Working with Economic Developers To Make Smart Relocation and Expansion Decisions

Medical Device & Diagnostic Industry Magazine
MDDI Article Index

Originally Published March 2000

Treating the site-selection process as a team effort will ensure the best results.

One consequence of a successful business is that the company may outgrow its administrative or manufacturing facility. Medical device makers involved in the expansion or relocation of their company's operations can benefit greatly from an open and honest—yet confidential and professional—relationship with the economic development organizations in the areas they are considering. Executives responsible for a site-selection decision often need just what professional economic development groups are in a position to provide: information, introductions, and integration.

Most economic development groups will themselves have the information that companies need, or quick access to the people who do have it. These organizations are generally a division of the local chamber of commerce or some type of public-private partnership formed to market a community. Thus, their professional representatives are in a position to introduce visiting executives to government officials, community leaders, real-estate developers, local businessmen, or even school principals. Once a site or facility has been selected and the expansion or move is under way, these same organizations and their allies are available to help integrate company personnel into the community.

However, the outcome of such a client/economic developer interaction is only as good—and as productive—as the trust between the parties. An open and ready exchange of information is essential. This article suggests some ways for executives involved in site selection for relocation or expansion projects to get the most out of their relationship with economic development groups.

ANALYZING PRIORITIES

Before beginning the site-selection process, companies should analyze the project and be very clear about their goals. In other words, what is the business reason driving the particular expansion or relocation?

A number of questions should be addressed up front to determine what are the most important site factors for the company. Is the market to be served a regional, national, or international one? What sort of infrastructure requirements—for example, access to transportation, academic research, or technology—does the company have? Other common questions might concern workforce requirements, unionization rates, corporate climate, education, or quality of life. Company representatives should be clear about the firm's priorities.

Local university medical centers often work with economic development groups to attract companies to an area.

The company needs to convey all of this information, along with the project goals and parameters—amount of capital investment, number of jobs, average wage for key categories of employment, timing of the project, and competing communities that are being considered—to the economic development representatives in the short-listed market areas under consideration. If accurate data aren't available, estimates should be provided, since even a ballpark number gives the economic developers something to work with and will allow the company to make fair comparisons among different locations.

The best way for device companies to contact economic development groups is often through the state's department of commerce, or industrial and trade division. Community chambers of commerce are also helpful in directing companies to the right contacts.

FOSTERING COMMUNICATION

Throughout the entire site-selection process, it is critically important that corporate personnel be honest about their goals and their alternatives, including naming those communities that are competing for the relocation. Although some consultants might recommend that a client play it close to the vest, site selection isn't poker: to get the strongest effort from economic developers and the best deal, a client should share as much information as possible in order to maximize the competitive spirit and resources of the community. Otherwise, the company's search can be perceived as a "tire-kicking" exercise, and the optimal package in the best community for a project may never materialize.

As for other types of companies, confidentiality is a serious concern for medical device firms, and a responsible economic development organization will place a high priority on respecting the confidentiality of a client's plans.

PICKING A CONTACT PERSON

A typical site-selection process involves many people, from both the client's and the developer's teams. Everyone should know who the contact person is on each side. It is especially beneficial for the economic developer to designate a "point person" for each project so that the client has a single point of contact for quick and reliable information.

Selecting a point person on each side is just the first step, however. The critical requirement is that they be accessible. Good communication may be the single most important condition for getting the best results from economic developers.

DRAWING THE TIMELINE

It is recommended that the device company establish a timeline that lays out the key steps in the site-selection process. Typically spanning six to nine months, the timeline might include the following benchmarks.

Gathering of preliminary information on the top 20 communities under consideration into a matrix, using a questionnaire format that defines the basic project parameters and explains what is driving the need for the relocation or expansion.

The timeline, with its series of milestones, serves to keep everyone on track. Without it, deadlines for finding appropriate sites, environmental permitting, securing business incentives, and other steps in the process can be neglected and missed.

WEIGHING INCENTIVES

Companies seeking to relocate or expand often wonder how to approach the matter of incentives. These can range from state incentives offering customized workforce training, tax credits, grants, and loans to community-level incentives through which reductions in property taxes and other business fees and licenses can be negotiated. Typically, incentives are based on the number of jobs created and the projected capital investment. Most states and communities require that a cost/benefit analysis be applied to each project for which an offer of incentives is being considered.

Incentives can play an important role in site selection and in the profitability of the new operation. But it's a mistake for a client to be too specific at the outset—such as by asking for a free site. A free site sounds like a good idea, but such may not be the case. Highly customized workforce training, for instance, may turn out to be more valuable in the long run.

Clients do best when they ask about incentives early in the process in order to understand just what they are, and then revisit the issue as a tie-breaker among the final two or three locations. Client credibility suffers when too much emphasis is put on the incentive package, rather than on the overall project and the business reasons driving the process. And credibility and trust are essential in getting the best deal.

EVALUATING WORKFORCE TRAINING

Nearly every state has a workforce training program, but all workforce training programs are not created equal. Companies must be sure they understand the way in which the system works in the communities they are considering. For example, if the training is provided through the local technical college, they should find out as much as they can about the quality of the institution that will be teaching their employees.

Some state programs use consultants to determine the best way to deliver workforce training to each relocating company, based on the company's unique requirements. Training may be provided through the technical college, it may be on-site at the company's new facility, or it may be at the company's existing headquarters or other plant location.

PLANNING SITE VISITS

A fair amount of time, money, and effort will be spent visiting prospective sites within the finalist communities. Before companies embark on site visits, they should prepare a detailed itinerary so that the visit isn't merely a cheerleading effort. The economic development organization will often arrange for meetings with the appropriate government officials and local businessmen along with the site tours; putting prospective clients in touch with executives already in the community can be extremely helpful. The client company should never hesitate to make its needs known if it has additional interests during the visit, such as viewing residential areas or better understanding educational opportunities.

INVESTIGATING THE MEDICAL INFRASTRUCTURE

If close ties to a teaching hospital or university medical center are important for a device company's business, it should make sure that the local university is willing and able to partner with private industry. The company should verify what resources would be available and determine the specific ways it could benefit from being near a particular facility. In some cases, local medical centers have entered into effective partnerships with economic development agencies to attract medical and pharmaceutical businesses to a region.

It can be useful for companies to look for businesses similar to their own as a way to facilitate an exchange of ideas and discover what attracted the other firms to the area. Although the absence of other medical device and diagnostic manufacturers in an area should not necessarily rule out that region, the presence of at least a handful of related companies signals that the location is a viable one and can provide a nucleus for good synergy among companies

CONCLUSION

Choosing a site for an expansion or relocation is among the most critical decisions faced by company executives. Economic development groups have an equally important stake in that decision. Treating the site-selection process as a team effort —characterized by clear and honest communication—is vital to the interests of both parties, and will ensure the best results.

David T. Ginn is president and CEO of the Charleston Regional Development Alliance in South Carolina. Over the past five years, the Alliance has been instrumental in attracting nearly 100 companies, more than $2 billion in direct capital investment, and more than 10,000 new jobs to the Charleston area. Medical companies currently located in or near Charleston include Berchtold Corp., Hill-Rom Co., C.R. Bard Inc., Varian Medical Systems, and Getinge.

Photo: Medical University Of South Carolina, Charleston

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