An Op-Ed Piece By John S. Shiely, Chairman, President And Chief Executive Officer Of Briggs & Stratton Corp. in the January 26, 2008 Milwaukee Journal Sentinel Online
"At a recent Public Policy Forum discussion aimed at getting insights from local CEOs on economic development in Milwaukee, I made the point that, in general, the No. 1 factor CEOs consider in choosing a site for a new office or plant is the tone of the local political economy.
Absent a positive tone toward capital providers, the potentially attractive aspects of a region (many of which I mentioned in regard to Milwaukee) will not be given a hearing. I suggested that the most important thing Milwaukee community leaders could do to improve our prospects for economic development in this region was to bury the vestiges of the old Milwaukee socialist ethic by abandoning the local zero-sum culture that views all wealth creation as coming at someone's expense and embrace an integrative, pie-expanding view.
Predictably, Michael Rosen, in a breathtaking neosocialist rant in a Crossroads op-ed, proved my point. Rosen has described himself as chairman of the Economics Department at Milwaukee Area Technical College and is frequently sought out by the local media for "objective" comment. He writes that CEO "demands for lower taxes, deregulation, privatization . . . have resulted in increased poverty, unemployment and growing inequality" ("Milwaukee businesses leaders seem to want a return to the 19th century," Jan. 20).
According to Rosen, prosperity only comes to a political economy when it increases taxes, promulgates more burdensome regulations and nationalizes various industries. If this Hugo Chavez brand of "economics" is what MATC is teaching the next generation work force, it's no wonder we have a problem. This is the same MATC that runs two taxpayer-financed business incubators that a recent Journal Sentinel report revealed as hopeless failures.
For the record, Rosen is the brother of Laura Drake, a former leader at Briggs & Stratton's union, an architect of the mindlessly confrontational "corporate campaign" against her company in the mid-1990s, which was designed to insult and harass Briggs' executives, banks, directors, customers and other constituents. Drake's strategies produced substantial local job loss, and Briggs management is supposed to accept responsibility for that?
If this mind-set was limited to an economics teacher and a radical unionist, the harm would be limited, but the campaign against Briggs was supported by Milwaukee community leaders at the highest levels. The mayor excoriated Fred Stratton by name on Labor Day. Milwaukee's religious community ran a negative campaign against our company, including a vicious stealth attack by our local Catholic archbishop that was well chronicled in an article I wrote, which was published in The Wall Street Journal. These counterproductive initiatives just don't happen anywhere else we do business.
Where did these jobs go?
Rosen would have you believe they're in Mexico and China. First of all, we have no operations in Mexico, and our Chinese factory accounts for well under 10% of our output. Over 90% of our production occurs in the United States.
I was recently interviewed by Time magazine for an article on companies that still operate competitively in the U.S. I described our cost-effective, high-productivity, focus factory model, which has withstood competitive onslaughts from the Japanese and Chinese. Our Kentucky plant is so productive it turns out a completed engine with only one half -hour of labor (at essentially the same cost as shipping an engine from China to the U.S.).
Journal Sentinel columnist Patrick McIlheran properly noted that the community in Kentucky works with us to develop a college student work force to meet seasonal demands and develop a talent pool. I can think of reasons this "win-win" program would not be possible in Milwaukee's zero-sum culture.
Milwaukee needs to understand that all economic value is created through unique, economically positive relationships with value-creating constituencies. This is a process where capital is brought in to support the firm's special relationship with customers, employees, suppliers and the communities in which they do business. We call this the firm's "value discipline."
The calculus is very simple: no special relationship, no value creation, nobody brings capital.
Another example of Milwaukee's zero-sum culture is seen in local attitudes toward wage disparity. When the media performs its annual survey of executive compensation, does it solicit the comments of a truly insightful expert on pay-for-performance? No, it dredges up the grandson of one of our former socialist mayors who remarks that these CEOs are overpaid in that they make "200 times what the lowest-paid worker on the shop floor makes."
Whether it's entertainers, players, coaches or executives, talent has a market price, and you have to pay for it. Some time ago, a couple of Milwaukee columnists criticized our company for providing products free to our directors so they could test them. Their beef was that directors could afford their own lawnmowers. I was ashamed how parochial and small-bore this made Milwaukee look to executives from around the country.
I've heard criticism that CEOs do not promote business development in this region. Local CEOs should, and do, promote the region. For example, I will host the annual board meeting and retreat for the corporate boards of the Rock and Roll Hall of Fame to promote Milwaukee to a national business community. But, as with any marketing program, we've got to have an attractive product. CEOs cannot force a change in the tone of the local community toward business.
Here's my prescription for changing the tone in Milwaukee so that the positive aspects of doing business here will get a fair hearing:
• Keep it simple. Most prospects don't view targeted tax cuts, uneconomic transportation initiatives and special subsidies positively over the long term. They are generally inefficient. Create a broadly positive business climate.
• Choose the right model to emulate. Rosen suggests Germany, but Germany is a welfare state with chronic unemployment and is exporting an alarming number of jobs to Eastern Europe, despite having academic achievement far superior to Milwaukee. We do not want to be Germany. Maybe we should look at Kentucky, Georgia, Missouri or Alabama. These regions admire capital providers, bend over backward to help local companies achieve a superior value proposition, keep taxes low and rarely use "two Americas" rhetoric.
• Educate for success. Initiatives should support the education, skills and work ethic desired by national businesses. Not many people can make a living carving driftwood (an MATC incubator). Want a model? Take a look at Ireland.
• Attract jobs to match skills. Rosen suggests we should pay high-skilled wages to low-skilled workers - a prescription for business failure. High-tech and innovation is great, but who's going to employ the more than 50% of MPS students who do not earn a diploma on time?
• Show support in the media. Milwaukee media seem to think their mission largely is watchdog and scold. That may be part of it, but, believe it or not, media in regions with healthy business climates are supportive of business.
• Support existing CEOs. While it may be emotionally satisfying to beat up the current crop of CEOs, the potential CEOs are watching. Communities with vigorous business development would not dream of alienating CEOs and scaring away the people who decide where to put the next plant.
• Understand the customer. CEOs don't want red carpets and motorcades. These are merely symbols of a customer-friendly approach. We do need to believe the community supports our mission of creating value.
• Encourage integrative political culture. Politicians must resist the zero-sum temptation to look at attracting businesses as simply a new source of revenue for government. A classic example: the recent proposed state law to force companies to disclose their strategies for minimizing corporate taxes.
• Embrace wealth creation. This is hard for some in Milwaukee to grasp, but the folks with money are the capital providers, and there is no prosperity without capital formation. These are the people who fund charitable and cultural initiatives that are generally more effective than government.
• Ditch the zero-sum work force mentality. If you fight initiatives that will improve productivity, you will lose factories.
• It's easier to keep 'em than to get 'em. Remember Allis-Chalmers, Master Lock, Tower Automotive, Heil, Koehring, Schlitz, Pabst, Cutler-Hammer, Nordberg, Oster, Louis Allis, Kearney & Trecker?
A journalist at the Public Policy Forum asked about the progress of the Milwaukee 7 regional initiative and demanded to know what the CEOs were going to do about it. This was like a heckler getting up at a comedian's show and saying,
"Make me laugh." Until greater Milwaukee makes substantial progress on the strategies I've mentioned, the Milwaukee 7 is operating with one hand tied behind its back. Progress will be slow."
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