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A Cloudy Business Climate
November 11, 2004 @ 6:33 am and 8:20 am on 90.3

The rankings are out and, once again, Northeast Ohio doesn’t stack up very well when it comes to being a friendly place to do business. Many feel that without policy reform, Northeast Ohio will continue to lose its ability to compete. As part of Making Change: Reinventing our Economy, ideastream’s Shula Neuman reports on what’s holding the region back and what might be done about it.

Philip Alexander was determined to move his company back to Northeast Ohio - even before the company ever existed. But his Boston-based investors insisted that Brand Muscle, Alexander’s software company, get its feet on the ground in Boston. In addition to the money, Alexander says, Boston had incubators and built in support systems that he didn’t have access to in Cleveland. Still, he says, Brand Muscle let the investors know that ultimately, Northeast Ohio would be its home.

Philip Alexander: We had indicated to them that we that the management team and a lot of talent that we knew about resided here and if we could achieve certain mile markers in the first year, the investors would allow us to come back. We achieved that in the first six months and came back to Cleveland.

Alexander says there are distinct advantages to doing business in Northeast Ohio - infrastructure costs, rent and labor are all lower than Boston. He says the company is growing and has only recently ran into difficulties after posting ten new job openings.

Philip Alexander: We are in fact having a little bit of a difficult time filling them. Cleveland seems to have people who are very highly talented who have been in the job market a long time. But young people seem to leave and I think companies like Brand Muscle offer them an opportunity to come back.

The lack of an abundant and ready work-force isn’t enough to discourage Brand Muscle from sticking around. However, it is one of the strikes against the region that many companies find frustrating.

Bob Farley: The number one issue we’ve run into over the last several months has really been about workforce.

Bob Farley is president of TeamNEO an organization dedicated to attracting and retaining businesses in Northeast Ohio.

Bob Farley: Workforce issue falls into two general categories, one is concern about whether they can attract high level talent they need for programmers or sales and marketing. The other is the availability of highly qualified production works.

Farley says business owners he talks to get plenty of applications - they just don’t see the depth of talent they’re looking for. This is a concern, says Ed Morrison, director of the Case Weatherhead Center for Regional Economic Issues.

Ed Morrison: The public sector really needs to focus on that issue. We need to move away from incentives to individual companies and move toward incentives for Ohioans to improve and constantly upgrade their skills and brainpower.

Morrison says, a solid, well-funded education system from pre-kindergarten through college will be key to driving the region’s future economic growth. Another commonly cited obstacle faced by Northeast Ohio companies shows up in a recent study by Cleveland State University Economic Development Professor Ziona Austrian. Austrian compared the region’s business climate to that of 30 similar metropolitan areas and found what most people here seem to know: the cost of doing business in the region is unusually high.

Ziona Austrian: The cost of office rent in the Cleveland Metro area is 12% lower than the U.S. average, but our energy cost is 33% higher than the U.S. average. Our state and local taxes are 12% higher than the U.S. average and our labor is exactly equal to the U.S. average.

On the whole, Austrian says, that makes the cost of doing business in Northeast Ohio 5% more expensive than average. Carol Caruso, senior vice president of government advocacy at the Greater Cleveland Partnership, points to still more issues challenging businesses including the soaring cost of health care and tort reform. But Caruso adds another problem that’s region-specific: it’s just not easy for businesses to work with area governments.

Carol Caruso: We really need to work with our elected officials to make sure they understand how difficult it is to get a permit to this and permission to do that. That is a huge disincentive, especially for small businesses.

It’s also a disincentive for large corporations. She says; more than one company - including Parker Hannafin - has moved its manufacturing facilities out of state because other regions had processes in place to help businesses get up and running. Caruso says the red tape and complications of working with area governments is no secret. She says TeamNEO was specifically created to establish a regional liaison that will help businesses glide through interactions with the public sector. Caruso also says the advent of the Greater Cleveland Partnership - a merger of three other business organizations - is an attempt to give the region’s business community one unified voice.

Carol Caruso: It’s very important not to just sit back and complain. It’s very important to use your united voice as a business community and come to the table with something constructive and we intend to do that.

Echoing what many of the region’s business owners say, Caruso points out that the downsides of doing business in the region are frustrating, but they don’t outweigh the quality of life Northeast Ohio offers, along with opportunities for advancement.
In Cleveland. Shula Neuman, 90.3.

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