Taking R&E to the Next Level

Since the 1970s, business retention and expansion (R&E) programs have comprised an important component of economic development work in many communities throughout the U.S. Initiatives aimed at keeping businesses in a community, and in facilitating ways for them to expand, have been shown to be extremely effective economic development tools, as compared to efforts at attraction of new industry. Studies have shown that approximately 80% of new jobs are created by firms already located within a community (Kraybill, 1995). The formalized R&E program in particular has been demonstrated to be successful in helping communities to achieve their economic goals (Smith, Morse, and Lobao, 1992). The purpose of this article is to describe the standard R&E program as it has been applied in Ohio and how this program has been adapted recently, with a specific look at the experience in Portage County.

Extension educators have a substantial history of involvement with R&E, which has constituted one of the core segments of Extension community development programming over the past two decades. Ohio State University Extension began development of an R&E program in 1977, and in 1986 entered into a 10-year partnership with the Ohio Department of Development to conduct R&E programs in communities throughout the state (Rohrer, 1998). Between 1986 and 1995, a total of 65 communities in Ohio completed an R&E program.

Each program is initiated by community members, usually a mix of business and civic leaders, who submit an application and then attend a one-day workshop conducted by a team of Extension specialists. A local R&E task force is established and an individual selected as coordinator. The coordinator's responsibilities include laying out a time line and checking to see that all parts of the program are completed in accordance with it.

At the center of the program is a series of volunteer visits by members of the task force to a number (usually between 50 and 70) of businesses. The primary objective of the visits is to ascertain from business representatives their concerns in continuing to do business in the community as well as what they see as barriers to expansion.

Businesses may be targeted on the basis of several criteria, including size, perceived likelihood of leaving the community or expanding within it, type of business, and location within the community. Since most R&E programs are undertaken at the county level, it is usually appropriate to include task force representation and businesses visited from across a wide geographic range in order to ensure strong community support. Some communities choose to restrict visits to businesses of one type, such as manufacturing, retail, or tourism-related. Volunteers receive training about how to conduct interviews with the representatives of the firms they visit.

Once the visits are complete, a series of action planning sessions is held, where issues are discussed. Task force members, in consultation with Extension specialists, prepare a final report, which includes recommendations for future work designed to address the concerns expressed by employers. The final report is released at a widely advertised public meeting, with community and business leaders invited. Typically, this meeting is well covered by local media and serves as an important focal point for the community's economic development efforts. From inception to completion, the average length of an R&E program is 12-18 months.

In the early 1990s, as the national economy was struggling, many communities were eager to sign up for the R&E program. OSU's capacity limits were constantly reached, with five new programs established every six months. As the economic recovery, starting in 1992, turned into a nationwide economic expansion in the mid-1990s, fewer communities expressed interest. As the national unemployment rate fell from more than 9% in 1991 to less than 5% in 1996, the goals of many community leaders began to change.

This was particularly true in many areas of Northeast Ohio, where unemployment rates dropped to around 3%. Many business leaders began expressing concerns that they were unable to find labor to meet existing needs. At the same time, numerous civic leaders were expressing concerns about the effect that continued growth was having on communities, such as urban sprawl. In such an environment, discussion of expanding businesses seemed inappropriate to many. The number of communities applying to the program continued to dwindle, until what had been the most active Extension Community Development program was, by 1997, virtually nonexistent.

At about this time, however, several members of previous R&E task forces from throughout the state began calling Extension offices for assistance. In Portage County, task force members made it clear that they were not interested in duplicating or repeating the R&E program done in 1993-94, but rather in conducting some applied research in follow-up to that program.

As in many R&E programs, the Portage County report placed a great deal of emphasis on labor force development. The report noted that it appeared likely that finding employees with adequate job skills would pose a significant challenge for businesses in the future. The report included the following recommendations:

• Addressing the issue of employee/employer training programs
• Creating an organization to follow this issue
• Considering industry training programs at the local vocational school (Maplewood JVS)
• Conducting research to identify the specific educational/vocational training needs that employers state exist for their current and prospective employees.

In 1997, Portage County Task Force members requested that Ohio State University Extension assist them in conducting a survey of businesses in the county in order to follow up on the recommendations that had been produced in the final report. Specifically, the members wished to examine employers' views on labor force preparedness and educational/vocational needs in the community. The survey developed was designed to (a) measure employers' views of employee skills and attitudes, and (b) determine whether these views varied significantly based upon factors such as wage rates and opportunities for advancement within the firms.

A mail survey was designed following techniques described by Dillman (1978) and sent to 176 manufacturing businesses in January 1998. Letters accompanying the surveys were addressed to the president or general manager of each of the firms including the 65 firms that had been visited in 1994.

Respondents were presented with a series of statements and asked to respond on a Likert scale, with 1=strongly disagree, 2 = disagree, 3=uncertain, 4 = agree, and 5 = strongly agree. Next, respondents were asked to provide some information about their employees such as beginning wage rates, length of employment with the firm, and average length of commute. Respondents were asked to restrict their consideration to production line employees, as opposed to management employees or secretarial staff.

Initially, 34 firms responded with usable completed surveys. A second mailing was conducted among non-respondents that yielded another 19 usable surveys. A third mailing resulted in an additional 9 responses, bringing the total number of usable surveys to 62, for an overall response rate of 35%. In order to account for non-response bias, an assumption was made that late respondents were similar to non-respondents (Miller and Smith, 1983). The responses to the first mailing (early respondents) were compared with those obtained from the second and third mailings. F tests were used with criteria p<.10 to compare means for all of the variables examined in the study. No statistical difference was found at this level, indicating that at the 90% level of confidence, non-response bias was not evident in this study.

