Snapshots: 60 Seconds with Jeff Finkle, IEDC

Finkle, CEcD, President and CEO of the International Economic Development Council (IEDC), discusses the impact of COVID-19 and remote work on real estate and economic development, and more.

By the BF Staff
From the September/October 2021 Issue

Business Facilities: EDOs have played a central role in the COVID-19 response in their communities. What’s the most important thing that EDOs can do to speed the recovery?

Jeff Finkle IEDC
Jeff Finkle, CEcD, President and Chief Executive Officer, International Economic Development Council

Jeff Finkle: The number one priority for economic development organizations (EDOs) right now is to advocate for vaccines. Vaccinated communities have a better chance of returning to pre-pandemic activities, getting people back to work, refilling downtowns and office buildings, revitalizing the battered travel and tourism industry and luring new investment. Once there is a sufficient level of the population vaccinated, EDOs can focus on those hardest hit small businesses, particularly minority-owned firms that are struggling.

Concurrently, workforce development remains fundamental to fostering a viable workforce pipeline for communities across the nation. In this rapidly evolving landscape, both local and federal efforts to provide training and educational opportunities is essential. And while the pandemic underscored the necessity of creating a sustainable 21st century supply chain to ensure resiliency against disruptions, it also highlights the need to diversify local economies and expand workforce development efforts for those that play a critical role in the supply chain, such as longshoremen, truck drivers and warehouse workers.

BF: Do you think there’s a consensus in the economic development community that recovery and resilience plans must be equity-driven, diverse and inclusive to succeed?

JF: The quest to implement equity-driven strategies for recovery and resilience is a major motivator for IEDC and the economic development community. IEDC’s 2021 State of Industry Survey revealed that 38 percent of EDOs reported that they increased efforts around economic inclusion, an 18-percent increase since 2017; 26 percent said they altered their organizational strategy to include economic diversification activities. Seven percent listed economic diversification as their number one priority for this year.

Our Economic Development Research Partners series documented strategies EDOs are employing to address equity and inclusion, ranging from the Tulsa Regional Chamber creating a business diversity council to EDOs partnering with nonprofits to mentor Black and Latino entrepreneurs. They also include efforts to connect job seekers in disadvantaged neighborhoods to job opportunities, and help low-income people make much-needed repairs to their homes.

I believe these kinds of activities will only continue to accelerate as we get the pandemic under control through vaccination and the economy continues to recover. Everyone won’t be at the same level and strategies will need to support the dynamics of each community. But incorporating equity and diversity into recovery and resilience plans is a formula for success.

BF: IEDC recently introduced a new Equitable Economic Development Playbook, which aims to examine structural racism in economic development and promote equitable practices and standards. Can you give us an example of structural racism in economic development?

JF: We know that small businesses are the backbone of American communities and vital sources of job creation and tax revenues. Yet when it comes to accessing traditional financing, too many minority-owned small businesses still face barriers.

Historically, minority-owned businesses have had weaker relationships with banks than their white counterparts—a legacy of banks refusing to lend to people in communities of color. And while discrimination in lending is against the law, research has documented how potential minority borrowers with identical financial profiles to white borrowers are treated differently by bankers and minority borrowers are denied loans at higher rates.

Studies continue to show that small businesses tend to have different outcomes depending on the race of the owners.

For example, the Federal Reserve surveyed nearly 10,000 small businesses last fall (six months into the pandemic) and found that while all small businesses were financially struggling, those owned by people of color were especially hard hit. According to CNN Business, the minority-led firms reported steeper declines in sales than white-owned businesses. They had a harder time accessing capital. And when they did get funds, they were less likely to receive the full amounts requested.

Various factors account for these disparities. What we do know as economic developers is that we have a basket full of tools, and we can help many minorities do better if we redouble our efforts to support those individuals and firms with the tools we have. Economic developers must support minority small business owners and entrepreneurs in accessing credit and financing for the good of our communities and our nation.

BF: What are some of the equitable practices that IEDC is recommending?

JF: We’re examining how certain economic development practices can be changed to improve economic outcomes for all people and communities. We focus on three main areas:

  1. Identify structural racism in areas such as access to capital, business attraction and workforce development, and recommend strategies for implementing more equitable practices;
  2. Discover the role diversity and equity place in site selection and infrastructure and education policies; and
  3. Identify and implement strategies for minority women entrepreneurs to create wealth.

BF: Are you optimistic that EDOs will have the staying power to make permanent a paradigm shift involving large societal changes like equity-driven development and putting an end to structural racism?

JF: The pandemic put a spotlight on the countless inequities that continue to exist in our society, but it also showed our resilience and ability to adapt and move forward. More than a paradigm shift involving large social change, I believe EDOs will continue to advance economic equity and racial and gender inclusion because of their values and standards, and also because of changing social dynamics.

These include the significant growth among people in the U.S. who identify as multi-racial, Hispanic and Asian reported by the most recent Census; the number of businesses and organizations that are incorporating racial and gender equality and inclusion into their purchasing, siting and conference location decisions; and the evidence that racial equity is a key issue for the millions of young people who will become our future workers and educators.

