What the Heck is going in in local economic development 2

Last month’s issue, “What the heck is going on in Local Economic Development 1″ was very well-received. It seemed the better part of wisdom to follow up with a second issue on that topic. The core idea behind this series of articles is to help local economic developers navigate economic development through their communities. The first issue introduced the reader to a few basic elements of the local economic development environment, and concentrated on two in particular: the Policy/Practitioner World and Onionization. In this issue, we deepen our understanding of the Policy/Practitioner World nexus and build upon two elements “Strategies, Tools, and Programs” and “Structures Matter”. To penetrate more deeply into the local situation, we will also introduce a new concept: the policy cycle. That will be plenty for this month. Let’s tackle the new concept first so we can weave the other elements into it.

The Policy Cycle

If the idea of the article is to help local economic developers be more effective in getting things done in their community, let’s start with creating a brand new program in your city, an accelerator or an incubator, and use it as an example. Don’t get hung up on the specific policy initiative, the real purpose is to use the accelerator as a device to learn how to problem-solve and structure your local initiatives–whatever they might be. Any reasonable project or initiative for which you require the approval of your EDO governance should work. The concept we are borrowing, policy cycle, comes from a sub-discipline of political science, public policy-making, which studies how “policies” are developed, approved and implemented.

For our purposes, policies can be broadly defined to suit our purposes, and public policy-making, in the words of a classic textbook by James Anderson, involves getting things done which “involve conflict and struggle among people with conflicting interests, values and desires” (p. 2). That pretty much hits our nail on the head. To be fair, Anderson and public policy-making centers on government and politics–but in most communities getting things done in economic development reaches into both. But no fear, all this does not get us into the Democratic/Republican stuff or the Progressive/Conservative stuff either. That will come in a later, much later issue. Essentially, getting something done is a “process”–a string of activities which culminate, if you’re lucky, in success in getting your initiative accomplished and a success in its operation. Public policy-making breaks down this “getting something done process” into five discrete stages or phases. That is the “policy cycle”.

The five stages are: (1) problem identification and getting the attention/getting on their agenda of decision-makers relevant to your initiative; (2) formulating your initiative/proposal and dealing with any alternatives to your proposal; (3) getting your initiative approved or adopted by the decision-makers; (4) implementing of administration of your initiative  to effectively accomplish its mission, strategy, or purpose; and (5) evaluation–is the initiative actually accomplishing what it was intended to accomplish and if not what should be done about its deficiencies or how do we take it to the next step. I suspect the policy cycle seems commonsensical to most readers, but don’t underestimate what the policy cycle implies. Far too many economic developers come up with an idea (from a panel at a conference, for example) and run home and start trying to get the initiative approved. Hold on and realize that approval is the third step and the fourth step, implementation, is where the rubber hits the road. Make a mistake in the first three steps and you’ve set yourself up for a career-ending disaster.

The most valuable lesson in the Policy Cycle may be to slow down, design an initiative that can both be approved and successfully administered. The hard work comes at the beginning. The really hard work is slowing yourself down to think things through half-ways objectively.

The Policy Cycle and the Policy World

The Policy and Practitioner Worlds approach the policy cycle with different objectives and perspectives.

First, let’s lay out the general landscape. The first state, problem identification and agenda-setting, is so big I would leave this stage for another day. Included in this first stage is an economic development plan. With your permission, let’s start with Stage 2: Policy Formulation.  The Policy World really grooves on the Policy Formulation stage. Most Practitioners get their idea for an initiative by reading something, by web-surfing, talking/listening to somebody, or hearing about how this great idea worked in Guam. More often than not, somewhere down the food chain, the idea originated from the Policy World.

Practitioners work, sad to say, in isolated settings, small EDOs, or running a program by yourself. There may be other communities down the interstate-but one hardly ever talks to them. I worked in Buffalo, New York–but for over a decade never met or talked to the economic developer, the Canadian economic developer, literally across the bridge. We met, had lunch, and neither of us ever saw each other again. Sure I’m a jerk, but no other metro area economic developer had met with this guy ever. The point behind this sad tale of incompetence is that the typical community level economic developer works from an isolated setting, and that ideas and initiatives usually are drawn from outside sources, and these probably started from the latest hot book, newspaper report, or research generated in the Policy World. Without you realizing it, the Policy World has intruded into the Practitioner World.

The Policy Formulation stage is the Policy World’s home base. But a Policy World idea most likely is not ready for prime time in your community. Like water from a stream flowing down a mountain–boil it before you drink it. Policy Worlders don’t live where you live; they live in an academic discipline, economics for instance, or follow the guidelines of their profession, like planning. They usually are attacking some cosmic problem, and although they would be the last to admit it, strongly reflect a partisan and ideological value system. They hide all this behind math and statistics, models and theory–all of which prove conclusively their idea is brilliant; questioning a statistical correlation is rather pointless conversation, so don’t even try. Policy World ideas are written in broad strokes. Their model or idea applies to and can be used by everybody no matter city size, politics, state or economic base–one size fits all.

