Dean Barber

One Win Begats Another

In Site Selection on October 13, 2014 at 9:28 am

Setting the tone for a corporate culture starts at the top. It is the top boss, the CEO, that forges what can be a tradition of success.

In sports, legendary football coaches Bear Bryant in Alabama; Vince Lombardi in Green Bay, and Chuck Noll in Pittsburgh created winning traditions by showing, teaching and insisting on how to win. One win begats another, which begats another until a tradition is born.

I think a culture of excellence, a winning tradition, can hold true in business and even government. In last week’s blog, I lauded the efforts of Michigan Gov. Rick Snyder, a former venture capitalist, in turning around that state’s business climate. It’s been a rather dramatic comeback story.

South Carolina has long had a better business climate. But that does not necessarily translate into meaning that all its past governors have been champions of economic development.

Some, for example, preferred a nice hike on the Appalachian Trail.

Call Me

Current Gov. Nikki Haley, by all accounts I’ve heard, is very much a hands-on economic development governor, which is why I gave her an honorable mention in last week’s blog.

She dutifully makes the telephone calls to company CEOs, and if and when they do come to visit the state, she is well briefed and prepared when she meets with them, often providing her personal cell phone with assurances that she is there to help.

“My governor writes her cell phone number down and says something to the effect. ‘I’ll work for you. Call me for anything you need,’ ‘’ said state Commerce Secretary Bobby Hitt.

“CEOs want to meet with the CEO. They want to look them in the eye and take a measure of them and know that if they come to this state there is someone there who cares about their business and that’s why they come.”

Points on the Board

And they have been coming. Since Gov. Haley took office in 2011, 371 projects have been announced, which include both new businesses and expansion of existing businesses. About 380 projects are listed as active.

Since 2011, about $12.5 billion in new investment has been announced in the Palmetto state, with 77 percent in manufacturing and 37 percent have been of international origin, according to the state commerce department. (With Japan, China and Germany leading the way in the past year.)

About 49,000 new jobs have been announced in association with those projects, of which 25,000 have been in manufacturing.

Like her counterpart in Michigan, Gov. Haley is campaigning for re-election on a platform of job growth. Not surprisingly, her challengers are contending that the announced numbers are inflated and not representative of what has truly happened on the ground.

Well to some degree that happens everywhere. I have worked a number of projects in which the announced job numbers and capital investment dollars never came to full fruition. And that’s because we live in a market economy and things change.

I have also worked projects in which jobs and capital investment came to exceed the initial expectations of both the company and the state. Like I said, stuff happens.

Project Managers Hear from the Top

When the governor does get a call from a CEO, Hitt said she will often subsequently telephone the project manager that has been working with the company to pass along any additional intel that she may have picked up, as well as offer guidance on what should be done to win the project.

“Now maybe half of our project managers are under 30. So I have a governor calling a 20 something and saying, ‘I just got off the phone with Dean Barber with Barber Manufacturing, and he tells me that he is happy with X, Y, and Z, but that he is have a problem with this. We need to see what we can do.’”

(Barber Manufacturing soon will be coming out with a new line of multi-colored nasal strips for horses, cows, goats, sheep, and llamas to complement our existing livestock earmuff line. Stay tuned.)

The typical breakdown of corporate dollars invested in the state is 70 percent expansion/30 percent new, Hitt said. Lately the numbers have been trending differently.

“We’re still getting all the expansions that we should have been getting, but 45 percent of our book now are new companies bringing new money, setting up new operations in South Carolina and that is cool,” Hitt said.

BMW, Michelin, Continental Tire and Boeing have all invested billions in factories in the state, making South Carolina a true manufacturing hotspot.

“We have gotten to the point where some trade publications are now referring to South Carolina as ‘the beast of the Southeast’ due to its economic development success. I like that,” Hitt said.

Still, the gross domestic product (GDP) increased in South Carolina by only 1.2 percent in 2013, well below the national rate of 1.8 percent. TD Bank predicts 1.6 percent GDP growth for South Carolina this year. Not bad numbers, but not beastly either.

