Location strategies fall somewhere between two distinct ends of the spectrum. On one end are the cost-driven decisions, and on the other, the performance-driven decisions. Personnel involved in the site search are divided based on their areas of responsibility. The objective of those involved in making cost-driven decisions is to reduce expenses. That means identifying the least expensive real estate option, with the lowest utility costs, lower taxes, and the most affordable labor. On the opposite end of the spectrum, you find those involved in the headquarters functions, R&D, and commercialization. Their objective is to recruit workers with the essential skill sets in a location with a quality of life conducive to attracting talent.
The implication for site selection is that any potential location must be capable of producing sufficient talent in the required positions. This includes both the depth of the existing labor pool and the pipeline generated from colleges and universities. Today, finding geographic locations where the demand for certain skill sets does not markedly exceed supply can comprise a daunting and critical task for companies.
Before starting a site selection process companies must “get it right” in terms of delineating specific HR requirements. The company’s Human Resources officer/director should be a key member of the site decision team. In today’s competition for labor, he or she is the most important person on the company’s site team. Dennis Donovan, Principal of WDG Consulting, advises that a company should first examine its existing operation(s) from a human resource perspective to see if there are any existing constraints. Then determine how a new operation will fit into the current footprint. If an existing operation has issues in recruiting or retaining workers, then consider downsizing or closing that facility. If no HR constraints and the workforce is stable, consider expanding at the current location if space allows or establishing a new operation within the same labor market to retain workers and recruit additional. Once the project’s building blocks are defined, adhere to a data-driven, structured process to choose the best long-range location. If there are HR constraints in the current location, proceed with identifying the strongest metropolitan area and sub-labor market for the workforce skills you need, and then proceed with the building options, whether an existing or new building.
When securing a favorable lease or sale real estate agreement, it is essential in the site decision to factor in that the real estate should enhance the ability to recruit and retain top-flight talent. This decision involves strategic location issues such as labor availability within the respective sub-labor market, distance to where the bulk of talent resides, location of competing employers, ease of commuting within a 30-minute zone from a site, the building’s appearance, sufficient parking, amenities, and green/sustainability measures. We are seeing an increase in space standards for the workspace for both industrial and office sectors due to the effects of COVID.
Prior to finalizing your site decision, be sure to request that the other ‘most important HR associated people’ – the representatives of the state and county workforce agencies, school district, and the university and/or community college representatives – connect with the company’s HR personnel to confirm they can fulfill the labor and training assistance needs. Be cautious when discussing the available workforce and the potential for an ongoing pool of workers. Consider the lead time to meet the company’s ramp-up schedule, especially if the community is promising labor if already oversaturated in the needed skill set(s).
Mitigating labor shortages is necessitating the addition of diverse groups to the workforce such as recruiting more women, legal immigrants, people with disabilities, interns, and second-chance hiring (former inmates). In the case of women, although 50% of the overall workforce are female, only 30% are in manufacturing. The U.S. Department of Labor’s Federal Bonding Program protects employers from employee dishonesty, covering any type of stealing for the first six months of employment at no cost to the employer or employee. The Texas Workforce Commission has a Bonding Service Coordinator to assist interested employers.
In manufacturing, the hiring of a supervisor that not only knows the technology but also has strong people skills is essential. Cobots (collaborative robots) are becoming increasingly used to perform tasks with human interaction, like assembly, dispensing, finishing, welding, and material handling. However, it is important to avoid over automating to still entice human labor desiring interaction to have input and collaboration. There is an increasing need for developing robotic career pass systems for workers. According to a report by the Manufacturing Institute Report & Deloitte, 2.4 Million manufacturing positions are projected to go unfilled from 2018 to 2028. Key job positions needed or process engineers and digital twin engineers, responsible for creating virtual models to test in real-world operating environments.
A poll of manufacturers taken in December 2021, conducted by L.E.K. Consulting and Industry Week, revealed that with people retiring, quitting to take new jobs, caring for children, plus other reasons, labor was the biggest shortage they faced in 2021. The poll showed labor at 42% of the respondents, with commodities next at 39% and the shortage of shipping containers and truck capacity third at 31%. Although manufacturers expect the labor and logistics shortages to get worse, the poll showed the most optimistic data point in the survey came from this question, “Will you have the workforce you need in 2022 to deliver customers’ expectations?”. An overwhelming majority of 72% said “Yes”. In 2021, the most common solutions to addressing the shortage were to provide alternative work schedules and more training. In 2022, some plan to also increase wages in response to the ongoing shortage. About 66% of those responding are spending money on robots, conveyors, and other automated equipment to facilitate production.
The office sector is experiencing more hybrid work arrangements such as 4-day work weeks or some other combination of in-office and home. The industrial sector is also seeing some 4-day workweek arrangements. As is the case for both the industrial and office sector, it is key to select a site or building in the best sub-labor market to recruit from. Site selectors, realtors, and company leadership should work together to ensure that the selected worksite will strengthen the ability to attract and keep requisite talent. Key elements to consider are office and collaboration space layout, parking, mass transit availability, both on-site and off-site amenities, green/sustainable design, the operating environment, image/ appearance, etc. The bull pen is gone. We are seeing a return of more private offices and open space for socialization and to foster collaboration.
Since the start of the Covid pandemic, cybercrime has jumped 600%. “With an increasing number of users, devices, and programs across all enterprises, combined with a torrent of data, much of which is sensitive/confidential, cybersecurity has become intermingled with daily life for organizations and individuals”, Dennis Donovan, WDG Consulting. According to Kaspersky Total Security, trends that are fueling the creation/implementation of cybersecurity strategies/programs/policies are: (1) Remote Working where home offices are less protected and organizations are faced with the challenges of managing the security of a distributed workforce; (2) an increased reliance on the Internet of Things (IOT) estimated to reach 64 billion IOT devices worldwide by 2026; (3) Ransomware escalating; and (4) Cloud Security hacker threats. In December 2021, Cyberseek estimated there were over 464,000 cybersecurity job openings.
Another component of the office sector is the customer service or call center industry where WDGC continues to see a steady stream of reshoring. Per Dennis Donovan’s experience, here quality and customer satisfaction weigh heavily in the site selection decision. One strategy to consider for both onshoring and reshoring these centers is locating in smaller and/or rural communities to maximize labor market advantages.
Since the majority of my work involves negotiating incentives for clients, I would be remiss not to touch upon this topic. Relative to incentives, the priority in the site selection process must be on the availability and costs of recruiting the workforce. It is difficult to find suitable labor markets and nearly as difficult to find available buildings in the optimal sub-labor market. Add to this the increasing demands for higher electric power requirements for some operations. Once these requirements are met then incentives can enhance a prudent business decision by supplementing the budget, cost savings, and cost avoidance. Among incentives that would be of greatest benefit in Texas are discretionary grants, funds and/or customized training, property tax savings, other tax rebates, and infrastructure support.
Linda Burns is a national site consultant for Wadley Donovan Gutshaw Consulting and is based out of the Dallas area, specializing in incentive negotiations and economic development location strategies. Contact her at [email protected].
