People Balance Out What Matters When it Comes to Location Selection

Up with people. This seems to be the attitude of CEOs when it comes to how they balance various attributes in their assessments of state business climates. Increasingly, “human capital”—the availability, cost, flexibility, even comfort of employees and potential employees—is eclipsing taxes, regulations and incentives.

That’s not surprising in an economy where talent has taken primacy over all other factors in business success.

Consider “right-to-work” laws, which restrict unions. A total of 78 percent of CEOs surveyed by Chief Executive said that they “will only hire” or “prefer to hire” in a right-to-work state.
“If you have that going against you from the beginning,” says King White, head of Site Selection Group, “it’ll minimize the amount of projects and capital investment you even get a look for.”

Indeed, each in the cluster of states in Flyover Country that recently flipped to right-to-work—Kentucky, Iowa, Wisconsin, Indiana and Michigan—either climbed in the 2017 Best & Worst States rankings or held its spot. The causal relationship isn’t verified, but CEOs
didn’t seem to like the fact that voters boosted minimum wages in four states last fall, bringing the total number where increases will take place to 20. The rankings of Arizona, Maine and Washington took big hits, while Colorado edged up two places to No. 13.

Meanwhile, all of the bottom 10 in this year’s Best & Worst States fared poorly in CEOs’ evaluation of workforce quality. Yet, even bottom-languishing states with relatively low workforce quality ratings, such as California, New York and Massachusetts, can attract businesses seeking talent in a specific sector.

Also, CEOs’ views can shift when it comes to potential corporate relocations. “Quality of life tends to be more important [when locating your headquarters] than if you’re building a manufacturing plant,” notes Dean Uminski, a Crowe Horwath site-selection partner who recently studied the HQ-location phenomenon. “They tend to want good education and social aspects like entertainment for employees and good transportation systems to get them to and from work.”