The Upstate Rocks

I was in South Carolina last week as the guest of the Upstate Alliance, a public-private marketing organization. It is one of eight regional economic development organizations in the state and is based in Greenville, which sits midway between Atlanta and Charlotte off Interstate 85. I arrived via a direct flight from Dallas to the Greenville-Spartanburg International Airport.

I was there on a “fam tour’ with six other site selection consultants to learn more about the 10-county Upstate region, with a population of 1.4 million.

During my one day of exploring, I went to Greenwood and Abbeville counties. Greenwood surprised me with its Greenwood Genetic Center, a nonprofit organization advancing the field of medical genetics and caring for families impacted by genetic disease and birth defects.

Clemson University plans to build a facility next to the center’s JC Self Research Institute to provide increased collaboration among GGC and Clemson scientists in areas such as autism and oncology.

FDI Rules Here

On Oct. 7th, 1988, Fujifilm held its first of what would become many ground-breaking ceremonies in Greenwood. The company has since invested about $1.8 billion on a 500-acre complex which includes 2.5 million square feet of manufacturing space. Fuji produces recyclable cameras, inkjet photographic paper, color photographic paper, and digital printing plates in Greenwood.

Fuji is a prime example of how and why the Upstate has become a cradle for foreign direct investment. About 375 foreign companies have business operations here, representing 31 countries.

Among them is BMW, which announced a $1 billion investment in Spartanburg plant earlier this year, increasing capacity by 50 percent and making it the German carmaker’s largest factory in the world with 8,800 employees by 2017.

BMW was instrumental in the development of an inland port just off I-85 in Greer, connected via Norfolk Southern rail 212 miles “deep” from the Port of Charleston. It opened in October 2013.

Tire Capital of the U.S.

Since 1973, Michelin has invested more than $5 billion in various facilities in the Upstate. The French company has announced investments of $1.15 billion in the past two years and currently employs more than 8,000 employees in the state. (Bridgestone and Continental also produce tires in South Carolina, making it the tire-making capital of the U.S.)

In 2014, A Brookings Institution found that among the largest 100 metropolitan areas, Greenville ranks 23rd for share of jobs in foreign-owned enterprises (FOEs) at 6.1 percent. The report also found that among 366 metropolitan areas:

• Spartanburg ranks third for share of jobs in FOEs, at 18.0 percent.
• Anderson ranks seventh for share of jobs in FOEs, at 13.4 percent.
• Greenville ranks 67th for share of jobs in FOEs, at 6.1 percent.

Over the last seven years, the Upstate has seen $13 billion in capital investment and 38,000 new jobs. About $3.7 billion in capital investment and 4,000 new jobs have been announced so far this year.

ReadySC is a recruit, hire and training program offered by the state to companies. It includes an apprenticeship program in manufacturing that I will probably focus on in future blogs. Leave to it say, I liked it.

Indeed, there is a lot I like about South Carolina and particularly the Upstate, which I am more familiar with. The winning of new capital projects has become a tradition there, where one win begats another.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

A Comeback Story

In Site Selection on October 6, 2014 at 1:10 pm

People love stories. I love stories and sometimes will frequently tell them in order to make a point.

I am by no means an accomplished storyteller, as I can recognize squirming body language and the pained expression of someone trying to be polite. Still, I will inflict a story upon others in the belief that it may touch them in some way for the better.

In helping companies find that best and most efficient place from which to operate, I am hugely dependent on data, most of it unsurprising and mundane. At those times, when pouring over columns of numbers, I am engaged in abstract or analytical thinking in order to make any sense of it. And to stay awake.

How About a Little Exceptional?

Narrative thinking, encapsulated in storytelling, is a different animal. It is ideally suited to the exceptional, which is what I would think that any economic developer would want to convey about his or her community.

Pull up a chair, Mr. Dean Barber, and let me tell you why Skunkfoot is so very special. As I see myself a participant in a largely incomprehensible cosmic play with its own conflicts, characters, beginning, middle, and end, chances are I am going to take the time to listen.

Even if it is not a particularly good story, I will most likely get something from it. But if it’s a great story, well, you might just have me hooked.

Jesus, Abraham Lincoln, and Mark Twain were all great storytellers. Their stories thrived on conflict and disruptions from the ordinary. And so they were irreverent and poked fun and criticized the way things were but also shed light on the way things could be. I would advise you read them.

