Dean Barber

Archive for February, 2016|Monthly archive page

Get the Lead Out: Communities Competing in a 21st Century

In Corporate Site Selection and Economic Development on February 29, 2016 at 8:54 am

My travels in business and pleasure have taken me all over this great country, and I would venture to guess that I have drunk tap water in hundreds of towns and cities.

In doing so, I have probably ingested brain-damaging lead, which may be the reason why I am a consultant today. I do stare at blank walls for lengthy periods of time.

But seriously, lead is a neurotoxin that poses a real threat to public health, and unsafe levels of lead have turned up in tap water in city after city. They include Jackson, Miss., where authorities last week warned that pregnant women and young children should not drink unfiltered tap water.

The Romans noted the effects of lead poisoning — loss of appetite, vomiting, convulsions, brain damage — among slaves who manufactured and laid the empire’s water pipes 2,000 years ago.

Now you might think we would have learned something. But the fact remains that lead pipes were widely used during the last century to deliver water and much of that old pipe remains in the ground today in communities across America.

Beyond Public Health

But this goes beyond even public health. As I have written in past blogs, the physical condition of our basic infrastructure — roads, bridges, schools, water lines and water treatment plants — greatly influences the ability of a local economy to grow.

In my consulting role to companies on corporate site selection, and to economic development organizations on business competitiveness, we invariably take a hard look at whether existing infrastructure meets the needs of the citizenry and the business community.

In short, if a community invests in itself, in terms of human capital (education and workforce training) and infrastructure, well, we like that. We like that a lot.

And if it becomes apparent that a community is not investing in itself, essentially not trying to compete in the 21st century, well, we don’t like that.

So this is about economic viability for communities in the 21st century. It just is.

A 30-Year Low

A report last week by the Center on Budget and Policy Priorities warns that state and local spending on infrastructure is now at a 30-year low.

Total capital spending as a share of state GDP fell in all but five states and the District of Columbia between 2002 and 2013, with the largest drops in Nevada, Florida and Michigan. I quote from the report:

“Commerce requires well-maintained roads, railroads, airports, and ports so that manufacturers can obtain raw materials and parts, and deliver finished products to consumers.  Growing communities rely on well-functioning water and sewer systems.

“State-of-the art schools free from crowding and safety hazards improve educational opportunities for future workers.  Every state needs infrastructure improvements that have potential to pay off economically in private sector investment and job growth.”

I don’t care what your politics are. Makes no difference to me. But the truth is that we have inadequate and deficient infrastructure all across this country. I cannot help but believe that if we’re going to remain a competitive economic force as nation, we have to invest in ourselves.

Tip of the Iceberg

Flint, Mich., has rightly drawn national news media attention because of lead levels in the water approaching that of toxic waste. But Flint may be the proverbial tip of the iceberg.

During a cursory internet search, I found quite a few news stories about suspected lead contamination in public water supplies in a host of places.

The Environmental Protection Agency, charged with protecting the nation’s drinking water, estimates there are 10 million lead “service lines” linking water mains in streets to buildings, while the American Water Works Association, representing about 4,000 water utilities, places the number at 6.5 million.

The trade group estimates the average cost for each replacement line at about $5,000, for a total of $32.5 billion. Congress banned lead water pipes 30 years ago.

“The only way we can solve this is by testing more aggressively and starting to replace these lead pipes,” Jeffrey Griffiths, a Tufts University researcher, told theChicago Tribune.

Most cities add corrosion-fighting chemicals to the water supply that form a protective coating inside pipes. Flint stopped the treatment in an ill-advised attempt to cut costs.

Research shows the anti-corrosion treatment also can be thwarted when street work, plumbing repairs or changes in water chemistry disrupts the coating, causing lead to leach from service lines.

Locating the Problem

Identifying and locating lead service lines can be a huge challenge for many communities as records are often largely inadequate.

