Low Costs + Skilled Workforce = A Perfect Fit
In order to satisfy their workforce needs, companies can avail themselves of specialized training programs as well as cash grants and other incentives.
Minah Hall, Managing Director, True Partners Consulting LLC and Natalie Matwijiszyn, True Partners Consulting LLC (Workforce 2014)
The site selection process has always been a complex balancing act of finding the “perfect” combination between the ideal physical location (proximity to interstates, airports, customers, etc.) and the most qualified and available workforce, with the cost of doing business in each location (utility costs, labor costs, and taxes) tempering the two considerations. Depending on the project, physical location may be very important to a company or specific geographic requirement.
However, recently the priority has shifted from a point on the map to a location with the best workforce and lowest cost of doing business. The recent boost of manufacturing activity in the United States, coupled with the influx of foreign direct investment, has made the focus on workforce inevitable. Companies have placed increased importance on workforce and corresponding incentives, reprioritizing them as a top-five factor in their location decision.
State and local jurisdictions cannot always overcome physical impediments, though they can compete for development projects by implementing various training and financial incentives. The economic development agencies are quick to respond to companies’ needs, offering incentives to make their locations more attractive through training programs or a lower cost of doing business.
State and local jurisdictions cannot always overcome physical impediments, though they can compete for development projects by implementing various training and financial incentives.
Over the past few decades, the U.S. skilled labor market weakened due to a decline of manufacturing in the United States. The offshoring of skilled manufacturing projects substantially impacted the local economy — more so than other regional economic activities. With manufacturing jobs moving to other global markets, much of the collective skilled labor knowledge left as well. Fewer people trained for skilled manufacturing jobs, and the emphasis on technical training shifted. Now, as rising fuel prices and geopolitical uncertainty cause companies to onshore their manufacturing facilities, a location with an available and skilled workforce has become an increasingly important factor in the site selection decision.
With a need comes a solution, i.e., jurisdictions offer innovative solutions when creating incentive packages that relate to workforce training. If a location does not have enough skilled labor, jurisdictions are able to provide funding through state-sponsored training programs to meet the specific needs of a specific project. Most state training programs will reimburse for some of the cost of training new employees, and some states will even reimburse the cost to retrain existing employees; however, the most successful and well-known training programs offered are those that allow for specialization.
The more specialized a training program, the more valuable the incentive will be to the company. Notable specialized training programs include Georgia Quick Start. The program’s success is due to the partnership between the company and the state of Georgia. Typically, the onus of developing the training is on the company; but Quick Start partners with the company to develop a program that is unique to the project. Quick Start not only helps develop the training, but also provides a facility for training prior to the opening of a new project and creates prototypes used in training — all without losing valuable time getting the project up and running. For example, a Swedish company recently collaborated with Quick Start to help the company train its employees to manufacture a new, highly sophisticated surgical product. By providing support from beginning to end, Quick Start allows a company to focus on other important elements of its location process.
Most state training programs will reimburse for some of the cost of training new employees, and some states will even reimburse the cost to retrain existing employees; however, the most successful and well-known training programs offered are those that allow for specialization.
When there is an obstacle related to the existing workforce, creativity can work to win a project. Louisiana’s FastStart® program adapts to each project and develops a training program that uses a customized approach to capture a company’s culture and deliver the training required; however, not all aspects of FastStart® focus solely on training. For example, a creative solution included the establishment of a recruiting website that included an overview of the company in need of labor. The website attracted nearly 2,000 applicants; of those, almost 700 were highly qualified and possessed the required skills that factored into the company’s location decision.
Streamlined Workforce Initiatives
In addition to offering customized training and other training-related incentives, many states are now recognizing the importance of having a streamlined workforce initiative to more effectively and efficiently communicate all of their workforce programs and resources. Within the last few months, Kentucky and Florida have both streamlined their workforce initiatives. In late January, Kentucky launched an initiative to transform its state workforce delivery system by providing employers with a one-stop-shop for all workforce-related resources through WorkSmart Kentucky. As part of this initiative, the state is offering flexible funding, in the form of grants, to help offset the costs of customized and in-house training needs.
In February, Florida launched a new unified workforce brand, CareerSource Florida, for each of the state’s 24 regional workforce organizations and nearly 100 career centers. Florida recognizes the importance of having a single statewide brand, making it easier for companies to find the resources they need in order to fill positions quickly.
Receiving cash incentives may sound like a great idea; however, many programs’ compliance stipulations related to obtaining the funding are overly burdensome. Companies must determine the true value of such training incentives
Weighing the Value of Training Grants
Not all workforce solutions are worth their value. Many jurisdictions offer cash grants to offset training costs. Receiving cash incentives may sound like a great idea; however, many programs’ compliance stipulations related to obtaining the funding are overly burdensome. Companies must determine the true value of such training incentives and make the decision as to whether or not to take advantage of them.
The primary question is whether the size of the grant is worth the cost to perform the required reporting. If a training grant demands complex reporting requirements and the company does not have a dedicated training coordinator or sophisticated tracking system, then the monetary value of the training grant may not exceed the cost of performing the reporting. For example, a grant of $150,000 that requires 30 separate reporting forms to be filed within the next 30 months is overly burdensome and may not be worth the benefit of receiving the training grant. Moreover, if the training grant agreement provides the recipient with a “chart” mapping out the various required reporting forms and due dates, then the company may want to strongly consider not taking advantage of the program. In contrast, a training grant for $150,000 that requires a company to submit a one-page report annually may be worthwhile.
Moreover, a company’s decision to pursue a training grant should be based on the company’s internal training profile. Companies ought to consider whether they have a robust internal system of reporting or if the reporting is being added onto someone’s already full workload. In evaluating whether to accept a training grant, it is best to evaluate the program in its entirety, and sometimes working backwards helps. By starting with the compliance, a company may ascertain the real value of a training incentive. First, determine the number of hours necessary to complete the required reporting; then perform a cost per hour to satisfy the requirement; and then compare the cost of reporting to the value of the training incentive. Additionally, a company should understand any clawback provisions and other potential penalties of missing a report or failing to maintain a minimum employee headcount, which may trigger payback of grants already awarded with interest and penalties, making a great benefit a headache in the making.
The focus placed on workforce and incentives is only going to increase in the future. For jurisdictions desiring to be part of a site selection conversation, an emphasis needs to be placed on keeping the costs of doing business low and strengthening the existing workforce. Gone are the days of using a “one size fits all” approach in developing a good workforce and attracting new business. The most effective tools seem to be ones that focus on a tailored approach for each project. Although this approach will not be successful in every instance or even possible at times, if or when there is a “perfect” fit, everyone will be better off.