But Now I See

This past week, I was in Ann Arbor, Mich., and the surrounding region. Like all places, I needed data, by which I could flip on the analytical switch and make deductions. But I also wanted to hear stories, because that would give me further meaning of the place.

The big story, the over-riding story of Michigan, and not just of the Ann Arbor region, is one of comeback. And everybody loves a comeback or a turnaround story as it plays to the dramatic narrative. As the old hymn reminded us, “I once was lost, but now I’m found. Was blind but now I see.”

Said Doug Rothwell, president and CEO of Business Leaders for Michigan: “There’s really been a big, big change recently.”

I credit much of the positive change to Gov. Rick Snyder, who just might be my favorite economic development governor now. I like the efforts put forth by Nikki Haley in South Carolina, Rick Scott in Florida and Dennis Daugaard in South Dakota, who comes across as almost weirdly humble. Bobby Jindal in Louisiana and Rick Perry in Texas also seem quite keen on economic development in their respective states.

Snyder’s Way

But Snyder, a former venture capitalist and chairman of Gateway Computer, has been the principal architect of a wholesale recovery plan the likes of which I don’t think I have ever seen before.

Since taking office in January 2011, about 300,000 new private sector jobs have been created under Snyder’s watch and the unemployment rate has been nearly halved from 13.6 percent to 7.4 percent.

The Tax Foundation, a Washington D.C.-based think tank, ranked Michigan’s corporate tax climate ninth most favorable in the country for 2014. The state was ranked 48th in 2011, before the Michigan Business Tax, an unpopular value-added tax, was repealed soon after Snyder took office.

Michigan now ranks sixth nationwide for the best entrepreneurial climate, up from 41st in 2007 and 2008, according to MiQuest, a Lansing-based nonprofit.

The state had 103 active venture-backed firms in 2014, up 66 percent in the last five years, according to a report released earlier this year by the Michigan Venture Capital Association.

Under Snyder’s watch, an unemployment trust fund that had a deficit of $3.9 billion now has a $1.5 billion surplus.

A Tectonic Shift

But in terms of grabbing headlines and creating the most chatter, Michigan becoming a right-to-work state is something akin to a tectonic shift. I know that it fascinated me and that I wrote plenty about it, because it happened in the very cradle of organized labor.

Snyder maintains the right-to-work issue wasn’t on his agenda until unions backed a voter proposal to place collective bargaining rights in the state constitution — a move he said would have been disastrous for the state’s already tarnished business climate.

“I didn’t go looking for this one, but when it’s put on the table, I don’t back away from a tough issue,” Snyder said.

And that seems to be the gist of why the business community supports him and hopes to stay the course with a second Snyder term. (But it is by no means a certainty, as polls indicate a tight race with Democratic challenger Mark Schauer.)

Snyder cultivates an image of being “one tough nerd” who is bi-partisan in his efforts to fix things that need fixing.

Business Backing

“For a while we were headed in the wrong way,” said Mark Alyea, president emeritus, Alro Steel Corporation. “That’s no longer true.”

Kurt Darrow, chairman, president and CEO of La-Z-Boy, which has been based in Michigan 89 years and recently moved into a new headquarters building in Monroe, said most business leaders are committed to Snyder’s reform agenda.

“We’re tired of being beat down and like the time when we were a top ten state,” Darrow said. “We’re going to do all we can get him re-elected because the alternative would be a big step backwards.”

Stephanie Hickman Boyse, CEO of Brazeway Inc., based in Adrian, said there has been “a complete change in culture with the workforce in Michigan” and yet the state retains a much deeper bench of skilled labor than in other states where it operates.

“The skill base is here. You can hire great engineers and great IT people, but we also have found higher skilled non-degreed people here in Michigan,” said Ms. Boyse, whose company manufactures HVAC, automotive, and refrigeration aluminum products.

“We cannot fill those jobs in Kentucky, Indiana, and Mexico like we can here. And that’s been an epiphany for our company.”

Like her fellow CEO members of Business Leaders for Michigan, she credits Snyder for much of the turnaround of the state’s fortunes.