The Wall Street Journal reported last week that University of Michigan Prof. Martin Kaufman deployed students and volunteer residents to review maps and 45,000 index cards from the 1950s on service-line information in Flint.

Finding much of the data missing, the group turned to 240 digital maps that Flint created in a 1984 survey to arrive at the estimated 8,000 or so lead service lines, down by about half from earlier estimates.

GM Had Options; Most Do Not

Soon after Flint made its ill-fated switch in 2014 to Flint River water from the costlier Detroit municipal system, officials at GM’s engine plant soon discovered that Flint water was rusting their engine blocks. Not good.

This is an example of infrastructure not meeting the needs of a major employer. But unlike residents and most businesses of Flint, GM was able in December 2014 to switch from the tainted water system to that of a neighboring township.

Now think about this for a moment. If we were engaged by a company to find optimal locations for a future manufacturing plant, and we learned that a major employer had switched water sources because of corrosion, don’t you know that would raise red flags.

Inadequate, deficient, unsafe infrastructure is always a mark against a community. In the world of business as in life, needs have to be met. If they are not, in terms of a corporate site search, we move on to other places.

Serious Needs

According to the 2013 report card by the American Society of Civil Engineers, the U.S. has serious infrastructure needs of more than $3.4 trillion through 2020, including $1.7 trillion for roads, bridges and transit; $736 billion for electricity and power grids; $391 billion for schools; $134 billion for airports; and $131 billion for waterways and related projects.

There is a growing debate and likely political battles on the horizon in many states right now regarding raising gasoline taxes to pay for road and bridge improvements.

Again, a cursory internet search shows the question being raised in Mississippi, Alabama, Maine, New Jersey, Delaware, Missouri, Indiana, Virginia, Colorado, Alaska and Wisconsin. (I have probably left off some.)

Nobody likes tax increases, that’s for sure. But with crumbling infrastructure and the need for our state and local economies to grow, this money is going to have to come from somewhere.

At some point, we’re going to do what we have to do.

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 Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Advertisements

Offshoring Announcements “Yuge” Gifts to Trump

In Corporate Site Selection and Economic Development on February 16, 2016 at 4:17 pm

It was absolutely gutwrenching to watch – a cell phone video made by of one of the 1,400 workers at a Carrier Air Conditioner plant in Indianapolis on being told this past week that their jobs were being moved to Mexico.

Now I am not sure that there is a good way for a company to do this. I do know that Chris Nelson, the company’s president, came off every bit like a stiff in a suit in delivering the bad news to his employees.

Upon reading a prepared statement, he was met with derision and anger from the gathered plant workers, which I think is totally understandable and even proper.

“I want to be clear, this is strictly a business decision,” Nelson told the workers, and “does not reflect on the facility or any individuals in it.”

I’m sure that made them feel a whole lot better.

Then Nelson urged the workers to calm down and remain committed to manufacturing high quality products, to which to which a voice rang out from the audience, “Hey, f—k you!”

How Would You Feel?

I would urge you to watch this painful video and then think long and hard on how you might have reacted if you had been on the receiving end.

Sadly, I know some business people out there, a minority to be sure, who do not empathize with their workers or any workers for that matter. They may watch this video and think the plant workers had it coming, that it was their fault.

I come across this mindset occasionally, business people who believe that American workers are overpaid (as if they are supposed to accept Mexican or Chinese wage levels) and under motivated.

Nothing I can say will change their minds.

Blue-Collar Appeal

But I can tell you someone who is changing minds, and please understand that this is NOT an endorsement.

The Carrier announcement to move operations to Mexico will only play well in the hands of Donald Trump and his bid for the presidency. Whatever you think of him, Trump has repeatedly pledged to crack down on the offshoring of American jobs, which gives him a blue-collar appeal.

When he first announced his candidacy last year, Trump immediately slammed Ford and Nabisco for moving manufacturing operations from the U.S. to Mexico.

