By Bob Potter Opportunity arises out of every economic downturn. In recent weeks, a stampede of out-of-state economic development organizations have rushed into the San Fernando Valley to lure companies away. Some go to great lengths, using flashy stunts and expensive marketing campaigns, to get the attention of companies that may be convinced to move out of state. Perceptions that California has not done enough to support businesses make the state fertile ground for states and regions working to entice its companies. They are offering communities with lower business costs, fewer regulatory hoops, better schools, attractive lifestyles, and, in some cases, enticing incentives. California’s current budget crisis will surely make an impact on its businesses. More than $12 billion in tax increases will create even greater challenges as companies struggle to stay afloat during this global economic downturn. Manufacturers, especially smaller, family-owned companies, feel undervalued. They are quick to entertain the notion of relocating to places where they can achieve greater value, significantly cut costs and realize lower taxes, lower workers’ compensation costs and less-onerous permitting processes. The Inland Northwest region, an area spanning parts of eastern Washington and northern Idaho, has benefited from the California’s laissez-faire attitude. Economic development representatives tried to keep only two of 73 companies that have relocated here from California over the past 20 years. Interestingly, both were large, well-known companies. Even though the state worked to retain them, Buck Knives Company, an El Cajon employer of 250, and Harpers, a Torrance company with 650 workers, believed the business case was more compelling to move out of state and relocated anyway. In order to retain companies and jobs in the San Fernando Valley, four critical factors should be addressed. 1. Attention equals retention California’s economic development organizations must pay more attention to business retention. Limiting the vulnerability to outside recruiters begins with making companies feel wanted, especially in the manufacturing sector. Small manufacturing companies find it increasingly difficult to operate and compete in California, particularly Southern California. Most business owners believe the California State Legislature no longer values manufacturing jobs. 2. Keep workers’ compensation in check Skyrocketing workers’ compensation rates are devastating for California businesses, driving costs directly at an employer’s bottom line and make it difficult for them to remain competitive. Other states will continue to prey on California businesses until the workers’ compensation system demonstrates a sustained solution. Aggressive fraud monitoring and diligence by the state legislature are the best defenses. Persuasive doctor and lawyer lobbyists must be kept at bay in order for meaningful reform to take hold. 3. Family values and lifestyle weigh in The favorable impacts on families and their lifestyles continue to weigh heavily on businesses retaining top employees. Workers are ringing up excessive commuting costs that total more than just time. While Californians have felt a brief reprieve from last year’s high gas prices, costs have begun to climb again. People cannot afford to spend two hours or more in a freeway commute with gas prices nearing $3 per gallon. Average commute times of 15 minutes offered by other communities are very attractive. Public transportation needs to remain a focus. Workers desire options that ease the burden of commuting and provide financial relief, many of which have added social and environmental benefits. Another concern for businesses is the quality of education for their children and their employees’ children. Frustrated with the quality and safety in California’s public education system, parents are turning in larger numbers to private schools. Private education comes with an expense, stretching already tight costs of living. California’s housing costs are among the highest in the nation. Companies considering relocation are pleasantly surprised that housing is affordable for owners and employees. Finally, from a pure lifestyle point of view, amenities such as a slower pace with lakes and mountains nearby presenting abundant recreational opportunities are often a tipping point in the decision to move out of California. 4. Minimize public process Relocation decisions are driven by many factors. The hassle factor is another one of them. Obstacles, such as California’s prolonged and cumbersome permitting processes, push companies to look elsewhere for streamlined, predictable permitting. Regions with business-friendly public processes demonstrate they value business and the jobs they represent. California must place higher priority on businesses and create a climate through public policy and retention initiatives that demonstrate companies are valued and a significant part of the state’s economy. Otherwise, many will continue to flee to places where they will be welcomed and where they can grow and prosper. Bob Potter is business recruiter for the Inland Northwest Economic Alliance, a regional economic development collaborative in eastern Washington and northern Idaho. For over 25 years he has recruited companies from southern California to this region. For information, log onto www.inlandnorthwest region.com.
Keeping Companies in State Requires Addressing Four Factors