Does Quality of Place Matter?

The October 2012 issue of Business Xpansion Journal carried an article entitled “Quality of Place Leads to Quality Returns”.  It is a great article encouraging economic development professionals to consider the long-term implications of strategic choices on asset creation, infrastructure investment and public policy reform. Scoop.it

“Quality of Place decisions can result in immediate returns, though they pay the highest dividends when developed as an economic asset benefiting not only current residents, but possible future ones as well.” [source: Page #11, October 2012 Business Xpansion Journal]

I am particularly interested in this topic because of the work I am doing with Xavier University to introduce their American Dream Composite Index as a performance measure in economic development. The Xavier University data, and data from market research I had conducted in my previous role as Executive Director of the Ohio Business Development Coalition, have convinced me the capital investment decision is far more complex than simply meeting project requirements and providing the best project NPV. We actually know in our guts this is true, because if it were as simple as looking at the numbers site visits wouldn’t be as important as they are.

The reality is that for most projects the due diligence process will yield 2-3 location options that on paper are essentially identical. The CFO would be happy with selecting any of them. But, when there is no longer a rational basis for selection, how does a CEO choose? The answer is on emotion. The CEO exercises her/his judgment and selects the location that feels like the best long-term fit for the Company, its employees, and its shareholders. CEOs get paid to make decisions in the face of uncertainty. They use data to minimize the risk of making a bad decision, but ultimately the decision is made on an emotional level.

There is actually scientific research to support the notion that emotion plays a critical role in decision-making.

Neuroscientist Antonio Damasio studied people who had received brain injuries that had had one specific effect: to damage that part of the brain where emotions are generated. In all other respects they seemed normal – they just lost the ability to feel emotions. The interesting thing he found was that their ability to make decisions was seriously impaired. They could logically describe what they should be doing, in practice they found it very difficult to make decisions about where to live, what to eat, etc. In particular, many decisions have pros and cons on both sides. Shall I have the fish or the beef? With no rational way to decide, they were unable to make the decision.” [source: http://changingminds.org/explanations/emotions/emotion_decision.htm]

Perry Marshall, author of a book on Google Adwords, claims “All people make buying decisions based on emotion; therefore your marketing must use emotion to sell what people want, not what you think they “need” or want them to need. Yes, this is really, actually true. Engineers, accountants, executives, attorneys, housewives, and ministers – PhD’s, delivery truck drivers and farmers – and butchers, bakers and candlestick makers – We all fundamentally make all of our decisions based on emotion, not logic. Logic supports our emotions and is used to justify our decisions after we have made them. Logic plays a part, but emotion is the core ingredient.” [source: http://www.perrymarshall.com/marketing/m11/]

For perspective, sustainable economic development was a big topic in the 2012 IEDC Annual Conference.  The discussions encouraged you to think longer-term about how your community develops and recognize that not all jobs are created equal.  Companies are looking for sustainability in their business success in all areas from energy availability to qualified labor access.

So, what does it mean and why does it matter?

It means you must deal with more than having a competitive set of assets and incentives if you want to stack the odds in favor of your community as the ideal location choice. You need to also care about the culture of your community.

I wrote an article about this for Global Corporate Xpansion magazine. I titled the article “The Smell of The Place”. The article discussed how a location’s ability to foster work:life balance is a competitive advantage, and how it impacts a Company’s bottom line performance. In the article, I shared a quote from Greg Oberland, Executive VP of Northwest Mutual the company that sponsored the study. At the time, he had said “What we’re seeing very clearly from this research is that the ‘personal balance sheet’ is considered the primary yardstick for success.”

I think Greg was on to something. If I were to write that article today, I would include a discussion on how the ability of a community to enable a Company’s employees to realize the American Dream is a meaningful competitive advantage. I have come to believe people’s personal balance sheet can be summarized by the degree to which they are able to realize the American Dream. The reason I didn’t take that position at the time is Xavier University’s American Dream Composite Index wasn’t available.

The 35 dimensions of the American Dream Composite Index can easily be thought of as a personal balance sheet. The ability to realize each contributes to an individual’s perception of achieving the American Dream. Once Xavier University finds a way to make the American Dream Composite Index available on a state and major MSA level, its utility as a performance measure will increase dramatically. When CEOs can begin to assess final location options on the differences in their employees ability to realize the American Dream, it is not hard to imagine them using the Index as an emotional tie-breaker in their choice of where to grow and expand their business.

What should my community do?

The first step is to ensure you understand your community’s core promise. What is it? Is it competitive?

If you determine your community promise is not competitive, you need a plan to get it competitive. There is nothing you can say that will make it competitive. You need to improve your community’s value proposition and this should be the main focus.

 

There is an old saying – “You can put lipstick on a pig, but it is still a pig.”

If your community will be viewed as seriously deficient versus alternatives you need to address the deficiencies quickly and decisively. In the consumer packaged goods world, we say, “fix your product first”.