Table 1 contains the summaries of the responses on the Likert scale statements.

The results show that respondents believe that neither current employees nor new hires are adequately trained in mathematics. Not a single respondent strongly agreed with either of the first two statements concerning math skills. But a significant difference was found in the evaluation of employees and new applicants, indicating that new applicants' math skills are well below the expectations of employers.

The statements on written communications revealed that employers are not satisfied with the skills employees have in this area either. Again, applicants were rated lower than current employees.

Half of the respondents stated that their firms offered training opportunities in math to their employees. However, a substantial number of respondents did not circle any response on this (16 of 62, or 26% of the sample). This indicates that there is some unwillingness either to recognize training opportunities or to reveal information on these opportunities on the survey.

Technical training was offered by 85% of the firms, and approximately 75% stated that employees have access to local vocational training relevant to their job skills.

Relatively high percentages of respondents believe that employees understand instructions on the job, have opportunities for advancement, are involved in decision making on ways to improve their job, and have a positive work ethic.

The findings also reveal that the outlook for labor demand in the community will remain high. Only seven firms indicated they had to lay off employees in the six months prior to the administration of the survey, while 43 were in the process of seeking employees to expand production. These results, along with local trends demonstrating continued decreases in the unemployment rate (Ohio Department of Development, 1999) indicate that the tightness in the labor market is likely to continue, and that the challenge of finding skilled labor in the community will only become more severe in the future.

A set of statistical tests was used in order to determine whether factors such as wage rates and opportunities for advancement within the firm influenced employers' perceptions of the skill levels or work ethic of employees. Not a single one of these revealed a statistically significant association (F, p<.10), indicating that the results appear to be similar across the entire spectrum of production jobs in the county.

The history of the R&E program in Ohio demonstrates a few important lessons for Extension educators. Foremost among these is that the demand for Extension programs is cyclical in nature. Regarding R&E specifically, clientele interest tends to be higher when the economy is weak. As economic growth proceeds and unemployment falls, the demand for the traditional R&E program declines, but requests for technical assistance from clientele relating to issues addressed in the R&E programs previously completed continue to be significant.

Extension educators need to be aware of how changes in economic conditions in their communities contribute to changes in program needs. As a supplier of programming resources, they must recognize changes in clientele needs, and adapt their programs to meet those needs. The result of this should be an on-going program evaluation process designed to supply the type of program desired by clientele at any given time. In the case of Portage County's R&E program, the 1998 survey of businesses on labor force development served an important function in taking R&E to this next level, with a highly structured and extremely successful program being adapted to meet current, narrowly defined objectives.

Since many of the R&E task forces that were formed in the 1980s and 90s are still in place, Extension educators have opportunities to access a clientele base in order to offer support to assist communities in achieving their goals. This is critical, because the future well being of the community, and eventually the nation, is at stake. In this particular example, one sees a situation where the labor force in general is not meeting the expectations of employers. Moreover, employers state that the problem is even worse for new hires and applicants than for those already employed. This phenomenon is not localized (Fenn, 1996). As the economy of the U.S. continues to become more linked with the world wide economy, the competitiveness of the American work force will have a major impact upon the standard of living of the country. It is highly appropriate for community development professionals to play a role in this issue.

In Portage County, the development of a community partnership of community educators, business leaders, and elected officials was recommended to find solutions to the problems of deficient skills of labor force participants. Based upon the survey results, resources for improved training are available locally. Business leaders, in conjunction with elected officials and community educators, must explore ways to encourage their employees to take advantage of these opportunities in order to improve their skills. An environment where life long learning is cultivated and rewarded must be created.

A partnership designed to achieve these objectives needs to be formalized in order to be effective. In Canada, labor force development boards have emerged in the 1990s in order to bridge training gaps such as those identified in this study (Sharpe & Haddow, 1997). The creation of these boards represents an innovation that appears to be cutting edge. Promotion of these organizations locally offers an excellent opportunity for Extension as it continues to strive to be pro-active in economic development issues in the future. Directing Extension resources away from traditional R&E programs and into the creation and facilitation of labor force development boards is an appropriate step in taking R&E to the next level.

Dillman, D.A. (1978). Mail and telephone surveys: The total design method. New York: John Wiley and Sons.

Fenn, D. (1996, August). Benchmark: The growing labor challenge. Inc. Magazine.

Kraybill, D.S. (1995). Retention and expansion first: An investment of resources in existing businesses reaps top-ranking job growth. Ohio's Challenge, 7(1), 4-7.

Miller, L.E., & K.E. Smith. (1983). Handling non-response issues. Journal of Extension, 21 (Sept/Oct).

Ohio Department of Development, Office of Strategic Research, (1999). Columbus: 1998 Estimates of Ohio's population, cities and villages, counties, and state.

Rohrer, J.D. (1998). The practitioner-educator in community economic development. The Gazebo: Community Development Newsletter, Ohio State University Extension, 1(2), 1-8.

Sharp, A., & Haddow, R. (1997). Social partnerships for training: Canada's experiment with labour force development boards. Montreal: McGill-Queen's University Press.

Smith, T.R., Morse, G.W., & Lobao, L.M., (1992). Measuring impacts of business retention and expansion visitation programs. Journal of the Community Development Society, 23(1), 123-143.

This article is online at http://joe.org/joe/1999december/a2.html.