By BOB POTTER
Opportunity arises out of every economic downturn. In recent months, a stampede of out-of-state economic development organizations has rushed into Los Angeles 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 elsewhere.
Perceptions that California has not done enough to support businesses make the state fertile ground for other states and regions to lure its companies away. They are offering communities with lower business costs, fewer regulatory hoops, better schools, attractive lifestyles and, in some cases, enticing incentives.
California’s budget crisis will surely make an impact on its businesses. More than $12 billion in proposed tax increases will create even greater challenges for California’s companies. They are quick to entertain the notion of relocating to places with lower taxes, lower workers’ compensation costs and less-onerous permitting processes.
The Inland Northwest, a region spanning parts of eastern Washington and northern Idaho, has benefited from 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. Even though the state worked to retain them, Kimball Office (formerly Harpers), a Torrance company with 650 workers, and Buck Knives Co., an El Cajon employer of 250, believed the business case was more compelling elsewhere and relocated.
Critical factors
Even in these challenging times, there is strong interest from L.A. companies to relocate elsewhere. In order to retain companies and jobs in Los Angeles, four critical factors should be addressed.
– Attention equals retention
L.A.’s business community and economic development organizations must pay more attention to business retention. Limiting the vulnerability to outside recruiters begins with making companies feel wanted.
Economic development organizations should make it known that they are willing to help solve companies’ business problems. If an outside recruiter engages with a company, there ought to be an open invitation from economic development organizations to work together, ultimately working to convince the company to stay.
If a company decides to leave, economic development organizations should spend time talking to them to find out what drove the company away. Much like a job exit interview, loss reviews can be helpful in preventing additional companies from leaving.
– Keep workers’ compensation in check
Skyrocketing workers’ compensation rates are devastating for California businesses, driving up costs directly to an employer’s bottom line and making it harder for them to remain competitive. Other states will continue to prey on California businesses until the workers’ compensation system demonstrates a sustained solution.
– Family values and lifestyle weigh in
Family and lifestyle factors continue to weigh heavily on businesses working to retain top employees. Workers are ringing up excessive commuting costs that total more than just time, with gas prices rising to $3 per gallon again. Average commute times of 15 minutes offered by other communities are very attractive.
Public transportation needs to remain a focus. Workers appreciate options that ease the burden of commuting, many of which have added social and environmental benefits.
Another concern for businesses is quality education for employees’ children. Frustrated with California’s public education system, parents are turning in larger numbers to private schools. Private education is expensive, 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 of life, with easy-access recreational opportunities are often a tipping point in the decision to move out of California.
– Minimize public process
The hassle factor is among the many issues that drive relocation decisions. Obstacles, such as California’s cumbersome permitting processes, push companies to look elsewhere for streamlined, predictable permitting and expansion opportunities. Regions with business-friendly public processes demonstrate they value business and the jobs they represent.
California, and Los Angeles, must place higher priority on businesses and create a climate through public policy and retention initiatives that demonstrates 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. He has recruited companies from Southern California for more than 25 years.
