Traditionally, most regional economic development organizations (EDOs) have focused primarily on marketing and business attraction. However, diminishing returns to marketing and attraction efforts are prompting many regional EDOs to focus more attention on the retention and expansion of existing businesses (BRE).
That can get messy if regional and local EDO roles overlap. Local EDOs can feel threatened by what they perceive as encroachment on their turf. And investors can become confused when regional and local EDOs both start asking them to fund what looks like the same work.
I’ve watched that dynamic play out in Northeast Ohio, as Team NEO, the regional EDO, has sorted out roles with local EDOs in an 18-county region that includes four major metros. It’s been a bumpy road.
When Team NEO was launched in 2003, its founders envisioned that, over time, local EDOs would shift responsibility for business retention, expansion, and attraction to Team NEO. The founders believed that consolidating those functions at the regional level would make it easier to support the growth of existing companies, expand the pool of attraction prospects, and leverage the region’s widespread economic development assets.
However, several local EDOs objected when Team NEO began calling on companies within their footprint (particularly their members), and they lobbied for Team NEO to stick to marketing and attraction. They ultimately prevailed, and in 2007, Team NEO ceded responsibility for business retention and expansion to the local EDOs.
That division of labor remained in effect for four years. Then in 2011, the State of Ohio reorganized its business development functions on a regional basis and gave Team NEO responsibility for organizing and managing a regional business retention, expansion and attraction system in Northeast Ohio.
That regional approach to business retention and expansion was reinforced in 2015, when leaders from business, economic development, and philanthropic organizations completed work on a Regional Economic Competitiveness Strategy (RECS). The RECS steering committee gave a reorganized Team NEO responsibility for implementing the new strategy, which included a set of recommendations designed to strengthen the region’s fragmented business retention and expansion system.
For the next two years, Team NEO made implementing those recommendations its highest priority. Then last year, Team NEO’s board commissioned a “check-up” to see how things were going.
They found that there had been some progress, but the results were far short of what RECS had called for. When they dug deeper, they found that the local EDOs had never fully embraced the RECS recommendations and that, while business retention and expansion was Team NEO’s highest priority, it was not necessarily the highest priority for the local EDOs, each of which had its own institutional interests, agenda, and priorities.
That posed a real dilemma for Team NEO. There was only so much they could accomplish on their own without the close cooperation of the local EDOs, but they had no authority to compel that cooperation. Moreover, attempting to compel the local EDOs to cooperate would likely provoke resistance and resentment.
So, the Team NEO board spent last year searching for a win-win path forward. They settled on a plan that has two key elements.
The first is greater strategic alignment between the Team NEO board and the local EDO boards. To achieve that, Team NEO has stepped up its engagement and dialogue with the boards of the local EDOs, taking better advantage of Team NEO board members who also sit on those local boards. They have also made the CEOs of the local EDOs full voting members of the Team NEO board.
The second key element is a more clearly defined, mutually beneficial division of labor for business retention and expansion activities between Team NEO and the local EDOs. Going forward, Team NEO and the local EDOs will each focus more on what they do best, and take better advantage of what each other has to offer.
For the local EDOs, that means conducting outreach to local businesses, with a particular focus on driver industries, coordinating local resources to respond to company needs, engaging local elected officials and local economic development professionals, and identifying available sites.
For Team NEO, that means aggregating and analyzing local call program data to discern patterns and trends that don’t show up in local data, developing deep industry and workforce expertise that goes beyond what local EDOs could develop on their own, developing program management expertise to coordinate a wide range of local, regional and state resources, tracking results to determine whether their efforts are making a difference, and convening local partners to share lessons learned and continuously improve the overall system.
The goal is to build regional centers of excellence that can achieve economies of scale for business retention and expansion similar to those the region has enjoyed in the past for marketing and attraction. That’s going to take a lot of work, but if Team NEO and the local EDOs can align and fully leverage the wide range of state, regional and local resources that are available, they can turn the size of the region into a huge competitive advantage.
Pete Carlson is president of Regional Growth Strategies