These and other social factors will have a direct impact on communities and will compel EDOs to continue to respond to the urgency for change. EDOs have made shifts in the past and yes, they can manage change.

BF: Millennials are migrating to affordable mid-market hubs, looking for a superior quality of life full of 24/7 live/work/play options. Do you think this migration also lifts the growth potential of chronically depressed rural communities?

JF: Ostensibly, the pandemic inspired some millennials to move out of cities to rural areas. This shift allowed them to buy property for the first time (Redfin reported that the percentage of people who were searching for rural homes jumped to 19 percent after the pandemic started, from 9 percent prior).

But migration is contingent on broadband accessibility. While other amenities matter, people cannot work remotely without the Internet, and COVID-19 instigated a long-overdue push for broadband expansion efforts. At least 40 governors launched new broadband initiatives in their state budget proposals in 2021, and Congress has made an enormous amount of funding available to states and localities to address digital equity through the American Rescue Plan, including about $388 billion in flexible funding.

It really is a complex matrix though, as this migration provided opportunities for some areas and challenges for others. We now see empty office buildings scattered throughout neighborhoods that formerly were bustling with employees, reduced real estate values and diminished support for small businesses in those same neighborhoods. Looking ahead, rural regions chasing investment will need to keep millennials satisfied as the economy reopens—as many new residents are already seeking co-living and co-working spaces in order to engage more with others—and urban areas will need to develop plans to keep their business centers vibrant.

BF: Did the speed with which EDOs adapted to working in a remote environment surprise you?

JF: No, the ability of EDOs to adapt to remote work and to participate in virtual events did not surprise me at all. EDOs are known for being nimble. They regularly pivot to evolving situations. Since the turn of the 21st century, EDOs have been navigating a complex and capricious economic development landscape.

Shifting global roles, demographic changes, evolutions in the energy market and rapid technological advances simultaneously converged over the past 20 years, and EDOs have adapted to disruptions in the landscape in the same manner as businesses, recalibrating approaches to meet the realities of any given situation.

There are many stories about EDOs distributing funds from the federal government to businesses that could have gone out of business, EDOs undertaking virtual tours of their cities and communities selling their community by Zoom.

Our nation’s EDOs are resilient, and as the economy reopens, economic developers will follow the lead of their investors and reset any work practices to adjust to the current conditions. Regardless of the platform, EDOs will always provide support to local businesses while keeping abreast of transformative technological advances and encouraging growth and opportunity at the local level.

BF: Do you think that the work-from-home model adopted during the pandemic will permanently reduce the amount of commercial real estate needed for office space?

JF: We have witnessed a decrease in office space over the past several years. For example, following the Great Recession, businesses reduced working space per employee; between 2018 and 2019 the average office space per seat in North America declined by 14.3 percent, according to JLL’s 2020 Occupancy Benchmarking Report.

Technology was reshaping the workspace before the pandemic, prompting the development of new designs to promote interaction and dialogue. In 2018, WeWork even made certain corridors narrower to increase the likelihood that workers physically run into each other. Some firms were also allowing for remote working to attract talent.

Going forward, we will now have to consider pandemics, and while it is true that more companies are offering hybrid schedules, I am not sure that most firms will want to downscale their footprint. Cubicles are making a comeback as the need for physical barriers overrides the interest for open plans, and more businesses are seeking greener designs as environmental, health and safety awareness grows.

An office gives a company identity, and a sense of belonging to employees. Notably, IEDC recently moved to an office similar in size, just a few blocks away from our current location. We have noticed that those desiring to work remotely, for the most part, are millennials and the generations after them, not the baby boomers.

BF: Does artificial intelligence really have a role to play in site selection, or in talent attraction and recruitment?

JF: Artificial Intelligence has highlighted the notion that humans and advanced machines can work together as COVID-19 induced practitioners to take advantage of virtual and augmented reality to show available sites to site selectors. It seems inevitable that AI and predictive analytics will play a bigger role in site selection in the future, but I want to emphasize that AI’s ability to replace personal connections is limited.

Therefore, while AI will take a more prominent place in the early stages of the process—when examining the first round of potential locations for the relocation or expansion of corporate clients is underway—human contact is still essential. In-person visits with local leaders and establishing relationships can’t be done by machine.

The same holds for talent attraction and recruitment. For example, remote recruiting has become more mainstream with 84 percent of recruiters adapting their process to include more remote interactions, according to data from Jobvite. AI tools like Talent Intelligence Platform and others have also seen an uptick in usage since the onset of the pandemic.

But again, personal encounters will still matter as the recruitment procedure narrows down. Importantly, economic developers will need to harness these new technologies to remain competitive in the increasingly complex landscape.

BF: Some economic development think tanks have suggested that productivity rather than job-creation should be the focus of EDOs? Do they have a point?

JF: Productivity and job creation go hand in hand, and the innovation economy has been the driver of much of the nation’s growth. Notably, the sectors where IEDC sees the most business recruitment efforts are in advanced manufacturing, followed by healthcare, logistics and IT.

