Merge, purge and privatize?

By Mark Lautman

Published 2/25/11


When it comes to creating the new jobs they’ve promised, governors and legislators everywhere are between a rock and a hard place on two fronts: crafting a strategy that will work in these new economic conditions — no easy task — and finding, organizing and funding the program efforts needed to execute that strategy.

The hard place for New Mexico is the state economic development apparatus and how little discretion anyone has over the organization, staffing or funding of the programs they supposedly manage.

Over the years, state economic development programs have morphed into a patchwork of fiefdoms, most of which could never get funded today. Each is defended by its own legislative constituency and abetted by a state personnel act that turns them into the bureaucratic equivalent of a Hotel California — “you can check out any time you like, but you can never leave.”

Assuming you have a strategy worth fighting for, there are three execution options: merge, purge or privatize.

When it comes to recruiting new employers, privatization sounds like a no-brainer. Who would you rather have looking for prospective employers and trying to get deals closed? A crew of private sector, results-driven entrepreneurs who know how to talk to businesses and do deals, or government bureaucrats you can’t fire?

Arizona, Ohio, Wisconsin and Iowa are trying to privatize their state economic development programs. While it sounds like a good idea, the devil is waiting on this one if you try it. Florida tried, and wound up in scandal and controversy after getting caught claiming credit for jobs that were never created, and jobs they had nothing to do with.

The last thing I want is to discourage anyone from trying something new. However, the wholesale privatization of a state economic development program is a bad idea. The private sector is in no better position to take on the financial and administrative burdens of a new economic development strategy than state government is.

That doesn’t mean you can’t effectively privatize or outsource parts of a state’s job creation efforts. A while back, some of us persuaded then-Gov. Bill Richardson to outsource the marketing and lead generation functions of the state’s employer recruiting program.

The rationale was that we needed a small, elite corps of performance-driven marketing pros that could be deployed to canvass any industry sector in any market. This crew was to focus exclusively on finding and qualifying new prospects. Once qualified, the prospect was to be passed on to a new, in-house team of chaser-closers in the state’s Economic Development Department. Under the original plan, the department was to establish a community development team to help get communities ready.

Separating marketing and sales this way solves one of the big problems in economic development. That is, once a marketing team generates a few qualified prospects, they stop knocking on doors until their deals are dead or done, which often takes years. Meanwhile, no one is finding new prospects, and that pipeline goes dry.

What developed was a private, nonprofit, state-funded organization called the New Mexico Partnership. It was a bold move by Richardson, and today it is arguably the most important and productive part of the state’s economic development apparatus. But there were fatal flaws in the way it was implemented that need to be fixed.

The Partnership’s board unwisely expanded its mission from “lead generation only” to one that includes sales, deal structuring, negotiating, closing and community development.

With this single act of “mission leap,” the board strapped the new organization with way more work than it was structured or staffed to do, and set it up as a direct competitor to the NMEDD and all the local economic development organizations it was supposed to serve.

Liberated of the responsibility to close the deals or get communities ready, the state agency never developed the internal chaser-closer teams or the community-capacity-building unit.

Instead of running around the state trying to do the jobs of NMEDD and the local economic development organizations, the Partnership should be scouring the country for prospective employers.

A pipeline of new job creation prospects might be the only way to create enough political capital to get the merging, purging and rebuilding done.