When determining the location of your next facility, whether you are relocating your company, establishing a new regional headquarters, building a new manufacturing plant or expanding into a new market, there are a number of factors to consider. It is critical to evaluate key drivers that directly affect the project’s ROI, including development costs, ongoing operational costs and incentives. However, while focusing on these important topics, companies often overlook red flags concerning the local labor force and attracting the right employees. Here are five labor-related issues many companies tend to overlook or miss completely when searching for a new location:
1. County Average Wages
County average wages are readily available from many different sources. However, when determining where to locate your operation, this research requires a deeper analysis. You might begin by reviewing your industry-specific wages in a target community, and then take it a step further to examine the average wages for certain positions you will be trying to recruit. Be sure to understand the average wages for entry level and experienced workers. Relying on what you pay your employees in other parts of the country can be a big mistake. Benefits and insurance premiums can also vary between regions, states and even counties. For example, a company may pay all shift managers a certain wage in the mid-west, but that may be too low to take to the northeast, or it may be too high in other regions. Paying below market wages in a region will result in difficulties staffing your project and high turnover, while offering wages well above market averages may ultimately prevent the project from being financially stable.
2. Challenges Other Companies Experience
An excellent tool for evaluating a local workforce is to consider what challenges other companies in your industry face within the same geographic region. For example, they may not have a problem recruiting new employees, but they may struggle with retention. Perhaps they do not have access to a local technical college, making employee training more expensive for the company. Another example we see across the country is turnover within a county. There may be several manufacturers who recruit well and train their employees consistently, only to have a major employer within their same county pay a higher wage and their newly trained employees are waiting to get hired down the street. Knowing and understanding your competition for local labor can provide critical insight as to the current environment. This information may tell you to look elsewhere or it can provide you with ways to position your employment offerings to attract and retain the best talent.
3. Workforce Availability
When working with the local government (who is trying to attract new companies and industry), most counties are quick to point out the availability of workforce. They may have had a company just relocate out of the area, leaving many employees without a job, or maybe they have a higher unemployment rate than their neighboring counties. Hiring enough employees for your initial phase may not be a challenge, but what if you have future expansion plans that would ultimately double or triple that initial hiring phase? Can the county support that growth as well? Can you continue to attract the right talent when you begin experiencing turnover? When assessing workforce availability, you need to look at the bigger picture. Far too often companies only focus on immediate needs and that can lead to committing to a region where they struggle to staff their facility for decades to come.
Cities and counties across the country are proud of their education systems. From K-12, to community and technical colleges to 4-year universities and beyond, their systems are impressive and the local government is confident they can support your project. However, knowing what to look for within these systems can provide a significant advantage. For example, a university in the area may have a great business program with high enrollment numbers, but how many of their graduates stay in that city? More importantly, how many of their enrolled students actually attend classes on campus as opposed to taking online classes remotely from other parts of the country? These prominent colleges and institutions are attractive on a brochure, but companies need to understand how they can tap into this pipeline to attract the talent they need to be successful. Without access to those students, a company will go from recruiting employees locally to performing national searches, which creates additional costs through recruitment as well as relocation.
5. Access to Training
This issue ties into the process of incentive negotiation as well as selecting a new location. When hiring employees in a new region, you want them to have the appropriate educational requirements, but what about job-specific training before and after they are hired? Every state, along with most counties and cities offer some sort of recruiting and training incentives to projects that qualify, but not every program is created equal. Some states may offer to train employees directly, while others will reimburse companies for their training costs. A big issue is ongoing employee training. If you are building a new facility, the state and county may be excited to offer training for all those new employees, but will they be equally excited three years later when you need help training just a few new employees? Will you have access to continuing education opportunities for your existing employees? If your company decides to replace old equipment with new technology, will the state training program or local technical school provide assistance with re-training your workers? These are all questions that need to be asked and answered prior to selecting your new site and getting the right answers can provide a significant positive impact for the project’s ROI.
When going through the site selection process, your business case must be fine-tuned and look great in a spreadsheet. Sales, revenues and logistics are critical, but you cannot take workforce for granted. If you struggle to attract and retain the employees you need, costs will increase, the corporate culture will suffer and the return on investment will be negatively impacted. When it comes to workforce availability, being better informed, knowing what to look for and knowing where to find it can have a dramatic effect on the long-term viability of your project.
Renée Rosenheck contributed to this article. Kris Phillips and Renée Rosenheck are co-founders and Principals of Global Growth Advisors LLC, a professional firm that provides labor analysis, location advisory services and maximizes incentives packages for companies investing in the United States.