Christopher Steele, Global COO and North American President, Investment Consulting Associates (ICA) (June/July 09)
In the 2008 Area Development Corporate Survey, "skilled labor" has once again ranked lower in importance than "labor costs" and "occupancy and construction costs." However, skilled labor remains a critical component in location success.
The Case for Skilled Talent
The survey asked for the most critical items in selecting sites. The term "site" can be used to narrowly refer to the selection of a specific plot of land or facility. On the other hand, the term "site selection" or "site selection process" can broadly refer to finding new business locations with all the attendant concerns, both strategic and tactical. Strategic questions - Why do we need this location? How will we define success? How might our needs change? - involve many factors, and skilled labor may be one of the most important.
Before we jump into the importance of skilled labor, it is useful to further define the term "labor" itself. In a broad sense, labor includes anyone who works at a location. However, some of the employees are indispensable to the success of the business. This can include managerial, scientific, financial, professional, or technical talent. At base, these people are required for any measure of success. At best, they drive excellence.
Access to skilled talent can be of utmost importance when making strategic location decisions. Figure 1 shows how employees filter through the employment lifecycle - from initial exposure to the labor market, through screening and evaluation, to and including productive employment, and ending in turnover or retirement.
Clearly, a robust labor - or talent - market needs to exist for this model to perform adequately. Financial services, high-tech, pharmaceuticals, aerospace, automotive, medical devices - all of these industries require this pipeline remain viable. Indeed, the breakdown of this pipeline can cause a company to move out of a community.
Moreover, companies need to understand how effective this talent is at a given task for a given price. Without this knowledge, predictions for success in a current or future community lack empirical basis.
So, how do companies evaluate the pool of skilled talent in a community? Simply put, to attract any given industry or use, the location needs to be able to answer three key questions for any and all of a series of key occupations:
1. Is it already here?
2. Can we develop it ourselves?
3. Can we attract it here?
Communities can ask themselves the same questions when trying to identify best-fit industries and uses.
Do We Already Have It?
The size of the overall labor market is usually easy to determine. Labor force statistics and general demographics provide insight into both the existing base as well as the expected dynamics. After all, it takes 20-45 years to make a 20-45 year old. Hence, we should be able to look at current year statistics for 10-year-olds of a particular population to estimate the size of the 20-year-old labor force within 10 years (in- and out- migration aside).
Additionally, companies are extremely interested in the availability of experienced individuals with sets of defined skills. These defined skills - cleanroom technician, machinist, international benefits specialist, medical claims officer - can involve many years of specialization. The difference between finding an exact match and an approximate match can mean either having to hire multiple people to fit one role or otherwise introduce unacceptable operational risk into key business processes.
While commercial data captures talent availability for some occupations, it lacks in specificity for others. Moreover this data can be difficult to obtain even in its imperfect form. The U.S. Bureau of Labor Statistics collects this data on a rolling and periodic basis. This means companies must compare communities at different points in time, using aged data.
Another indicator of talent availability is the number and types of companies already operating in a specific area. Paying attention to plant expansion, relocation, and downsizing notices provides insight into both opportunities and risks in candidate communities.
On-the-ground evaluation is a critical tool in the site selection process. It can provide best practices on where to find talent, local customs and regulations, as well as salary and other compensation. It can even provide information as to how to arrange and operate the workplace in order to maximize employee effectiveness.
Can We Develop It?
Sometimes the skills required either do not exist in sufficient number or are so novel that the talent base must be either enhanced or created wholesale. While the initial talent base can be identified from the local and regional pool, additional education or training programs must be created either within or outside of the company to fulfill the need.
Local and regional colleges meet this need on one level. Universities can produce a steady stream of graduates with finance, MBA, computer science, medicine, nursing, and other basic skills bases. These are key building blocks for 21st century jobs. Likewise, some industries can produce talent that can be adapted to other uses. For example, precision manufacturing for automotive uses may be adapted to medical devices. Chemicals technicians make for great pharmaceutical production professionals.
In addition, developing the local labor market is an ideal role for state and regional incentives. The best of all incentive packages are those that invest in both the long-term success of the company and the community. They are not zero-sum games but are instead practical tools for building a partnership between business and the public sector. Flexible, well-run industrial and occupational training programs explicitly fit these roles by training local citizens (also known as taxpayers and voters) to fill jobs for which a company has declared a need. The match between supply and demand is explicit. Even if more applicants receive training than eventually find positions with the company, the exercise raises the overall skills base for the community, making it a better target for further business attraction.
Can We Attract It?
Some skills are simply so specialized and so rare that companies enter the expansion and location strategy exercise with the explicit knowledge that no individual market will be able to satisfy their needs for talent. In these cases, they must be prepared to recruit this talent from a larger regional, national, and even global talent base. Certainly, locations with a significant cluster of existing skills and the programs to adapt them provide stronger starting points. But other locations - which perform better across the broader range of strategic need - can still attract a highly skilled labor force. Quality of life becomes a strategic concern in such cases.
A measure usually reserved for headquarters functions or those where a cadre of corporate officials are to be relocated, quality of life remains one of the most difficult concepts to define in location strategy, largely due to subjectivity. What may make for a great place to live for one family may not work for all. For example, consistent 80°F sunny weather, away from crowds, etc. might represent pure misery for a family that enjoys four seasons, snow, and the excitement of the city.
Still, successful companies do impact their ability to bring talent to their location through the quality of their own workplace as well as the quality of the communities in which they choose to do business. Such companies inherently understand their employees' needs and values and assimilate these into their location strategies.
Implications for Economic Development
While each of these is a key question for any company making a strategic location decision, local communities may not ever hear the question directly. Companies typically perform several rounds of screening and candidate elimination before contacting those communities in the "beauty contest." Once a company reaches this threshold, questions more often revolve around the availability of specific sites, infrastructure, and the tactical costs of operation.
Nonetheless, those communities that think about the types of industry they have now - and those they want to attract - benefit from taking an inward look at their own talent pools: those they can produce, and those they can bring to the area. Any downward disparity at best represents a competitive disadvantage. At worst, it represents a risk for losing business activity.
On the other hand, rich mines of definable talent can be fantastic attractors for business. Communities should take the time to understand the resources at their disposal and make sure that word reaches the willing ears of those looking for the right location.
Christopher Steele is President of CWS Consulting Group, a business consulting firm specializing in location strategy, site selection, and industrial development. He previously served as President, Real Estate Line of Business at TranSystems and as a Senior Manager in Ernst & Young's Real Estate Advisory Services Group.