Much Ado About Not Much

Recently I found myself on a panel of so-called experts (please note that I include myself in that category) and one of the panelists said something that I thought was not quite right.

But time was limited and I said not a word. I jotted down some notes to myself that this fellow was thinking in very 1990’s terms and not by today’s realities. Heck, I didn’t even let my face show my disagreement with his comments.

In short, the speaker told a roomful of economic developers that you had to be in a right-to-work state to compete for industrial projects. No ifs, no ands, no buts.

Well, that struck me as a very simplistic view that no longer holds true. Now it is true that some manufacturers, even today, will give preference to a right-to-work state when considering new places corporate investment. But if I were advising them on a site search project, I would tell them that it’s a new world and that the old no longer holds true.

For the uninitiated, if a union wins an election to represent workers in a right-to -work state, individuals can essentially opt out and do not have to join the union. That does not apply in states that are not right to work. All federal labor laws regarding organizing and the holding of an election are the same.

Well before Indiana became a right-to-work state in 2012 and followed by Michigan in 2013, two bedrock manufacturing states in the Midwest with long labor union traditions, factory workers, especially in bigger operations, have been viewing union representation with a more critical eye.

Today, just 6.7 percent of workers employed in the private sector are members of a union, according to the Bureau of Labor Statistics. (Public-sector workers have a union membership rate of 35.3 percent or more than five times higher.)

Some previous hot spots of union activism are not so hot. As a matter of fact, they are downright cold, which is why right-to-work status can be overemphasized in a backdrop in which industrialized labor union movement is hardly running and gunning.

Much more telling than the Chattanooga vote in February, where Volkswagen workers rejected the UAW despite nods and winks from VW management that they should do otherwise, was a vote the month before in Youngstown, Ohio. Forgive me for quoting myself in a blog written back on Feb. 15 called The Night the Union Died.

“Now let me tell you what happened last month in Youngstown, Ohio, a city with a long tradition of labor union activism. Workers there voted two-to-one against forming a union at two Vallourec Star pipe mills.

“Representatives of the United Electrical Workers Union make noise that they will renew their fight to organize and represent workers, but they always say that after a loss. They had their heads handed to them in Youngstown, Ohio, of all places. Watch for Ohio to fall in line with Indiana and Michigan and become a right-to-work state, just as their southern counterparts have been for many years.”

We live in a country today where a good paying manufacturing job is cherished, not just in Georgia or Alabama or South Carolina (right to work states), but also in Ohio, Kentucky and Missouri, which are not right-to-work states. And the truth is that I would have no more hesitancy working a manufacturing site search project in the later states than the former.

I would tell a manufacturing company this: Yes, we will look for recent union activity in any given area (some large cities in the Northeast and Mideast can still be problematic and the Teamsters remain a serious bunch) during a site search and make note if we detect any troubling signs.

But if you pay competitive wages, communicate with your people and treat them with respect, the chances of you getting a union today are fairly remote. And that now holds true even in states with a heritage of unionism.

I have seen and spoken to a number of manufacturers in the industrial upper Midwest — places like northern Indiana, northern Ohio, and western Michigan — who have been operating non-union plants for years with no problems. Would I preclude taking a manufacturing client to those regions? Absolutely not.

If Missouri and/or Kentucky, for example, were in a prescribed geographic sphere of a site search for a manufacturing client, scratching those states from consideration simply because they are not right to work states would, again in today’s environment, be cutting off the nose to spite the face. It would make no sense.

So I largely view right-to-work as playing to perceptions of a better business climate. And because of that, it would not surprise me if some more states will eventually join the right-to-work PR club.

And that’s fine. It makes for a good selling point for economic developers, especially if directed to a company (or even a consultant) that will not take the time to examine the situation on the ground and think things out. So for me, mere right-to-work status is not a determining factor, although local union activity can be.

Beating a Dead Horse

I cannot help but think that elected officials in Mississippi are truly beating a dead horse with the passage last week of legislation limiting union activities. The U.S. Bureau of Labor Statistics shows that 3.7 percent of Mississippi workers were union members in 2013, one of the lowest rates in the nation.

If you discounted the service sector, that number would be lower still. But lawmakers get into a tizzy for all sorts of reasons and come up with lame brained, often unnecessary, if not strange laws. Witness Georgia this past week: You better damn well be packin’.

If I am looking at Mississippi for a manufacturing project, rest assured it’s not going to be union activism that is going to scare me off. No, my questions and concerns will primarily focus on workforce development, skill sets, training programs, pipelines for talent, STEM education, that kind of stuff.

Mississippi Gov. Phil Bryant can say what he wants, and he did: “Just to be blunt about it: We just don’t want unions involved in our businesses or our public sector,” Bryant said after signing three bills into law, which become effective July 1. Another state lawmaker called the bills “preemptive” because union activity is already rare in Mississippi.