“Ford announced a few weeks ago that Ford is going to build a $2.5 billion car and truck and parts manufacturing plant in Mexico. $2.5 billion, it’s going to be one of the largest in the world. Ford.”

Trump said that if he were president, he would put the screws to Ford.

“I would call up the head of Ford… I would say, ‘Congratulations. That’s the good news. Let me give you the bad news. Every car and every truck and every part manufactured in this plant that comes across the border, we’re going to charge you a 35-percent tax, and that tax is going to be paid simultaneously with the transaction,’ and that’s it…”

A Perfectly-Timed Gift

While Ford has not confirmed it, word leaked out last week that it is indeed planning to build a big, new assembly plant south of the border, while expanding a plant that’s already there.

Together, the projects will more than double Ford’s production capacity in Mexico. Within a few years, Mexico could account for more than 30 percent of Ford’s North American vehicle production, up from 14 percent last year.

Mind you, Ford is not so different from many companies that have made mad dashes to Mexico and other low-wage countries to get larger margins on their products.

Is that wrong? I’ll let you be the judge. Certainly it has had a detrimental effect on communities throughout this country.

After Ford spent months saying that his criticism was off base, don’t you know that announcing a big expansion in Mexico during the heart of the primary season would be a perfectly timed gift to Trump.

Tapping Into the Angst and Anger

Forget for a moment that Trump too often engages in simplistic bravado devoid of specifics, and some of which borders on hate speech. Most of his supporters would probably fully acknowledge that.

And they know that Trump cannot rule like a dictator, but would need Congress to make any major changes to U.S. trade policy.  No president can slap on a 35 percent tariff.

Still, it is clear that he has tapped into an angst and anger of a middle class that has been decimated, part of which is due to bad trade deals, which he rails upon, and which has contributed to the gutting of manufacturing jobs in this country.

It should be noted that U.S. manufacturing, while having taken some big hits, is far from being at death’s door. Total number of workers in U.S. manufacturing is now at about 12.4 million, a seven-year high. So all is far from being lost.

Nevertheless, corporate offshoring, as in the case of Carrier, and corporate tax inversions, as in the recent case of Johnson Controls, continues to happen with great regularity.

Tax Inversions

Earlier this month, Wisconsin-based Johnson Controls and Tyco International, based in Ireland, merged, with the new company to be headquartered Ireland, where the corporate tax rate is 12.5 percent, compared with 39 percent in the U.S.

The U.S. corporate tax rate is among the highest in the world. In a bid to lower their tax bills, more U.S. firms (about 50 in the past 10 years) are making merger deals with foreign companies. In short, moving their legal corporate headquarters out of the U.S. to another country cuts their tax bill.

American companies are sitting on $2.10 trillion in profits earned overseas, according to a 2015 Bloomberg News review of the securities filings of 304 corporations. That is money that could be invested in the U.S. if conditions were only ripe for it.

Trump advocates cutting the U.S. corporate tax rate to 15 percent, thereby eliminating the need for corporate tax inversions to happen. I believe this is a problem that could be solved with bi-partisan support.

I Don’t Care

Trump asserts that the other presidential candidates do not have the courage or ability to “make America great again.” Having taken money from special interests, they would be beholden to the will of special interests once elected.

But by self-funding his campaign, Trump says he is essentially inoculating himself from a donor class and special interests,

Again, more bravado talk from a billionaire, but it still touches a nerve with working people who believe that Trump will stand up for them.

“So under President Trump, here’s what would happen: the head of Ford will call me back, I would say within an hour after I told them the bad news… And he’ll say, ‘Please, please, please.’ He’ll beg for a little while, and I’ll say, ‘No interest.’ Then he’ll call all sorts of political people, and I’ll say, “Sorry, fellas. No interest,” because I don’t need anybody’s money … I don’t need anybody’s money.

“I’m using my own money. I’m not using the lobbyists. I’m not using donors. I don’t care.”