Again, the point I am trying to make is that Practitioners tend to get their ideas and program/project innovations from external sources. Policy Worlders do not design programs. For the most part they are oblivious to the issues of program implementation. Their work is more strategy-like, their action plan designed for a power point and forty-five minute lectures–not for an unfriendly legislature or hostile tax payers. It doesn’t matter that the initiative really, really seems to be exactly what your community needs. It may be–but the Practitioner needs to have a serious conversation with herself, and others, before proceeding further. The initiative, the idea, needs to be customized to your policy cycle–and should be rejected if it is not likely to make it successfully to the end. Pick one’s battles thoughtfully. The consequences of failing can be serious indeed. The consequences of winning a too-divisive battle can create enemies who live to fight another day. If you really want to go ahead with the concept, than concentrate on formulating a proposal that can make it through your community’s policy cycle–don’t deal with one stage at a time.

Again, the approach is to devise a proposal in the formulation stage which stands a good chance for approval and can be successfully administered–even if on a reduced scale. You can grow a good program. But a badly designed program, or one compromised too severely in order to be approved will likely sink and as its captain, you go down with the ship. We are not done yet with the Policy Cycle and Policy Worlds. Stage 3 (approval) and 4 (implementation) are chiefly the province of the Practitioner. While Policy Worlders might on occasion be useful in the approval stage, you know the “expert who lives fifty miles away”, most of the time, the approval stage is dominated by local players with local baggage. Bringing in outsiders is probably more likely to backfire than succeed.

As for the implementation stage, Policy Worlders should be used to accomplish your own specific and defined purposes and little else. If something goes wrong, fix it yourself, and then bring in the Policy World. In Stage 5, evaluation, however, Policy World can play a role–but again the Practitioner ought to take into account the differences in their world views. Policy Worlders, for the most part, are insensitive to the problems of administration, implementation, sovereigns and politics. They can assume a rationality that does not exist in your community. A Practitioner using a Policy World consultant in evaluation best serves himself and his community if he has thought about what specifically the Policy World can contribute to the evaluation. The work product should not be open-ended, “we will figure it out as we go along” kind of thing. As they say in construction management, it’s change orders that break the budget.

Perhaps the bottom line to the Two Worlds and Policy Cycle  relationship is the observation that the Policy World revolves around ideas, disciplines/theories and strategies–the Practitioner World orbits around people, institutions, tools, and processes. Formulation (Policy) and Implementation (Practitioner)–they are two different worlds. The two tied together can be powerful, but it doesn’t often happen by accident.

Strategies, Tools and Programs: the elements of an successful initiative

STRATEGIES: Understanding the distinctions between strategies, tools and programs can be quite helpful to understanding the “lay of the land”. Strategies are goal-oriented. They are calls to action which, at root, provide a rationale why and for whom you are engaging in an economic development activity. Business Retention is a common strategy–assist the firms already in your community and make sure (1) they don’t leave and (2) they prosper as best they can.

Notice that this definition is rather general. It doesn’t say which firms, when, or how to assist them–and it includes two competing definitions for retention (prosper and don’t leave).  The strategy will instead of providing that kind of detail will more than likely say why it is important to preserve your existing economic base–and build upon it (that’s the prosper). Strategies are meant to be general. They answer why this effort is valuable, and in so doing they suggest some ways you can measure how well the strategy is working–and who the “constituency” of the strategy might be (existing firms, labor unions, suppliers) and it alerts your local chamber that you are doing something that affects their membership. In short, your strategy also affects who you need to work with–and vice versa. The strategy can identify partners and potential violations of turf. In this way a strategy is similar to an item on a restaurant menu–pretty general, but if you don’t want fried chicken, don’t order it.

Strategies are important in the formulation stage for sure, but are even more important in stage one–problem identification and agenda-setting. Somewhere in the strategy you might want to link how the strategy addresses the problem–and you may want to use wording and rationale to ensure that it gets noticed (favorably) by those that make the decision to go forward and those who are affected by it. In other words, strategies have purposes other than simple problem-solving. Simply saying that most new jobs are created by companies in your existing economic base may be true and good rationale for business retention–but alone it does not. In other words, you don’t back into a strategy, it starts thing off, defines and links, sends our warning bells, motivates decision-makers and constituencies.