 

Once you have a competitive promise then you are in a position to invest in telling your community’s story and attracting capital. And, you should design and deploy strategies to ensure your community’s promise remains competitive. This requires a longer-term perspective than a 4-year election cycle.

What is the process to do all this? Check out my blog post entitled “Four Step Process For Building A Brand”.

Discussion

Leave a comment with your thoughts on one or more of the following questions.

  • What is the quality of your place? How do you determine this?
  • Do you have data that gives you insight into the question? Where can you get it?
  • How well does your Region enable the American Dream for people living in your area? Does this align with your assessment?
  • If it scores low, what can you do locally to make your community the positive exception? Which of the 35 dimensions can you impact?
  • What is your community’s promise? How do you find out?
  • Is it competitive? How do you know?

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7 Comments so far

  1. […]   […]

  2. Frank Tamberrino

    October 16, 2012

    Site selection, as those in the business know, is a process of elemination, until the very end. As pointed out in your blog, the final stages of the process is based on “tie breakers”, which include incentives and a set of intangibles. Some of the intangibles do indeed rely on emotion. Company executives try to mitigate risks with their decisions and site location, and part of that is instinct based on site visits and relationships that have been established. I have experienced winning and losing projects based on personal decisions and preferences. We won a couple corporate offices in Sarasota because the opportunity was good and the decision makers wanted to live there. We won some good projects in Pensacola, but I remember losing one to Panama City because the Chairman of the Board had a condo and boat there. Some things you can control, and others you can’t.
    The bottom line for a State or community is to be business friendly, provide a trained workforce and good infrastructure. You’ve got to be in the game to make it to the end where incentives and tie-breakers count.

  3. Jeff Greene

    October 18, 2012

    Quality of place certainly does matter, but as noted one of the most frequent determinants of location is where the owner lives. This is certainly true of smaller companies. In my opinion, if the company is only interested in the incentive package they are probably not the kind of company you want since it is likely that they are going to abandon you once the incentives run out and look for another sucker that will pander to them.

  4. Hi Ed,
    I read your blog with interest and have to agree with the main thrust of the article having worked in Inward Investment & Business Support previously.
    Indeed there can be a raft of areas that can be investigated or scrutinised at the due diligence stage, most commonly: skills sets within the labour pool, the commercial property offer, the transport and IT infrastructure systems etc…

    And you are right, when all topics have been weighted it does come down to a gut feel or emotional choice. In one instance, rumour has it that a CEO was finally persuaded by his wife on a site selection/company location issue because the choice of retail shopping was of a better quality!!

  5. Linda H. DiMario

    October 20, 2012

    Of course it does! However, listening to professional site selectors or many economic development specialists – you wouldn’t know it. I have come to understand that if these people find it more “professional” to marginalize the tangible intangibles as pivotal decision-making criteria. Certainly they are going to direct their clients to data, matrices and specifications that speak directly to the HARD core isues of site selection. That’s their job. But to pretend that quality of life, the core essence of a place and other emotional signatures of a city do not influence these decisons is ludicrous. In addition to attracting a high quality work force, site visits and spouse and family visits are more than incidental – they are mandatory. Because these things matter!

    And to that point, standing in an airport security line chatting with a gentleman reveals that his last site selection process was upturned by a CEO who like the data but didn’t like the place! Anecdotal, yes. Truthful, yes. Such proclivities are not showing up in data and they may never show up in the data because external influences like place, social media and other people’s opinions are really difficult to measure in traditional ways. But our environment and the environment in which we live or work most assuredly influences our decisions.

  6. Jack Kinnicutt

    October 25, 2012

    My experience is that emotion plays a significant role in a company’s location decision, especially once the field has been narrowed. One example comes to mind when, in late 2005, Barilla America was looking for a site in the Northeast to build its second U.S. manufacturing plant. A total of 56 sites were originally consider. The field was narrowed to 12, then to two: Altoona, Penn., and Avon, N.Y. Both sites offered everything the company needed in terms of size, rail access, location to Interstates, incentives, etc. Ultimately, Avon, N.Y., won out. The reason? The company felt more “at home” in Avon. It was that emotional connection that ultimately brought the project to this small village in Upstate New York and led to its $96 million investment and the creation of 121 full-time jobs.

  7. Mark Barbash

    October 31, 2012

    I believe that emotion can play a role throughout the site selection process, albeit likely in different ways at different times. From personal experience, I’ve worked with: ….a CEO who decided to move away from a community because he wasn’t “accepted” by the local country club / power elite; …a .final decision based on the actual miles from the company location to the owner’s second home; ….a small tech company that wanted to be “in the action” so located on a second floor along a major campus corridor. Obviously, there are a variety of factors that enter into a decision, but I would argue that numbers are only one part of the equation.

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