Truly, truly such comments (and laws) are irrelevant to me. They are much ado about nothing or not much. They may have resonated 20 years ago, but no longer. Now if New York Gov. Andrew Cuomo or California Gov. Jerry Brown said as much, then, yea, I probably would sit up and take notice.

And if Mississippi’s governor and state legislature would pass some preemptive bills to substantially improve vocational and STEM education in that state, I would also sit up and take notice. The same holds true for any number of states.

In short, right-to-work makes for nice window dressing. Far more critical from my standpoint is how states and communities can provide for a highly skilled workforce that man the digitized factories of the future. That is how a place can truly distinguish itself.

Manufacturers want and are in desperate need of self-directed and engaged workers who can collaborate with others and who have math, engineering, computer-based analytical skills and are able to innovate. In essence, they need thinkers.

Communities that are able to produce that kind of workforce will win manufacturing projects of the future, because it is technology that allows us, as a nation, to compete.

Right to work, pshaw. Give me people who can do the work.

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.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

But Not Just Any People

I surely had not planned it that way, but my remarks at the Southern Economic Development Council’s “Meet the Consultants” conference in Dallas last week very much fell in line what I had written only a few days earlier in a strategic plan for a rural county in Georgia.

And it was essentially this: If you truly want to compete and win manufacturing projects in the future, people are the key. But not just any people — you must have the people who can perform in the digitized factories of the future.

Consider this: The U.S. Department of Labor says there are about 300,000 job openings in manufacturing, while some employer surveys indicate that might be a low number.

It is apparent that as manufacturing processes become increasingly automated and IT driven (translation: more productive), companies will need fewer people, but those who will be needed will be armed with basic science, technology, engineering and mathematics (STEM) skills.

“And although the extent to which robots take hold of manufacturing remains to be seen. What is indisputable is that the sector is entering a transformative phase,” I told my audience of several hundred economic developers.

“The winners will be those communities that can adapt and meet the demand for higher-paid, skilled workers—manufacturing engineers who design and improve high-tech machinery and the systems linking it together; process specialists who oversee operations and improve their efficiency; and maintenance technicians who install, monitor, repair, and upgrade the advanced equipment.”

More Self-Directed and Engaged

Now if you listen to plant managers (and I do), these highly-skilled workers are not a dime a dozen. They’re out there, but it often takes work to find them. Meanwhile, experienced and knowledgeable old hands, technical talent developed over years on factory floors across America, continue to retire.

Replacing them is what keeps many plant managers up at night wondering just how they will pull that off.

As I relayed to my audience at SEDC and in my strategic/action plan/target industry study for Screven County, Ga., the factory workers of the future will be more self-directed and engaged with the following attributes:

• Ability to collaborate with other people
• Analytical skills
• Basic math, engineering skills
• Ability to innovate
• Computer-based skills

These factory workers of the future will be working on spotless plant floors where production processes will be largely digitized, which means that IT will be instrumental in making decisions, and where production capability/flexibility trumps capacity. To my gathered audience at SEDC, I said this said:

“Now you might be able to offer a company a great building or a great site. You might even be able to put together a very attractive incentive package with property and sales tax abatements, and grants and the like.

“But if you cannot offer an advanced manufacturing company the workforce of the future, if your community is not turning out the workers who can man the factory of the future, well that company would be at a distinct disadvantage if it erroneously chose your community.

“And I would recommend, should that manufacturing company employ my services on a site selection project, that we set our sights on those communities that are putting a premium on STEM education in their local schools and offer robust technical training where industry is truly a partner. That’s the community that I would advise a manufacturing client to consider – that which goes beyond simply a building or a site.”

Don’t get me wrong, we are also looking for a good building and/or site that meets the need of the client company. But the workforce needs of a manufacturer today can hardly be overstated, something that many real estate brokers just don’t get.

Get Them Dancing

So if I were an economic developer in a community targeting manufacturing as a source of jobs for the future, one of my top priorities would be to get manufacturers and educators in a room together on a regular basis.

They may come from different tribes and talk different languages and will initially be wary of each other, but if you get them meeting together long and often enough, mutual areas of interest will emerge and trust will form. And then you might actually get something done that establishes a real pipeline of talent for both existing industry and prospective employers who might consider your community for a new plant.

Now I have never been in a community where the local economic developer acknowledges that the local community college, where most vocational training now typically takes place – how should I say this delicately? — sucks (a technical term meaning substandard) at doing that.

On the contrary, just about every economic developer that I have met goes to great length to assure me how responsive the local community college (and high school) is to the needs of existing manufacturers — that the schools and local industry are literally joined at the hip. But when I talk behind closed doors to the plant managers, well, I’ll often hear a different story.