Yet the IEDC Annual State of the Industry surveys have demonstrated year over year that lack of a qualified workforce has been the number one challenge for EDOs. Moreover, a recent survey by IEDC’s think tank, the Economic Development Research Partners Program, also revealed that workforce and talent issues are the primary concerns for EDOs. So, while technology enhances productivity, it also creates a demand for different types of jobs, and that’s where we fall short.

BF: BF always encourages locations to showcase their assets rather than denigrating competing locations in a neighboring metro or state. Are regional growth strategies essential to success in the 21st-century economy?

JF: Oftentimes, a town or city has a better chance of attracting investment as part of a larger regional economy with its more plentiful regional assets. Being part of a region is important because it can attract companies that a discreet community would not. That’s been our experience working around the country.

BF: Labor market demographics analysts like Emsi Burning Glass are projecting a decades-long labor shortage exacerbated by a dwindling global population. Do you think this will change the political dynamic that demonizes immigration?

JF: I’ve been making that case for a long time, but also as a function of the aging of the U.S. population.

In just one example, the average age of line workers (those who climb ladders and work in cherry pickers to fix our overhead lines) for some of the telecom companies, electrical companies and cable companies is 50-plus years. Who better to replace these folks than many of our immigrants from Central America and Mexico, who already are doing so well in the construction industry and may already have pertinent experience—if we could figure out a way to give them green cards or set them on a path to citizenship? There are nearly a quarter-million of these jobs in the USA.

As our workforce gets squeezed harder and harder, I think there will be a growing constituency, especially among businesses and even labor unions, to bring this existing workforce out of the shadows and into these types of jobs.

BF: After Superstorm Sandy hit NJ in 2012, about $20 billion was spent to rebuild beachfront properties that now are endangered by the rising sea level. Is it time to rethink coastal development and disaster recovery strategies?

JF: Communities are continuously updating their economic recovery strategies, learning from one another, and taking the risks to try new approaches to resilience. The economic development community knows more now than we did during earlier hurricane seasons. IEDC is in the process of updating our report Leadership in Times of Crisis, a toolkit that educates the economic development community on disaster preparedness, recovery and resilience strategies. In the six years since it was last updated, economic development organizations employed new strategies and learned lessons that can be replicated in other communities for economic resilience.

Several coastal communities are reconsidering their beachfront zoning, the industries and workforce that depend on the coasts and the risks involved in coastal development. Any updates to their local development codes will take time for research, development and approval.

The redevelopment of beachfront properties post-disaster is very likely to occur simultaneously with any updates to the coastal development codes from a disaster. IEDC encourages members to advance plans for a disaster and provides hands-on resources on the Restore Your Economy webpage and from our participation in FEMA’s Planning for Economic Recovery training course.

BF: Group C’s Founder, Ed Coene, worked with you on the Council for Urban Economic Development that preceded the IEDC. What was the Council’s mission and how did it lead to the IEDC?

JF: Ed was a friend, and his children Ted and Susan carry on his legacy as leading advocates for America’s urban centers. Ed was the first publisher to join CUED in 1967, and in 1999, he received the organization’s Chairman’s Award for Lifetime Achievement in Economic Development.

Back in the 1960s, poverty, unemployment, racial riots and business flight dominated large cities. The federal government responded by passing a variety of economic development programs, and the mayors of the nation’s top cities became catalysts to help cities take advantage of these tools, including facilitating the formation of CUED.

Another organization, the American Economic Development Council (AEDC), had its roots in rural and mid-sized communities. But as cities expanded their suburbs and rural areas became more urbanized, services overlapped, and economic development professionals were interested in the benefits of both organizations.

Eventually, it made more sense to merge and have one organization serve the industry. While AEDC brought a chamber of commerce, business and marketing background, CUED brought strong relationships and skills related to public-sector programs. In 2001, the International Economic Development Council was formed to carry out the mission of helping all-sized communities thrive by creating, retaining and expanding jobs that facilitate growth, enhance wealth and provide a stable tax base. I wish Ed was still with us to see how we have changed.

BF: What are the biggest changes in economic development, site selection and in the professionals in this industry that you’ve witnessed as a leader in this community for nearly 35 years?

JF: Technology has had a huge impact. One example is the supplanting of databases over surveys for site selection.

A site selector 35 years ago would scour detailed survey data provided by the economic development office of any given region. The survey data would provide insights into the region’s average wages, unemployment compensation, workers’ compensation and employee numbers of local companies.

Today, those surveys are few and far between. Instead, site selectors can look up most of that data from powerful databases. In the past, when your community got short-listed for selection, there were often indications you were in contention. Now, a community might not even know it was under consideration or rejected from consideration.

The industry is focused on entrepreneurship in ways it was not in the past. We are now trying to figure out how to grow and identify entrepreneurs and provide them the services they need to be successful. We have gotten better at business retention and looking at new ways to retain companies and jobs. We have also gotten better at focusing on diversity, equity and inclusion and on making sure that the benefits of economic development are dispersed fairly, not just to the wealthiest communities.

Read more Snapshots interviews with economic development professionals here.