Workforce Workshop: Evaluating a Community’s Labor Pool
The company must identify its needs, canvass local markets, and assess prospective locations’ educational resources before it can make a site decision.
Workforce Q4 2016
Communities often tout local graduation rates when promoting economic development, but those numbers alone are unlikely to lure a major employer to town. A large company seeking a new location requires detailed information about workforce capabilities, perhaps touching on specific fields of expertise, ongoing graduation trends, and the availability of specialized training from nearby schools.
An understanding of how a site search team evaluates workforce resources will help municipal leaders and economic developers respond effectively when helping prospective employers evaluate their region. How does a company go about assessing an area’s existing workforce? What training infrastructure is essential to support various enterprises, and how can businesses and educational institutions collaborate to develop an adequate, ongoing supply of qualified job candidates?
Before the team begins combing the countryside for pools of workers, it must identify the education levels or skills required for the new location. Answers to the team’s line of questioning at this stage are seldom obvious, and sometimes the employer’s real estate director or chief financial officer working with the search team won’t have that detailed knowledge, either. The peril of hiring the underqualified is clear enough, yet employers also incur a risk by hiring overqualified individuals.
Real estate advisors may find the most accurate clues to education requirements by donning their deerstalker caps and interviewing line managers about the functions that will occur at the new facility. What must a worker know on the first day of employment, and what will they learn on the job? Thinking of their best or most effective employees, what are their educational levels, what capabilities did they bring to the company, and from what prior work history? What education levels among applicants result in the longest tenure?
That last question underscores the importance of matching education requirements to the work, rather than hiring the most educated people that apply for a job. One company may prefer to hire highly trained or experienced workers to step in and perform a task from the start, while another employer may prefer bright but inexperienced workers for the same task, choosing instead to train them in the company’s method.
The peril of hiring the underqualified is clear enough, yet employers also incur a risk by hiring overqualified individuals. A repetitive job below the worker’s skill level may quickly induce boredom, leading to increased turnover and ongoing training costs. Also, the higher a person’s education, skill, and experience level, the greater the compensation they will likely demand, even if those extraneous qualifications go unused on the job. Therefore, a workforce suited to the work helps to control the employer’s wage and training costs.
Additionally, the team must consider the scale of job groupings within the planned facility. For example, many metropolitan areas have adequate labor to support a 100-person operation of three to four primary functions. An employer may plan to hire 20 to 30 accountants and similar numbers of help-desk operators, sales personnel, and inventory or assembly technicians. Those requirements are unlikely to overtax the workforce in a diverse market.
On the other hand, if an employer plans to staff a 500-person office almost entirely with engineers researching power supply solutions for the next generation of mobile phones, only a handful of cities may fit the bill. The proposed operation’s scale together with the extent of specialized functions to be performed within it will help define the size and degree of specialized skill sets required of the optimal labor market.
Canvass the Markets
With a clear understanding of the activities expected at the new location, the site search team is ready to dig into labor details in promising markets and make a list of metros that may meet the employer’s needs. Where are the major employers in the client’s field? Where are schools teaching skills the employer seeks in its workers? And where do those trained individuals choose to live after graduation?
Site evaluators must weigh existing labor market indicators alongside demographics and graduation trends for a long-term operation. While specialized workforce training is available through some school systems, often businesses cannot depend solely on these programs, waiting idly by while schools and universities train their initial employee base for a new location. Employers typically want confidence that there will be a ready supply of qualified applicants at the start, and that the applicant pool is deep enough to be sustainable over the long term. Detailed Academic degree data is important to companies that have specialized labor requirements.
Nor can a business expect all of the workers hired when its facility first opens its doors to remain on the payroll indefinitely. A fairly stable employer may need to hire replacements for 5 to 10 percent of its positions each year to replace those who move up within the company or on to other employment. The level of attrition seen within an operation is a function of many variables, most notably company/management culture, job function, compensation, and labor market dynamics. Companies dominated by high-stress jobs, including some call centers, may experience annual attrition exceeding 50 percent, requiring a steady stream of qualified applicants trained in the appropriate skill sets.
Special skills don’t necessarily entail prohibitive labor costs. For some software developers, high costs of living and competition with name-brand employers in New York, San Francisco, and San Jose, California, do drive up wage and salary requirements in those metros. Yet many technology companies will find smaller but similarly educated and skilled workforces to suit their requirements in less crowded markets like Madison, Wisconsin, or Salt Lake City or Provo, Utah, where software engineers have gravitated to enjoy a good quality of life and lower cost of living. Other markets, including Boulder, Colorado, and Austin, Texas, were once in that tier of more affordable software markets, but their associated costs have grown along with their reputations as technology hubs.
The larger the specialized labor requirements, the more important detailed academic degree data becomes in the evaluation process. A company planning a 500-person facility where 60 percent of employees will share a special skill set has a compelling reason to locate where schools are producing degreed graduates in that field of study. This may involve more than a count of bachelor’s or advanced degrees, perhaps requiring a deeper dive into numbers of degrees or professional certifications awarded each year in particular lines of study.
At this canvassing stage, site selectors are simultaneously evaluating markets based on other factors, such as cost, supply chains, the availability of incentives, access to markets and clients, and risk of business interruptions due to earthquakes, wildfires, hurricanes, or other natural disasters. The objective is to assemble a list of metros as location candidates. The proposed operation’s scale together with the extent of specialized functions to be performed within it will help define the size and degree of specialized skill sets required of the optimal labor market.
Up to this point, an experienced site selection team will have relied on its own research, augmented by government and third-party databases, to profile the markets in its search. Now with reliable data in hand and working from a short list of metros, the team can reach out to economic development and community leaders to learn what local educational institutions may bring to the table.
All parties stand to benefit when local schools, colleges, and universities are willing to adjust their programming to better prepare graduates for jobs in their communities. Orlando, Florida, for example, enjoys exceptionally good communication between economic development leaders, businesses, and educators, with institutions such as the University of Central Florida and nearby Valencia College allowing some education credits to carry over between their schools as part of cooperative job training programs.
In another example, several major institutions in Eastern Massachusetts recently provided letters committing to coordinate educational programs that would feed a large pharmaceutical company’s employment needs, should that employer choose to move to the metro. Economic development organizations can be invaluable at this stage of a site search, providing boots on the ground and leveraging local relationships to explore workforce resources and training options.
Find the Right Spot
As the search nears its end, the team identifies metropolitan areas and ultimately specific properties. Even in a market with an excellent workforce and educational resources suited to a company’s needs, the majority of that targeted workforce may be concentrated in certain submarkets or neighborhoods. The employer must choose not only the right city, but also the right submarket, to maintain access to the desired workforce.
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