“He’s a very down-to-earth, get-it-done kind of governor. His approach is ‘how quickly can we get this done?’ and ‘what is the right thing to do?’ He works with people to get a collaborative resolution in solving problems in a very nonpolitical manner. Rick has gotten people excited about the state of Michigan again.”

During my few days in Michigan last week, I came away with my own story based on hearing stories from others. I know this place now is a far bigger than Detroit alone, where a very positive story is playing out.

And while much of Michigan’s economy is tied to automotive manufacturing, there is a much wider diversity of companies making and doing other things. Michigan is the home of such prominent names as Whirlpool, Steelcase, Domino’s Pizza, Stryker Corp., Dow Chemical, Quicken Loans, and La-Z-Boy. And Google has initiated a growing tech cluster in downtown Ann Arbor.

In Harmony

Ann Arbor is also the home of what is ostensibly a pretty off-the-wall company called Zingerman’s, a multi-faceted $56 million, 700-employee food service business.

I had the pleasure, along with some fellow site selection consultants, to sit in a meeting where staff members reported on what was happening in their particular parts of the company. I remember one staffer saying that miniature-sized goats provided an inordinate amount of milk based on their size, which was certainly news to me.

I don’t know how I will ever be able to use that information, but it is nonetheless burnt in my brain as being exceptional. So, too, was hearing co-founder Ari Weinzberg, dressed in black jeans and a black t-shirt with rolled-up sleeves, explain how he wanted his company to “operate in harmony with nature.”

I just knew this was a fella who could tell a good story, but I had to leave before hearing one. At least I have one of his books – “A Lapsed Anarchist’s Approach to Building a Great Business.”

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

Let’s Build a Future

In Site Selection on September 28, 2014 at 6:28 pm

I liked the building. It had some good things going for it – 22 dock doors and a large concrete pad in the back, 32-foot-high ceiling with good lighting and modern office space.

And it was big, more than 250,000 square feet with nearly 700 parking spaces for employees. And it was only a few years old and in excellent condition.

“So what do you think of my building?” the economic developer asked proudly after giving me a tour of the property. He so much wanted a tenant for that large empty space under roof. It would mean jobs and a big win for his community and a feather in his hat.

“I think it’s a very good building,” I replied. “I don’t much care for the goat trail that we took to get here.”

Goat trail is an exaggeration. A narrow, crumbling farm lane, however, is not. Why a company chose to build there I do not know. I was actually shocked by the location, and that’s saying something.

What I do know is this – the company didn’t last there very long, less than two years. It proved in my mind that companies should concentrate on their core focus and leave the driving, the site selection to the experts. See blog “Why Companies Should Outsource Site Selection.”

But it was a nice building.

Cornerstones

When I am asked to speak to audiences of economic developers, which I enjoy, I sometimes get the distinct feeling that I am supposed to provide that all-important one thing that a community should embrace in order to win corporate investment.

Well, there is no silver bullet, but more often than not, it does comes down to two big things – talent and infrastructure. You have to have the human resources, the talent, for a specific operation, and you have to have the physical tools, the infrastructure, in order to compete successfully.

If you don’t have either of those in a sufficient capacity, chances are we are moving on seeking greener pastures. And I’m not talking vegetation.

And while this combination of people and infrastructure may at first blush sound like a simple proposition, I can assure you that actually determining what is on the ground is not so easy as it entails a systematic investigative process.

It’s a lot of work and again most companies are not well-equipped or experienced to do that very well.

More often than not, this blog, written for both a corporate and economic development audience, focuses on people and infrastructure. Both are cornerstones of a business environment.

And when I go on a familiarization tour of a community and/or region (I will be participating in several in the coming weeks), it’s the human capital and the physical support system that I am trying to fathom.

As an aside, I do not go on fam tours for free. As a self-employed consultant, I simply cannot give away three days of my time without being compensated. It’s just not a business model that works for me.

The Need to Move

Enough on that. Let’s get back to infrastructure, which in the bigger scheme of things is a far more important topic than my consultancy. Infrastructure is a very broad term.

It can consist of many things, airports, schools, electric utility grids, pipelines, and on and on. For purposes of today’s blog, we focus mainly on transportation and for good reason — companies need to move people and product around.

