Spring, 1998, Vol. 4, No. 2

Industrial Retention:

Strategies to Promote Community Economic Development

By Graig Meyer, a second year SSA student with a concentrationin administration. His field placement is at Youth Guidance.

While the U.S. is moving towards a more global, service based economy, most cities still rely on industrial businesses as significant sources of employment and revenue. In many communities where residents rely on jobs provided by manufacturing businesses, deindustrialization still poses a serious threat. Some locations have responded with Industrial Revolution (IR) strategies designed to prevent the deterioration common to deindustrialized areas. Over the last twelve years, the Westside IR and Expansion Network in Cleveland, Ohio has strengthened the economic foundation of a working class area in one of the U.S.'s quintessential industrial cities. The program is an excellent model for how to promote economic development, business stability, and employment in a community at risk of economic deterioration.

The neighborhoods most likely to be in need of an IR strategy are frequently home to small manufacturing companies which may be prone to move from these areas for a variety of reasons: sale of the property they rent space in, the need for updated and expandable production sites which are more easily found in undeveloped areas outside the city, and the impact of trade agreements such as NAFTA which act as incentives for firms to move manufacturing sites to countries with cheaper costs of production. In the industrial Northeast and Midwest, businesses which leave are most likely to relocate domestically, moving to areas outside of the city or to cheaper parts of the country. To combat the harmful effects of industrial loss, an IR strategy may aid the neighborhood by helping residents retain their jobs, assisting companies avoid costly relocation and providing a mechanism for growth and redevelopment to a neighborhood which may otherwise have limited options.

IR Program Goals, Theories, and Structures

The goal of an IR strategy is to enhance neighborhood development without a cost to the residents of the neighborhood. IR is a development strategy preferable to gentrification or other upscale development which may displace neighborhood residents. Indeed, IR works to anchor firms to where they currently conduct operations and thus enables area residents to benefit from associated jobs and revenue. Industrial retention initiatives are based on location theory. Under this theory, the primary concern of business is how to acquire factors of production such as land, labor, capital, and technology. Concern for the regulatory environment, tax breaks, and local subsidies provided by an area are secondary (Fields, 1996). Local IR initiatives attempt to match the production needs of businesses with resources available within the community, while developing a commitment among local businesses to support the community.

Successful implementattion of this strategy requires collaboration on a number of levels based on a reinforcing cycle of support between community residents and businesses. While the concept of partnership is common to social workers and businesses alike, the concept of collaboration is distinctive and often not fully understood or implemented. Collaboration requires more than a brief commitment to a social cause with the hope of favorable publicity, an improved image, or strong brand/cause identification for the businesses involved. Instead, it focuses on long term social gains, such as creating a better place to live and do business. As an alternative strategy to more traditional public-private partnerships and exchanges, it gathers more resources, has a more comprehensive focus, and demands a more sustained effort.

The benefits an IR program provides to a community can be substantial. In some cases, they have been able to induce industrial job creation in regions suffering from widespread loss of manufacturing jobs (Cohen, 1997). The greatest benefit is the potential employment and wage growth of the community residents. Immergluck and Hilton (1996) suggest that access to local jobs improves social capital and leads to a greater sense of shared social interest between residents and business, inducing community action to address neighborhood problems.

Industrial retention strategies also provide significant benefits when compared to strategies based on attracting new business development. In general, fewer resources are required to retain industry than to attract new industry to an area (Parsons and Kanahele, 1990). Further, development strategies based around tax incentives subsidize new business, giving them a competitive advantage over businesses already committed to the community. In addition, locally owned businesses are more responsive to community needs and more likely to reinvest profits in the community (ibid).

Businesses benefit from IR programs in a number of ways as well. Through employment programs, businesses may be provided with a quality pool of labor. Programs are perhaps most helpful in the ways they provide direct support to help businesses maintain, develop and expand facilities through brokering other services such as loans or helping them navigate through bureaucracies such as zoning procedures. Some programs have also pooled the resources of member businesses to provide low-cost support programs such as health care or retirement plans.

While many IR programs are run by local governmental agencies, collaborative efforts may be better organized by non-profit organizations which act as brokers, matching the needs and resources of community members, local businesses and government. The Westside IR and Expansion Network (WIRE-Net) in Cleveland, Ohio is an example of an IR program which meets all of the requirements for a successful IR strategy.

Citizen activists and neighborhood businesses created WIRE-Net in 1986 because neither the state nor city government had a program to retain and incubate small businesses. The group's mission is to retain, grow and attract industrial and related employers, and to engage them as stakeholders in the community. Nearly half of their service area's 300 manufacturers are members of WIRE-Net, and many of the members actively participate in WIRE-Net programs.

