Economic development is more than making more jobs

In its modest factory on the city’s south side, Woodland Furniture does not represent a typical economic development success story.

The Associated Press

http://www.magicvalley.com/news/business/index.asp?StoryID=6484

Four years ago, it was doing well enough with its French country tables, beds, cabinets and armoires, favored by interior designers nationwide. But its owners knew they needed to boost production and sales to stay in business.

Their first thought was to spend $7 million to expand the plant by 150,000 square feet. The company probably could have gotten at least some of the money to finance the project.

But instead of borrowing and building, the company turned to lean manufacturing, a concept derived from Japanese auto manufacturers. It reorganized its factory floor to make more efficient use of its workers.

Had the company expanded instead, said Dave Fenton, the sales and marketing manager, "we wouldn’t be in business today."

Now Woodland has 160 employees and a reputation for being a place where highly motivated people make quality products.

The irony is that if Woodland had announced four years ago that it was expanding its plant and spending $7 million, the news would probably have been presented to the community as an economic development coup.

A large grant or loan would have likely been involved, and the company would have been hailed for the new jobs it was expected to create.

A few years later, the company would have taken its place alongside companies that received economic development money and hosannas only to fold a year or two later.

"You can actually go broke if you do economic development wrong," said Bill Sellers, director of TechConnect East in the Idaho Innovation Center.

A company such as Woodland is a success story because it involves more than creating new jobs.

"Too often, people are looking at the short term, as if job creation is the be-all and end-all," said Tim Solomon, executive director of the Regional Development Alliance. "You have to build economic foundations."

"It’s about companies adding value, bringing money in and making people more wealthy," he said. "You have to ask, "Can the community be more profitable and the company more profitable simultaneously?"’

Years ago, Solomon wrote a master’s thesis on economic development. But when asked for a precise definition of economic development, Solomon said it was in the eye of the beholder.

"There is no common definition of economic development in the world," he said.

The success of any economic development effort can be measured by two yardsticks — a rise in per-capita income and a corresponding decrease in poverty.

It’s not just about giving money to a company that wants to build a factory and hang out the "Now Hiring" sign. A community has to consider how many people will be coming to work at a big plant and how many of them will have children who could cause overcrowding at the local schools.

A Wal-Mart distribution center in Hurricane, Utah, offers a textbook example of what can go wrong. As assiduously as it was courted, economic developers did not think too much about what 200 trucks a day would do to the local roads. Fixing those roads cost millions of dollars.

Many times, money is best spent on companies that seek to train employees.

"You raise the skill levels of the people at the bottom, and as they rise, new people take their place," Solomon said.

At Woodland, woodworking skills are helpful, but a good work ethic is more important. Workers teach each other new skills on the floor, and individuals gravitate toward the tasks that attract them.

Most important is that everyone stays busy, which is guaranteed by the compensation system. An employee receives a paycheck every two weeks. Every other week, he or she receives a bonus check based on pieces finished versus hours worked.

"The way we know we’re winning is the size of our bonus checks," Fenton said. "The bigger their checks are, the more profitable we are."

Innovation is also encouraged. At one point, the company wanted a lathe that could turn wide-diameter pieces of wood. When it asked the lathe company how much such a machine would cost, it was told $300,000.

Woodland found a solution in-house instead. Skip Blair, who came from a farm background, engineered modifications to the lathe for $12,000 plus parts.

"It’s that farm mentality and ingenuity," Fenton said. "We’ve got a lot of that out here. Everybody’s accountable to everybody else."