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UNCONVENTIONAL WISDOM
From Site Selection magazine, May 2015
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Good State or Bad State?

Site selectors offer their thoughts to companies and states navigating the dicey waters of economic development and social legislation.

by PATTY RASMUSSEN
T

he flap in Indiana over the state’s Religious Freedom Restoration Act (RFRA), including the announcement by Angie’s List that the company’s $40-million, 1,000-job expansion in Indianapolis was put on hold, caused us to wonder: Are social issues — like marriage equality and religious freedom — really finding their way onto the checklists of site selectors? Does such legislation negate the fact that Indiana is a right-to-work state, has a well-trained and well-educated workforce, and offers companies strong logistical advantages? The answer is yes and no — and no comment.

“Quality of life doesn’t matter at all until everything depends on it,” says Janet Ady, president and CEO of site consulting firm Ady Voltedge. “What I mean is that quality of life is not often the driver, unless it’s a headquarters, talent-driven type of a deal. But for the others, it’s not even on the radar until we get down to the final list of locations. It can definitely be a swing factor, though probably not at the initial stages unless it’s a place like Apple.”

Some site selectors declined to go on the record, citing pending deals and announcements, or the desire to wait until the muddy waters clear a little. But Dennis Donovan, principal at WDG Consulting, echoed Ady’s comments, saying social issues often come into play with headquarters locations and with companies in the high-tech sector, whether office, manufacturing or R&D.

“These operations have a significant reliance on young professional talent, including a large proportion of New Millennials,” says Donovan. “It would be difficult to relocate talent to the new location — and the existing workforce in current locations would strongly oppose the company siting new capacity in a state or metro with restrictive social legislation.”

But the biggest change that occurred with regard to Indiana wasn’t a loss of right-to-work status or a suddenly crumbling infrastructure. Instead, the perception of Indiana, rightly or wrongly, became a significant factor. And that’s a problem. “High tech and other companies also have to protect their brands, image and reputations,” Donovan continues. “This type of talent generally finds these social conservative attitudes or laws to be anathema to their core values.” Donovan believes that states or metropolitan areas that embrace such legislation would not be of interest to high-tech companies seeking a new location.

John H. Boyd, principal at The Boyd Group, agrees. “Millennials are the coveted sector of the labor market today,” he says. “Cities and states are bending over backwards to attract millennials and the so-called ‘creative class.’ Social policies like in Indiana run against the grain of what is considered mainstream today, and polls show that millennials increasingly reject these laws and wish to live and work in more progressive cities and states.” Boyd points out that such laws could potentially impact foreign direct investment as well. “European clients, accustomed to more progressive governmental policies, are especially sensitive to the kind of anti-gay law passed by Indiana.”

One of Donovan’s colleagues, John Gutshaw, also a principal at WDG Consulting, offers this cautionary tale. “Even when a project must serve a narrowly defined location, there can still be cross-state options,” he says. “Our current logistics project considering Indiana versus Illinois is one example. While they have to be in the north Midwest region, a choice exists between the two states. If neither location has a major offsetting advantage or disadvantage, the social issue could become a deciding factor. We would recommend avoiding this kind of exposure.”

His colleague agrees. “Bottom line: these states or metros would see volume of high-tech location activity appreciably decline,” Donovan says. “There would also be a drop, although less severe, in other sectors such as advanced manufacturing. The social legislation does negate some of the hard-earned locational assets that such areas have developed. Advice to government leaders from a site consultant perspective: Don’t do it.”


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