Published: Wednesday, August 13, 2008
Business world doesn't lend itself to easy rankings
The Olympic Games provide a dramatic, competitive stage for the world's best athletes. When the victors receive their medals, the gold medalists are confirmed -- for that time and place --world champions.
There's a wonderful transparency about most athletic competitions. Break the tape, you win. Stumble, you lose. Score more goals, leap higher, shoot straighter -- it's all there in Beijing for the world to see. No ambiguity.
We like clear outcomes. And sometimes wince at the decisions of judges. Subjective evaluations are always troublesome. That's why boxers hope for the knockout.
Ambiguity dominates outside the arenas, however, as the recent "best states for business" reports show. Washington's rankings soar and swoop like seagulls trailing ferries. Just in the last month we've seen rankings from a university research center, a popular business magazine, a cable network and two global consultancies.
Consider the differences among them.
A few weeks ago, the Bureau of Business Research at Ball State University ranked Washington the 25th best state for manufacturing and logistics. The researchers looked at education, crime rates, business costs, and research and development. Missouri, Utah and Florida ranked highest. We did relatively well on education, not so well on cost factors.
Taking a different approach, Development Counsellors International, a global economic development and marketing firm based in New York, surveyed corporate executives. Asked to select the most favorable business climates among the states, 41 percent of the 281 respondents selected Texas, 30 percent chose North Carolina, and 20 percent picked Georgia. Just 2 percent cited Washington. No data -- just professionals' perceptions.
On the other hand, Forbes magazine recently ranked Washington as the third best state for business. The magazine does not fully disclose its criteria or how much importance it assigns various factors. Washington ranked near the top on clusters including labor quality and availability, transportation, bond ratings and growth prospects. We were near the middle of the pack on business costs and, oddly, quality of life.
Forbes' rankings differed considerably from another media assessment, CNBC's ranking of "top states for business." We didn't do so well on that one, tying with New Jersey for 18th place. Texas, Virginia and Utah were the top three. Our state did well on access to capital, technology and innovation and quality of life. We fared poorly on costs and "business friendliness."
Others look at "best cities." KPMG, an international consulting firm, recently examined the taxes imposed on business by 35 major international metropolitan areas. Seattle ranked among the biggest taxers, coming in at 27th (ranked from least to most expensive).
I could go on. And on. Like kids with alphabet blocks, there's no shortage of folks wanting to sort the business world in rank order.
It doesn't work. This competition isn't a one-dimensional sprint. Myriad factors come into play, only some of them a function of public policy.
There's no definitive study, just as there's no single "business climate." What makes a place good for manufacturing may not be equally advantageous for biotech. Land costs may matter more for some, while others place more value on proximity to research universities.
Catchalls like "quality of life," regulation and education are measured differently depending on the evaluator's biases. Typically, the more specific, the better. Industry-focused research, like the BSU manufacturing study, will generally be better at capturing relevant information than a general business climate assessment. Academic research is more credible than most media analyses, because of the value universities place on transparency and peer review. While data and statistics matter, so do the perceptions of site selection and economic development consultants.
Finally, because conditions vary dramatically within a state, metro area reports are often more useful than statewide reports. State policies matter most when we consider how they influence business costs and labor markets.
Strikingly, the disparate evaluations confirm that Washington's a high cost state at a time when global competition, a still-weak dollar, and a sluggish economy make cost considerations highly salient. That's a problem.
The "best places" game provides a little diversion, temporary bragging rights and some useful information. But the rankings themselves don't mean much. There are neither knockouts nor gold medals in this competition.
Richard S. Davis writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.
There's a wonderful transparency about most athletic competitions. Break the tape, you win. Stumble, you lose. Score more goals, leap higher, shoot straighter -- it's all there in Beijing for the world to see. No ambiguity.
We like clear outcomes. And sometimes wince at the decisions of judges. Subjective evaluations are always troublesome. That's why boxers hope for the knockout.
Ambiguity dominates outside the arenas, however, as the recent "best states for business" reports show. Washington's rankings soar and swoop like seagulls trailing ferries. Just in the last month we've seen rankings from a university research center, a popular business magazine, a cable network and two global consultancies.
Consider the differences among them.
A few weeks ago, the Bureau of Business Research at Ball State University ranked Washington the 25th best state for manufacturing and logistics. The researchers looked at education, crime rates, business costs, and research and development. Missouri, Utah and Florida ranked highest. We did relatively well on education, not so well on cost factors.
Taking a different approach, Development Counsellors International, a global economic development and marketing firm based in New York, surveyed corporate executives. Asked to select the most favorable business climates among the states, 41 percent of the 281 respondents selected Texas, 30 percent chose North Carolina, and 20 percent picked Georgia. Just 2 percent cited Washington. No data -- just professionals' perceptions.
On the other hand, Forbes magazine recently ranked Washington as the third best state for business. The magazine does not fully disclose its criteria or how much importance it assigns various factors. Washington ranked near the top on clusters including labor quality and availability, transportation, bond ratings and growth prospects. We were near the middle of the pack on business costs and, oddly, quality of life.
Forbes' rankings differed considerably from another media assessment, CNBC's ranking of "top states for business." We didn't do so well on that one, tying with New Jersey for 18th place. Texas, Virginia and Utah were the top three. Our state did well on access to capital, technology and innovation and quality of life. We fared poorly on costs and "business friendliness."
Others look at "best cities." KPMG, an international consulting firm, recently examined the taxes imposed on business by 35 major international metropolitan areas. Seattle ranked among the biggest taxers, coming in at 27th (ranked from least to most expensive).
I could go on. And on. Like kids with alphabet blocks, there's no shortage of folks wanting to sort the business world in rank order.
It doesn't work. This competition isn't a one-dimensional sprint. Myriad factors come into play, only some of them a function of public policy.
There's no definitive study, just as there's no single "business climate." What makes a place good for manufacturing may not be equally advantageous for biotech. Land costs may matter more for some, while others place more value on proximity to research universities.
Catchalls like "quality of life," regulation and education are measured differently depending on the evaluator's biases. Typically, the more specific, the better. Industry-focused research, like the BSU manufacturing study, will generally be better at capturing relevant information than a general business climate assessment. Academic research is more credible than most media analyses, because of the value universities place on transparency and peer review. While data and statistics matter, so do the perceptions of site selection and economic development consultants.
Finally, because conditions vary dramatically within a state, metro area reports are often more useful than statewide reports. State policies matter most when we consider how they influence business costs and labor markets.
Strikingly, the disparate evaluations confirm that Washington's a high cost state at a time when global competition, a still-weak dollar, and a sluggish economy make cost considerations highly salient. That's a problem.
The "best places" game provides a little diversion, temporary bragging rights and some useful information. But the rankings themselves don't mean much. There are neither knockouts nor gold medals in this competition.
Richard S. Davis writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.
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