So why the apparent disconnect? Now that is an interesting question. Let me say this — it would be unfair and wrong to simply blame the educators. I believe manufacturers have a responsibility to reach out and communicate their needs to educators, and I would hazard a guess that most, busy doing their things, simply do not do that.

So it takes two to tango. My advice to economic developers is to try to get these two disparate groups together onto the dance floor. With patience and continued effort, good things will happen.

Fellowship with Food

You have heard, no doubt, the old saying that the way to a man’s heart is through his stomach. Well, this past week, some very nice economic developers from the Southeast were trying to get to my heart. Or maybe give me heartburn.

I was with economic developers from Alabama for dinner on Monday night, where I got to see some old friends from my days with the Economic Development Partnership of Alabama. It was over dinner that Ed Castile, the director of AIDT, one of the premier state-sponsored training programs in the country, revealed that he was a big fan of Abraham Lincoln, something we both have in common.

The next night, Tuesday, I joined a delegation of economic developers from Mississippi Power and several cities from that state for dinner at a downtown Dallas steakhouse where I dined on buffalo steak and, get this, chicken fried lobster.

As a self-described southerner (I also have Midwestern roots so I am in reality more of a hybrid), I am partial to fried foods, knowing full well that it might shave a few years off my life. So be it, I will go out happy. By the way, Texas is the first and only place where I have found “Chicken Fried Chicken” on menus. I’m still trying to figure that one out.

But with all due respect to my friends in Alabama and Mississippi, my most memorable meal last week took place not at a restaurant but at a private home in rural Georgia.

Back in Screven County

On Wednesday morning, I flew from Dallas to Savannah and then drove with my friend and fellow consultant Jason Hamman 50 miles north to rural Screven County. It’s there where we were invited to a low-country boil (think shrimp, sausage, potatoes and corn on the cob in a big pot) at the home of a board member of the Screven Development Authority.

The board was holding this party for us without yet learning the results of our report. They would hear our findings and recommendations the next day. I mentioned that night that they might want to hold off and hear what we had to say before throwing us a party.

But despite our frank and sometimes tough assessments, which we gave the following morning, board members appreciated our efforts and thanked us for our service.

I don’t mind telling you that I made friends in Screven County, a rural place of great civility and charm, a place with deep farming roots but also where a sophisticated manufacturing tradition exists. In some ways, it is the quintessential rural community.

It would be a great place for me to escape the big city and hide on occasion, lick my wounds and maybe knock out a screenplay or a novel. (I was offered a remote cabin, which would be perfect for doing just that.)

But if that ever happens, well, it will be somewhere down the road.

In the meantime, 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.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Can Manufacturing Spur a Jobs Revival?

My work load did not permit me to post a new blog on Sunday, so I am re-posting an earlier one. I promise not to do this too often, so please bear with me. Besides, this particular blog just might be worth reading a second time.

Barberbiz

In his State of the Union address last week, President Barack Obama spoke in laudatory terms of “a manufacturing sector that’s adding jobs for the first time since the 1990s.”

Well, technically that is true. Manufacturing jobs, after a long and steep decline, have grown by about 570,000 since early 2010, coming out of what can only be accurately called as the Great Recession.

But what the president didn’t say was that job growth at factories has slowed sharply in the past three years — from 207,000 in 2011, to 154,000 in 2012, to just 77,000 last year, according to the Labor Department.

I think it is safe to say that much of what the president said about a resurgence of the nation’s industrial sector can best characterized  by what Peter Tchir of TF Market Advisors would call a big dose of “hopium.”

As a student of American history, I suspect that most presidents, past, present…

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Companies Behaving Badly

Mitt Romney was right about this – corporations are people. Or rather, a collection of people.

And because people are what they are, they will inevitably mess up on occasion. In the past week alone, I have read a collection of news reports about companies making big mistakes if not behaving badly. Among them:

General Motors: Senators accused GM this past week of “criminal deception” over a decade-long ignition problem linked to 13 deaths.

CEO Mary Barra pledged that GM will be forthcoming with results of an internal investigation into what led it to keep using ignition switches it knew were faulty for years, then change the parts without alerting the public or regulators.

Toyota: A settlement with the U.S. Justice Department in March ended a criminal probe over the way Toyota handled its biggest recall ever. The Japanese automaker pay a record $1.2 billion fine for misleading and concealing information tied to American recalls dating back to 2009 – when vehicles sped up without prompting from drivers.

The $1.2 billion dollar payment represents the largest criminal penalty imposed on a car company in U.S.history and came with a rare admission of guilt from the company.

PG&E: The owner of  California’s largest utility, PG&E was charged this past week with 12 pipeline safety violations by the U.S. government for a 2010 natural gas explosion that killed eight people and left a crater the size of a house.

