen, so, you know, you have what we call the blue collar workforce. You don’t refer to it as talent. But now we’re going to do so because it’s going to become more technology savvy and more technical in nature. So if some of the repetitive tasks are going to be taken over by robots, then who’s going to maintain robots? And who’s going to run them? Who’s going to program them?

And so, the same people who used to work in, you know, warehouses are now going to transform into what we would not call labor, but as talent. And the difference between the two is skills. So when it become skilled, it becomes talent, and that’s how we refer to it. So that’s the transformation we’ve seen, that even that kind of labor or talent is just going to become more technical in nature.

Andy: My conversations then switched gears to asking “how do you go about evaluating the quality and quantity of talent in a specific community?”

For every consultant, stage 1 was desktop-research – just getting a handle on the size of the workforce by job definition and wage scale offered within the community. And each consultant had dozens of data sources that they were accessing to serve their clients (and many privately complained about the costs of these databases).

Mike Mullis, President and CEO of J.M. Mullis Inc. shared concerns about how the available data is lagging behind the workforce needs of companies.

Mike Mullis: The problem that we’re seeing right now is that so many of the job descriptions are changing in new, advanced technology that the SOC codes don’t fit anymore.

Andy: Is it, like, five years out of date or how long?

Mike: Probably seven or eight.

Andy: Dennis Donovan echoed that concern.

Dennis Donovan: It’s not that there’ll be new jobs, but there’ll be jobs that change. You know, there’ll be different requirements for machinist or for, you know, analysts or whatever. So, many of the jobs, will have some functions that they’re now performed, and then there’ll be a set of new functions and new skills required. And then there’ll be completely new jobs such as Digital Strategist. I mean, you know, five years ago, did anybody know what a Digital Strategist is? And you go try to find a job description, it’s very difficult to find. But it’s becoming an important consideration for the end-to-end customer experience, a Digital Strategist. Didn’t exist years ago.

Patience: After the desktop research, comes the qualitative research which for most consultants meant heading into the field to conduct employer interviews. Larry Gigerich, Executive Managing Director of Ginovus, described the process.

Larry Gigerich (Ginovus): So we’ll go into a market and we’ll do two things primarily. One, we’ll talk to our client and ask them if they have any peers or any other groups that they’re aware of in a market that they particularly want us to interview as a part of this process. And then we’ll also talk with the regional economic development organization and find out from them who they would recommend or who is willing to do those types of interviews. Now, we want to make sure we always have independent subjectivity, you know, and certainly, the regional economic development groups wouldn’t be doing their job if they didn’t point you to people that they thought would share good things, right.

Andy: Would this be like a final three kind of thing? When…yeah okay. You’re down to that.

Larry: Yeah. Usually, it’s the final three for our firm. And then we’ll go in and we’ll meet with three or four employers. We’ll typically spend an hour, hour and 15 minutes and we’ll have, you know, a set list of questions. And again, they’re really getting down to not only the talent related pieces, which is going to dominate the conversation, but we also like to get insight into what they see in the market in terms of just operating conditions. You know, are the governmental entities good to work with, are there barriers that they have challenges with in that market? And we want to know the…you know, what their…from their perspective, the good and the bad things. Again, primarily focused on talent but a little bit about the area and what that’s like to operate in.

Andy: I asked two of the consultants about the favorite questions they like to ask on company interviews. Here’s Jeannette Goldsmith, Vice President of the Strategic Development Group and Seth Martindale of CBRE.

Jeanette Goldsmith: My question is always if money were no object, what would you do to make this community better or to make your job easier?

Seth Martindale: I like to ask the questions and maybe this is my personality, but, you know, what’s the worst experience you’ve had? You know, take me to the worst place in the city and what’s the most difficult challenge you face? And it’s really easy to talk positively about a workforce or about a community, but it’s really hard to get people to open up about the negatives.

Andy: While the economic development groups often set up the meetings, they rarely participate in the sessions to ensure employers can feel comfortable answering the questions candidly. Dean Foote, President and CEO, of the Foote Consulting Group, described a meeting with a plant manager where candor wasn’t a problem.

Dean Foote: We had a meeting, the EDO took me to the meeting and says, “Well, can I come in with you?” I said, “No, this is going to be confidential. So we go into the office, he closes the door, and I said, “What’s it like working in this market?” And he says, “This was the worst decision we ever made, this plant here. I can’t find anybody, everybody leaves. There’s drug problems,” on, and on, and on. And it was just bad.

Andy: A number of the consultants expressed frustrations that it was becoming harder and harder to get employers to participate in these meetings. Here’s Jay Garner of Garner Economics.

Jay Garner (Garner Economics): So we always interview HR people, plant managers, anybody within a company in that community that will give us information. Here’s where the problem’s coming in now.