But Wait, There’s More

Also Wednesday, and also in Indiana, United Technologies Electronic Controls announced that it will move its Huntington manufacturing operations to a new plant in Mexico, costing the northeastern Indiana city 700 jobs by 2018.

Carrier Corp. and UTEC are units of Hartford, Conn.-based United Technologies Corp.

Again, I want you to know that I am not an advocate for Trump (or anyone else for that matter) to be our next president. That is your personal decision when the time comes.

What I am saying is that Trump understands that speaking harshly (and sometimes with vulgarities) about bad trade deals and offshoring is a message that will resonate.

I believe there are more than a few plant workers at Carrier who think of this billionaire real estate mogul as an anti-establishment tough guy and “one of us.”

This presidential campaign could be one for the history books, possibly pitting Trump, the nationalist, against Bernie Sanders, the  avowed socialist. As both of these New Yorkers would say, this will be “yuge.”

Ron’s Road Show

Ron Kitchens and his Consultant Connect road show came to Dallas this past week, hooking up economic developers from around the country to Texas-based site selection consultants.

I was one of the chosen consultants to bloviate on matters that I thought economic developers should know or consider.

My message was a bit heretical: Do not consider the consultants the end-all to your business development efforts.

The overwhelming majority of companies, sadly from my point of view, will not use consultants in choosing a location to expand operations, but rather do it themselves. They are wrong in doing that, but that’s another story for another time.

The point I was trying to make to my economic development friends is that they should engage in systematic and continuous business development, targeting companies and decision makers within those companies, and not just rely on developing relationships with consultants.

The consultants are the low-hanging fruit, but there is so much more out there if you only look.

Business development was the subject of last week’s blog, “Why Don’t He Write? What is Wrong With Us?”  Business development, which should be a systematic and continuous outreach effort to develop contacts and mine sources for information, is something that you will never be perfect at it.

But you can get better at it the more you do it. My suggestion: Do it.

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 Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.

Why Don’t He Write? What is Wrong With Us?

In Corporate Site Selection and Economic Development on February 7, 2016 at 7:40 am

Last week, I stood before an economic development board of directors and gave a recap of a proposal on how to best grow an industry sector in their community.

We had submitted a proposal two months ago, and found ourselves one of four finalist firms selected to essentially argue our case. We had 30 minutes.

I spoke about the knowledge and experience of my project partners, who were present via Skype. They said more about their backgrounds and gave ideas on how we were offering more than just a report but an action plan.

Then it came to the question and answer phase, and one board member asked a question that momentarily threw me for a loop. I’m paraphrasing here but he asked in essence, “Why aren’t companies coming here. What is wrong with us?”

His question went to the very heart of what we would be delving into if we were chosen to do this work, because our starting point would be a SWOT analysis to determine the community’s strengths, weaknesses, opportunities and threats, especially relative to this one industry group.

Why Don’t He Write?

It’s weird how sometimes something from left field will come to mind at moments like that. Standing there, I thought of the scene from the movie “Dances with Wolves.” A crude wagon teamster looked down upon a skeleton on the prairie and laughed: “Somebody back east is saying, “Now why don’t he write?”

Why don’t companies come here? In most cases, communities that wait for business investment to come to them, typically find themselves waiting and waiting and waiting.

Go Fish

The truth is that you have to go fishing, and you have to know what you are fishing for, and you have to have good bait. For lack of a better phrase, we call this business development, which for me is not nearly as relaxing as fishing.

My reply to the board member’s question was something like this.

“Look, we haven’t yet done a SWOT analysis to determine what your community’s strengths, weaknesses, opportunities and threats are, so I would just be guessing.

“But it rarely works to sit back and wait for business investment business to come to you. You have to engage in business development, which is never easy, with target industries in mind, but only after you know what your strengths, weaknesses, opportunities and threats really are.”

I may have said it better here than I said it there, but you get my drift.