PG&E was charged in a grand jury indictment filed in federal court in San Francisco with knowingly and willfully violating the Natural Gas Pipeline Safety Act by failing to test and assess unstable pipelines to determine whether they could fail. The company was also charged with keeping incomplete and inaccurate records about the pipeline that exploded.

Duke Energy: CEO Lynn Good stepped before the cameras for the first time this past week to answer questions about the utility company spilling millions of tons of coal ash into the Dan River near Eden, NC., back in February.

“It was an accident and it resulted in an accidental discharge,” said Good, making no mention of any company wrongdoing. “And I just want to say we are accountable for this and are prepared to move forward.” 

North Carolina Gov. Pat McCrory, a longtime Duke employee, has urged the company to “come out of the shadows”.

German Beer: Germany’s Federal Cartel Office has fined a group of brewers 231.2 million euros ($319 million) for their part in alleged illegal beer-price fixing — the second round of punishment in the case.

The antitrust authority penalized six companies, with Radeberger and the German unit of Danish brewer Carlsberg accounting for the lion’s share of the fines. The office had already announced fines totaling 106.5 million euros in January against another five companies over price-fixing.

So there you have it, a spate of recent news stories about companies who are alleged to have acted bad;y. These reports show that even companies of substantial means, capabilities and reputation can and do mess up.

And that’s because corporations have yet to become fully digitized with a staff of cyborgs and robots, but instead rely on people, who are always hard to program.

If Management Will Listen

There is not a whole lot that a local economic developer can do when a company behaves badly. A viable business retention and expansion program would ideally give an economic developer a pathway to speak to senior management and possibly provide valuable counsel if management will only listen.

If a company views that local economic developer as a trusted ally, senior managers just might listen. Maybe.

Getting companies to listen has always been one of my biggest challenges as a consultant. I don’t think of other consultants as my chief competitors in site selection work. Rather, it is those companies who choose to do site selection on their own.

More often than not, they will fall short as site selection is not, never will be, nor should be their core function. But it is my core function, along with advising economic development groups on how to better compete for corporate investment.

Quoting the great management consultant Peter Drucker, I would urge companies to “Do what you do best and outsource the rest.”

Signs of Growth

To the millions of unemployed and underemployed in this country, this recovery may still feel like a recession. But there are continued signs that the economy is improving, albeit slower than we would like.

On Friday, the Labor Department said  the U.S. economy added 192,000 non-farm jobs in March. The nation has recovered all but 437,000 of the 8.7 million jobs, including those at government agencies, lost as a result of the last recession.

At the current pace of job creation, we should reach a new high for total employment sometime this summer. But it will come five years after the recession was supposed to have ended. Also, keep in mind that the labor force participation rate remains near its 36-year low. It stood at 63 percent last month, well below its long-term average.

Manufacturing reduced payrolls by 1,000 workers in March after adding 19,000 in February, according to Friday’s report. Construction companies boosted employment by 19,000 workers and retail payrolls rebounded 21,300.

Automotive in Gear

On another positive light, cars and light trucks sold at a 16.33 million annualized rate in March, the strongest since May 2007, according to Ward’s Automotive Group.

Demand is certainly the driver behind automotive companies investing billions of dollars in new capacity in the United States and Mexico. Last month, BMW said it would expand its assembly plant near Spartanburg, SC., creating 800 new jobs by 2016 and boosting production by 50 percent, to 450,000 cars a year.

The $1 billion investment by the Munich-based automaker would make the plant one of the largest in the U.S.

I Don’t Get It

Speaking about automotive, I’m not the only person scratching their head about the size and scope of Tesla’s so-called future $5 billion, 10-million square foot “gigafactory.” One of my better read blogs recently was “Skeptical Me” on this very subject.

“I don’t quite get it,” Volkswagen AG Chief Executive Martin Winterkorn told the Wall Street Journal last month. “We have enough suppliers and wouldn’t get the notion to build a battery factory.”

Sales of electric vehicles remain less than 1 percent of the total U.S. market. From 2008 to December 2013, over 170,000 highway-capable plug in electric cars have been sold in the U.S.

But here is Tesla, with sales of just over 22,400 cars last year, saying that it can sell 500,000 vehicles a year by 2020 if it can just build this plan and thereby reduce the cost of its lithium batteries by 30 percent. I’m sorry, but that looks like a stretch to me, as is the Obama’s administration’s goal of having 1 million electric vehicles by the end of next year.

Five years ago, Germany set a goal for 1 million electric vehicles by the end of this decade. A McKinsey & Co. study foresaw an average annual 25,000 new electric cars being added from 2011 to 2014. The average number of new registrations in the first three of those years was just 3,720 annually.

In January 2013, less than 0.1 percent of the passenger cars on German roads were electric.

It does make you wonder. I am reminded of Art Linkletter’s book from years ago called “Kids Say the Darndest Things.” Well, so too do company executives and politicians.

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.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.