They don’t want to meet with you anymore. Because it’s so hard to find certain types of labor. The old adage of a rising tide lifts all boats doesn’t necessarily apply to some of these companies anymore, because they’re afraid that if they get a competitor, or somebody that would be even a non-competitor, but might pay a little bit more money and wages, they’ll lose employees. So it’s getting more and more of a challenge for companies to talk to us.

Andy: Finally, of the ten consultants I interviewed, six reported worker drug use and in particular America’s opioid crisis to be having a major negative impact on work force availability. Here’s Jeanette Goldsmith again followed by Darin Buelow, Principal with Deloitte Consulting.

Jeanette Goldsmith: One of the data metrics that we…I look at a lot is labor participation rates as opposed to unemployment. And one of the things that you’ll find is that the labor participation rate across the country is decreased a lot over the last…I hate to use the word a lot. I could say something smarter like significantly but I’m not a statistician. So it has decreased in the past couple of decades and I think most people would say that that is a result of drug and drug usage.

Darin Buelow: There’s an increase in deaths from the opioid crisis, right? So, we’re losing something like 70,000 or 80,000 people per year due to drug overdose. That’s a Vietnam War every year that is also hollowing out levels of the talent market. And every one of those is a personal tragedy. In the macro sense,  those are workers that we’re losing.

Andy: To keep the discussions and this podcast forward-thinking, we asked the consultants a question that is increasingly important. If you were in an economic developer’s shoes, would you invest in workforce development (essentially growing the people that already live in your community? Or would you invest in talent attraction (bringing people with the needed skills to your community)? The group was equally split in their advice. Dennis Donovan bet on workforce development.

Dennis Donovan: I would put more of my money into workforce development, and make sure that workforce development is coordinated. I think a role of economic development is to coordinate all the stakeholders involved in workforce development, because if you don’t have a world-class workforce, it doesn’t matter what your target industries are, they’re not going to come. You know what I mean? So that is more important.

Patience: Larry Gigerich made a case for talent attraction dollars.

Larry Gigerich: Yeah. I would more heavily invest in talent attraction, and the reason why I say that is it’s twofold. One, I think that’s going to define the places that are successful or not as successful over the next 25 years from an economic development perspective. The second part of that is in the general workforce development area, there’s so much money already invested in that area, so many programs and for that matter, the private sector and trade associations are doing a lot on their own. I think the economic development organizations need to be mindful of making sure those programs are good and working, but they should be investing in talent attraction. That’s going to be the defining moment between places that are successful and that aren’t as successful as we go forward.

Andy: Darin Buelow took this a step further arguing that talent attraction would become more important than investment attraction.

Darin Buelow: Talent attraction is going to become more important than project attraction. I think that we are in such a dire need of talent and jobs, and that there are going to be communities, metropolitan statistical areas, even states who are in raw real numbers going to be losing people in the next 10 to 15 years. Their labor force will shrink in real terms over the next 15 years. There are going to be winners and losers.

I believe that economic development needs to pivot a little bit and try to attract key people, engineers, inventors, scientists, people who are going to drive job creation on a multiple level. And, you know, you can look and see where are people moving from and where people are moving to, even though today’s United States, if we talk about this country, is less of a mobile society than it ever has been, there are still quite a bit of movements going on.

The recent tax reform is motivating even more people to move from higher tax coastal states to lower tax jurisdictions. We see cities like Columbus, Ohio attracting people every week. Austin, Texas is attracting people every week. People are moving there for jobs, moving there for a better life. And this is going to make up a big difference. This in my view is the new currency of where economic development should emphasize and evolve into.

Patience: So that is episode 56 and our first set of takeaways from the Site Selectors Guild Conference. Andy, what is episode 57 going to look like?

Andy: So I sat down with ten consultants for a half-hour each – so that’s five hours of interviews. While we focused our discussions on the talent issue, a lot of interesting trends and learnings came up throughout the conversations. I’ve picked out four of them that I want to bring to light in the next episode. And I’ll have to leave everyone in suspense until episode 57.

Patience: So this is sort of like a coming attractions…

Andy: That’s right. Stay tuned for the next episode.

We have an army of people to thank in today’s podcast: Darin Buelow, Dennis Donovan, Deane Foote, Jay Garner, Larry Gigerich, Jeanette Goldsmith, Chris Lloyd, Seth Martindale, Mike Mullis and Rajeev Thakur. Thank you for being generous with your time and sharing your thoughts in our sessions.

We also want to thank Rick Weddle, Michelle Comerford, Angela Rodgers and Brian Rodgers for all of their help in setting up these interviews.

Patience: The Project is sponsored by DCI. We are the leader in marketing places and have served over 450 cities, states, regions and countries. You can learn more about us at aboutdci.com.

Andy: We hope you will keep listening, there are many more projects to come.

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