IR Program Components

The first of five components of an IR program is the evaluation of existing business in the community. This includes preparing an inventory of all businesses in the community with information about principals, type of business, numbers of employees, products and services, etc. It is also important to prepare an inventory of available land and buildings in the community on a property classification basis. Important research resources include economic census data, property tax assessment data, federal statistical references, zoning records, and a record of business licenses issued. WIRE-Net completed a set of 200 plant visits and surveys during its first year of existence, and used these visits to involve local firms directly in the program development process.

The second component of an IR program is appraisal of business problems. This involves determining who is doing what business in the community and analyzing the current problems experienced by the private sector. WIRE-Net's initial set of site visits is an ideal beginning. Embedding this component in the collaborative model is necessary to ensure the program's long term success. The parties involved should constantly share information about their current and upcoming needs to create effective solutions for all parties involved. WIRE-Net has accomplished this by maintaining an average of 200 site visits per year and using its membership base as a barometer through meetings, newsletters and other means of outreach.

The third component of an IR program, analysis of the development environment, considers factors such as zoning and development regulations as well as possible support mechanisms for industrial development and expansion. An effective analysis can result in the development and implementation of procedures for communication between businesses, government and financial institutions. In response to its membership needs, WIRE-Net provides a Government and Banking Liaison Assistance program, providing support to companies planning to expand, looking for finance deals, having problems with public issues or simply trying to navigate their way through city bureaucracy.

The fourth component of an IR program involves establishing assistance mechanisms that engage the collaborative parties in problem solving efforts. Regular meetings, business activity summaries, newsletters, etc., are recommended forums for addressing such vital issues as improving buildings and sites for business use and development, reviewing zoning and land use policies, renovating underutilized commercial properties, and making use of new technology. WIRE-Net also provides a Business Assistance program, which employs an engineer with experience in manufacturing and manufacturing marketing who is available for consultation. This program emphasizes peer-to-peer learning by connecting members for consultation and by developing a Learner's Group where business leaders and top management commit to a year-long shared learning process based on their own experiences.

The success of an IR strategy may rely on its specific tools of retention, the fifth and final component. The most important tool for matching community businesses and residents is the Hire Locally program in which WIRE-Net interviews and screens neighborhood residents looking for employment and matches them with the needs of local businesses. To complement the matching process, WIRE-Net provides an extensive Education and Training program that trains new employees in basic manufacturing skills, offers customized training programs for employers, provides supervisory and management training and holds regular workshops on topics such as marketing, technology, human resources and management. A recent addition to WIRE-Net's stable of programs is a School-to-Work program which pairs member companies with students at the local vocational high school. To complement its other business assistance programs, WIRE-Net offers Site Search and Development Assistance to companies thinking about expanding. As part of this program they maintain an inventory of neighborhood sites available for sale and rent, and have recently begun to develop a 10.5 acre ready-to-build industrial park. In addition, WIRE-Net offers member specific benefits, including discounted rates on an employee assistance program, long distance phone service, and security patrol.

WIRE-Net is an excellent example the effectiveness of an IR program. In an area where 60% of the neighborhood's jobs are in manufacturing, the program provides significant benefits to community residents through direct services and support of the local economy. A successful program develops a cadre of tools to foster retention and growth of area businesses by responding directly to their needs. The results can be measured by the impact on a number of economic indicators and by the response of community members and businesses.

REFERENCES

1. Warren Cohen, "Jobs In the Hood: A Cleveland group keeps employers from fleeing to the burbs," U.S. News and World Report (June 9, 1997): 57.
2. Gary Fields, "Markets, Economic Development and Business Retention," Economic Development Commentary 20, 1 (Spring 1996): 24-29.
3. Daniel Immergluck and Timothy Hilton, "Breaking Down Barriers: Prospects and policies for linking jobs and residents of the Chicago Empowerment Zone," (Chicago: Woodstock Institute, November 1996).
4. Ioanna Morfessis, "Corporate Social Responsibility in Economic Development," Economic Development Commentary 20, 3 (Fall 1996): 12-17
5. Robert J. Parsons and Albert M. Kanahele, "Business Retention To Stimulate Economic Growth," Economic Development Commentary , 14, 3 (Fall 1990): 4-7.
6. Additional information was gained from WIRE-Net annual reports and promotional material.

Graig Meyer is a second year Ssa student with a concentrationin administration. His field placement is at Youth Guidance.

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