Outreach is Hard Work

Business development is an exercise in outreach and I’ve always believed that most economic development organizations are not particularly good at it. It’s hard work and to some degree it’s even scutwork, like digging a ditch. But it has to be done in a continuous and systematic way.

In a follow-up email the next day, I thanked the staff and the board of the economic development organization for giving us the opportunity to compete for the project.

I even offered to show them some not-so-obvious ways and means by which to identify and make contact with senior corporate decision makers in companies within that industry group.

Wave the Flag

I also suggested that the community has to get out there and wave the flag by attending at industry conferences and trade shows and developing relationships with business people outside their community.

You can make all sorts of strategic errors in business development, but if you meet the right people and develop relationships with them, good things can happen.

The Fixation with Hot Leads

Too many economic development groups are looking solely for “hot leads” when they should be looking at building long-term relationships with companies that could and would be a good fit for their community, whether there is an imminent project or not.

I cannot tell you how often I run across this short-term “hot lead” mentality among economic developers to the exclusion of almost everything else.

I’m convinced part of the reason is that there are some consultants out there selling that smoke in a bottle, and a goodly number of economic developers are buying it.

Last week, while I was in this city and about an hour before I spoke to the economic development board, I was on the telephone with the president of a manufacturing company in the Pacific Northwest. He said this, which is an accurate quote: “We have talked about a Southeast facility but it hasn’t moved much past the discussion phase.”

Playing the Long Game

Now that was music to my ears, a great opportunity for me to provide consulting assistance on a future site selection project. And because of that, I’m going to stay in touch with this man, all the while knowing that nothing will probably happen this year.

But because this is not an imminent project, I know of some economic developers who would see no urgency, no need to develop a relationship with this business person. No project, why bother.

And they would be so, so very wrong. Business development should be played as a long game and not for short gain.

He Gets It

Next week, I fly a southern state to consult with an economic development department of an electric utility company. They want me to look at their big data gathering initiatives and see how we can leverage all that information into developing relationships with people in identified companies.

I feel pretty confident that I can help them. But to gauge whether they were smitten with the “hot lead” mentality, I asked a senior executive with the utility this question: “If I introduced you to a company executive who said his or her company might be looking in your area two or three years from now, would you consider that a win?”

His answer was “absolutely,” which was the right answer. But I have worked some economic developers who would have said no, which to me is to cut off your nose to spite your face.

He Doesn’t Get It

Last month, I was on a conference call with the head of economic development for a New England state who had been bitten by the “hot lead” bug.

He didn’t want to hear about developing relationships with identified companies as likely suspects. Rather, he just wanted that silver bullet on how to win projects in the 200-300 people range.

I came away from that conversation thinking this man had no more understanding of business development that I do about quantum physics.

But at least I know what I don’t know. This was a bureaucrat with no economic development experience thrust in position that he shouldn’t hold and answering to a governor to whom he desperately wanted to please.

Actually, that is not a particularly rare scenario on the state level throughout this country come to think about it.

Part Art, Part Science

This thing we call business development is all about developing and then mining, that is extrating information from, sources over the long haul.

I believe it’s part art and part science, especially now with the big data resources that we can use to our advantage. Unfortunately, many people with the job title of business development will never really truly get the hang of it, largely because they don’t spend the time to learn what works and what does not.

In some ways, it is easier for me to show than explain how I go about getting names, email addresses, direct phone numbers, and mobile phone numbers of senior executives.

The president of that Pacific Northwest manufacturing company had invited me to call him. Over the course of two days, we communicated via LinkedIn inmail, email, telephone and text messages, four different mediums.

Whether he decides he needs our help with a future site search project a year or two from now, or whether this community chooses us in the next two weeks to help bolster their recruiting efforts for an industry is almost beside the point.

They now know about us. And they now have an idea about how we can help. And we will stay in touch because we’re playing the long game. And relationships matter.

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 Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.