Strategies are inherently “political”, “rhetorical”, “inspirational”–and they are linked to solving an acknowledged community problem. Without defining each, some of the most commonly used local economic development strategies are: business retention/economic gardening and attraction (often linked, but don’t have to be), business climate (usually at state level), tourism (or people attraction), physical development (greenfield) or redevelopment, physical infrastructure, workforce and skills development, small business and entrepreneurism. There are others, of course, but before you add to the list, wait until we finish this section–many readers will be tempted to add “programs” to the list, thinking they are strategies.

TOOLS: Before we discuss programs, however, we next need to understand tools. A one-cylinder sports car is a lawnmower. Tools are the engine behind the strategy. Before one can construct a program, one needs to know what tools are available to plug into the strategy to make a program out of it. Putting the program before the tool is literally putting the cart before the horse. The starting point in tool selection is what your own EDO “controls” and can use without some other having to make its own decision. If you are a chamber, and you want a business attraction program, like it or not, that’s sooner or later going to involve incentives such as tax abatement–which only your local government can approved. A key tool to close a deal is outside your direct control. In this case, you can gather all the leads you want, and closing the deal is someone else’s job.

Choosing a strategy involves a good understanding of what tools are essential to its effective implementation. Having access to a pool of money no half-way intelligent company would want, means you do not have a tool that will work well. Tools also include a variety of attributes that make them appropriate/inappropriate to your strategy. Tax abatement really doesn’t work well with retail firms or start ups, for example. Tools, and who operates the tools vital to your strategy and structuring your program. A workforce EDO could easily assume responsibility in their strategy for using tools (K-12 schools/community college) controlled by others. Another example, a chamber is not going to engage in waterfront revitalization–it cannot acquire sites through eminent domain. One final example phrased in a question–should a government department attempt a business assistance strategy (by itself)? In the last example, what tools does government control–there are many but when you list them you will identify the tools (land use, permits and zoning for instance) and shape the subsequent program. BTW do any of these tools create jobs?

The most common tools in use today are: tax abatement, guarantees and credits, bond issuance (both tax exempt and taxable), eminent domain, land use powers, authority to “write down” investment-asset, industry/sector/management business expertise, a tourist destination or event, marketing expertise and credibility, asset (land and property) ownership/management/lease/sale capacity, capital (as in revolving loan fund, venture capital, grant), available staff, construction management capacity, regulatory powers (essential to business climate), curriculum and relevant expertise (skills training or entrepreneurism), access to membership. ability to advocate policy effectively.

Again there are more tools, but most of these tools are more likely to be listed in a SWAT (strengths and weaknesses) than as tools the engine of strategy and programs. Another set of these tools are quite controversial and their use is likely to generate opposition and even legal counteraction. Tools are essential to drive strategies and programs–they are not mere strengths and weaknesses. Absence of a tool relevant and essential to a strategy or program is a red light–stop right there and go onto the next project or find another strategy. If you can “control” the tool understand how it is used, time frames, resources required–and the effect of all this on your decision-makers and constituents.

In my first article I stated that EDOs, strategies and programs revolve around or are built upon tools. Tools often determine the occupational mix in an EDO staff. If one wants to use eminent domain–better have access to lots of lawyers. Want to lend money? Banking and financial people are essential. Want to manage/sell/construct/lease property–better have the right skills in your staff.  The specialized skills associated with tools, however, can cut two ways–they can help you and hurt you. Not all bankers can operate a venture capital or equity program. A construction engineer used to dealing with trade unions in construction projects may not be suitable for other strategies. An EDO dominated one type of occupation essential to its primary tool, may find adding new tools and occupations a very divisive matter. When I said you should understand your tools, also understand that tools directly and indirectly can define your EDO and shape its operation, mentality, and behavior–and the perceptions of outsiders.

Programs: Almost all economic developers are familiar with programs. They are the meat and potatoes of our job. A program puts specificity into a strategy–and it should be constructed around tools you control or have firm agreements with other EDOs to access. So our business retention program will be for certain size or specific industry/sector firms. It will involve a visitation program, a survey and inventory for a database, and will focus on a specialized loan fund whose terms and conditions are salient and attractive to the targeted firms. In this instance, the tools of available staff with relevant expertise, an appropriate RLF, a database capacity, and the existence of targeted firms in your economic base (don’t laugh–cluster development implies targeting something you have little of). An attraction program involves media placement, advertising, database and information marketing capacity, maybe access to site selectors and industry groups, and a staff to qualify and process leads. It might help to possess an attractive product that somebody actually wants–but no matter attraction may be most helpful in addressing domestic concerns and local psychological inadequacies.

We will concentrate on programs in other issues, but for now my message is that the program is last to be designed–after a strategy chosen because it logically addresses a perceived and acknowledged community problem of concern to decision-makers and to policy participants. Secondly, the program is designed around specific tools which are controllable/suitable and relevant to the work product delivered to the client or target–and the strategy.

The Initiative: Structures Matter