Dean Barber

The New Weapon

In Corporate Site Selection and Economic Development on July 5, 2015 at 7:08 am

I generally put little stock in magazine articles that focus on ranking places by their business attractiveness.

I wrote as much three years ago in a blog called ‘You Rank, We Rank, Some Stank.”

There are two exceptions to my general rule, although that is not to say that I necessarily understand or agree with the findings of either.

Still, I give some weight to the Tax Foundation’s State Business Tax Climate annual ranking, and with more trepidation, largely because it is broader in scope, to that of CNBC’s annual America’s Top States for Business.

Now I will admit from the outset that I put more credence on these two reports largely because of my own cynicism and experiences.

A Strict No-No in My Book

For it is my belief  that some trade business publications that actively target economic development organizations for advertising revenue turn out questionable editorial product.

Now I’m a former old-school newspaperman who believes that for a news organization to have any credibility, it cannot allow for advertisers to influence how and what it reported as news. That’s a strict no-no in my book.

So there has to be a wall between news/editorial function and that of advertising, both of which are absolutely necessarily for a commercial publication to be sustainable.

But for some trade publications, and again I stress some, I see little evidence that such a wall is in place. Indeed, what I do see is see is much advertising masquerading as objective journalism.

Again, I am talking about those business trade publications that really focus primarily on economic development organizations for advertising.

What’s Happening in Connecticut?

If you are not an economic developer, you may not know what I am talking about. So to the economic developers, I ask you this question: When was the last time that you read a story in one of these  aforementioned trade publications that was not particularly flattering about the business climate of a certain place?

Every state wins projects, but how often do you read stories  of companies that believe they are paying too much in taxes or that the regulatory climate is over the top?

Recently, as reported in The Wall Street Journal, General Electric CEO Jeffrey Immelt told the company’s Connecticut employees that he had “assembled an exploratory team to look into the company’s options to relocate corporate HQ to another state with a more pro-business environment.”

Mr. Immelt points to the fact that Connecticut had raised taxes on GE five times since 2011. “I believe we should pay our fair share and that all of us should give back to our communities,” he wrote.

He added “we can compare Connecticut with other states where small and large businesses have a better environment to thrive and compete.”

Debt service is on track to grow in excess of 14 percent of the overall state budget. Connecticut’s growing debt obligations paired with mounting collective-bargaining obligations and employee retirement costs have created a financial environment that is not structurally sustainable.

As a result of this mounting fiscal fiasco, taxes in Connecticut will have risen by $8 billion in the past six years.

Florida Comes Calling

Truth be told, from taxes, to energy, to labor, to housing, Connecticut is a high-cost state, and that has some in the business community there wondering if they should not be thinking of greener pastures.

And it is for that very reason that Florida Gov. Rick Scott was there recently, touting Florida’s business climate in comparison. Former Texas Gov. Rick Perry made such trips to high-cost states with some regularity, drawing the ire of the governors of the states being targeted.

(“Poaching” companies from one state to another has been a long tradition in this country. It is somewhat surprising that more fisticuffs don’t break out when economic developers gather at national conferences and trade shows.)

But will you read an exhaustive, critical story of Connecticut’s business climate in a trade publication catering to economic development advertising? Or that of California or Illinois?

I think you know the answer to that.

Far From Gospel

So going back to the subject of rankings, I place more veracity with the Tax Foundation and CNBC, because I see no evidence of advertising tainting their findings.

Clearly, CNBC, a cable network owned by NBC Universal News Group, a division of Comcast, does accept advertising. But that advertising is overwhelmingly of a consumer product/service nature– from Chevrolet to Charles Schwab.

While I have seen some place advertising on CNBC, most notable of late that of New York state, I believe it to be a very small piece of the pie of total advertising revenue that CNBC takes in.

Having said all that, CNBC’s ranking of states for business climate does leave me scratching my head, as the cable network’s methodology and weighting differs considerably than the criteria we would employ for location analysis projects for corporate clients.

So while I pay more attention to Tax Foundation and CNBC business rankings, their findings are far from gospel. Rather, I think of them as notable notes.

Minnesota?

When CNBC most recent rankings for best business states for 2015 came out last week, Minnesota came out as No. 1.

I asked a fellow site selection consultant for his reaction, and he replied that he was “shocked” by the finding. Frankly, I was, too.

Texas coming in as No. 2, well, that didn’t surprise me. Texas is always somewhere near the top, year after year. But Minnesota coming in at No. 1?

Even CNBC had to explain itself a bit: “Never since we began rating the states in 2007 has a high-tax, high-wage, union-friendly state made it to the top of our rankings. But Minnesota does so well in so many other areas—like education and quality of life—that its cost disadvantages fade away.”

In the category of “cost of doing business,” which is paramount in most location analysis projects that I have been involved in, CNBC ranks Minnesota at 35th, which is certainly not great fodder for economic development marketing.

But that didn’t stop the Minnesota Department of Employment and Economic Development from sending me an email one day after the CNBC rankings were published laced with favorable quotes from business leaders in the state. An example:

“This is national recognition of Minnesota’s vibrant and diverse business community. It leverages our talented workforce, an amazing quality of life, and a great higher education system. Minnesota’s dynamic economy benefits our company, our employees, and our communities.” — Andersen Corporation CEO Jay Lund.

The largest window and door manufacturer in the country, Anderson announced in April a $45 million expansion at two facilities in Minnesota that will create 300 jobs.

Evidently, Anderson is putting their money where their mouth is, which is always a good testament about any place.

Where All the Women are Strong

When I think of Minnesota, I cannot help but think of Garrison Keillor’s tongue-in-cheek remarks about the fictional town of Lake Wobegon, where “all the women are strong, all the men are good looking, and all the children are above average.”

And more and more, it is that human element, the talent dimension in seeking a workforce best equipped to do the job, that companies are increasingly looking for.

Said CNBC in its ranking report: “Rather than just seeking the lowest taxes or the highest incentives, companies are increasingly chasing the largest supply of skilled, qualified workers. So states are touting their workforces like never before, giving the Workforce category — where Minnesota finishes a respectable 13th — greater weight in our study.”

Cost Matters But …

From my standpoint, operating costs will almost always matter big time for most location analysis projects. It is for that very reason that companies like GE are making noise in Connecticut.

But relying simply on cost to the detriment of investing in human resources, that of education and workforce training, is increasingly a losing proposition. And business leaders, educators and economic developers in Minnesota get that to their credit,

Now I may not fully get or agree with CNBC’s rankings, but their emphasis on talent and workforce readiness as the single most important criteria for business climate is probably a right way to look at things.

Cost matters, no doubt about it, but workers are the new weapon in the battle for business.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Plano, Texas. He can be reached at dbarber@barberadvisors.com or at 972-767-9518. If you liked what you read here, invite Dean to speak at your next meeting.

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  1. The new trend that business has moved to is a focus on ancillary costs in business and soft skills from the workforce. Although, it is still questionable on how much weight the CNBC scorecard puts on those relative intangibles.

    Minnesota is definitely a self-motivated community and they have to be due to the high potential of being cut off from supplies because of snow. That preparedness translates to a greater workforce of people who focus on self-improvement and cross training.

    My evidence is not extensive, but from personal empirical data. If 3M agrees like Anderson does that would definitely alleviate any questioning on my part.

    Regards,
    Clifford T Mitchem
    Professional Developer
    Life Leadership
    http://LifeLeadership.com/61435084
    life.leadership@inbox.com

  2. […] rankings are more rigorous than others. Location consultant Dean Barber recommends the Tax Foundation’s State Business Tax Climate Index and CNBC’s Top States for Business […]

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