And for manufacturing, this is ultra critical. Recently I toured some rural provinces in Costa Rica, a beautiful country with a lot of potential. Not surprisingly, transportation infrastructure was a huge challenge for these outlying regions. Some of the roads I traveled were narrow and teeth rattling.

But we find the very same in parts of rural United States, and even in metropolitan areas, roads and bridges are often inadequate to meet the demands placed on them.

Manufacturers have long been concerned about the failure of this country, the largest economy in the world, to maintain its infrastructure. In a 2013 survey, the National Association of Manufacturers found that 70 percent of manufacturers said U.S. infrastructure was in fair or poor shape and needed a great deal or quite a bit of improvement.

Their concern is echoed by the American Society of Civil Engineers. Last year, ASCE gave the nation’s infrastructure a grade of “D+.”

A Stark Warning

And now NAM came out with another report last week that further sounded the alarm, revealing a decade of troubling trends in infrastructure formation, such as a 3.5 percent drop per year in the volume of highway, road and bridge investments as well as further sharp decreases in mass transit, aviation and water transportation infrastructure investment.

“The United States is stuck in a decade-long period of decline that will eventually harm job creation, future productivity and our ability to compete head-to-head with companies all over the globe,” said Jay Timmons, NAM’s president and CEO. “As we sit idle, our competitors are churning out investments in their infrastructure.”

The NAM study, conducted by Inforum at the University of Maryland, said an additional $100 billion was needed annually to bring infrastructure up to minimum standards. In 2012, investments in roads, bridges, ports and other infrastructure totaled $291 billion, of which governments contributed $181 billion and the private sector contributed $110 billion.

Spending on public infrastructure grew at annual rate above 2 percent from 1956 through 2003, but declined 1.2 percent a year from 2004 through 2012, much of it due to weak state and local expenditures after the 2008 recession.

Here’s What Could Happen

The study determined that for every dollar invested in infrastructure by 2030, there would be a $3 boost to the U.S. economy. Highlights of the report show that if the recommended $100 billion per year was spent on infrastructure improvements, the following would result:

  • Almost 1.3 million jobs would be created by 2015 and 1.7 million by 2017.
  • GDP would be increased 1.3 percent by 2020 and 2.9% by 2030.
  • Household disposable income would see a net gain of $1,300 per household by 2020 and $4,400 by 2030, measured in 2009 dollars.

It is probably not a great stretch to term NAM as a politically conservative group. And yet here is this organization advocating what would amount to a 40 percent increase over the current spending on new infrastructure projects.

NAM is not dropping the other shoe and asking for an increase in the 18.2-cent-a-gallon federal fuel tax, which has not been increased since 1993. Annual collections for the federal fuel tax have been declining as motorists drive more fuel-efficient vehicles and rack up fewer miles than in the past.

Business Warms to More Funding

Congress has relied on a series of stopgap bills in recent years to maintain level funding for transportation. Meanwhile, the business community, including the trucking industry, is starting to realize that paying higher fees may be the answer.

“The infrastructure has gotten bigger and that means you need more funding to maintain it,” Susan Alt, senior vice president of public affairs for Volvo Group North America, which makes commercial trucks and construction equipment, told The Wall Street Journal.

Former U.S. Treasury Secretary Lawrence Summers has called for a “major” plan to boost the country’s economic growth and said borrowing to fix aging infrastructure would help lower the jobless rate.

“What we need in the United States is a comprehensive growth strategy to get that rate from a struggling 2 percent to a 3 percent,” Summers said in an interview broadcast on the Fox News program “Sunday Morning Futures With Maria Bartiromo.” “Over time, that would be transforming of job opportunities for millions of Americans.”

My take: Investing in the country’s transportation infrastructure will pay dividends in the long run, especially for manufacturers who depend heavily on trucking for receiving supplies and delivering products.

It’s also a basic business tenant that you have to spend money to make money. You have position yourself in order to win.

I submit that the U.S. remains a very good bet, and that we – both the public and the private sectors – should have enough confidence as to bet on ourselves and our future. Our competitiveness as a nation is at stake.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use is prohibited. Excerpts and links may be used with permission.

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