Sometimes when you put your ideas out there in the world, the responses take on a life of their own. My post about the damage done to communities when we let consultants pretend that they are wizards led to a number of great comments here on the blog… and an alternatively informative, mind-stretching and downright funny thread on the LinkedIn Economic Gardening group. The following exchange is pretty close to what was posted… I straightened up the grammar and sentence structure a bit and cut out a few (admittedly interesting) side items to make the whole thread a little easier to follow.
I encourage you to read, learn from the masters, and enjoy. Thanks for a great discussion, folks!
Muriel L Eason • Della, I agree with the points… All too true in my experience. I also find that many consultants tend to interview local experts to factor their knowledge into their reports and conclusions, then charge a big fee and gain instant credibility.
Too often, the local experts are ignored or dismissed in favor of consultants, even if they are right in their conclusions …
Al Jones • As you point out Muriel, the insights are usually from the locals and long observed and mulled over, rather than a brilliant consultant working from some generalized Census data and a whirlwind tour of the town…. “The Music Man” number about the trouble in River City of bored and delinquent youth stemming from the recent arrival of a pool table is a classic consulting spiel — [and] the solution [is] a band that, of course, only the consultant could conceive, organize, supply and implement for the local yokels.
Economic Development consulting is nearly as rich as management consulting or engineering consulting in buzzwords, fads, trends, etc. and magic databases/ formulas/ powerpoint presentations…I haven’t learned to hide my disbelief when their work plan shows how they’ll learn the community and the regional economy in 2-3 days here and 7-8 brief interviews (I’ve often been one of the interviewees and taken them on tours, the shallowness of their actual curiosity is breathtaking, with rare exceptions …).
Getting their projects unstuck in a practical sense (I call it “Destuckifying” so it sounds more exotic and expensive) is a lot more productive and interesting, but far more tiring than running some listening sessions and crunching a bit of easy data.
Steven Deller • I recall when Arthur-Anderson got into the economic impact game….very slick presentations, very slick presenters, very high prices for services…..and it was junk science….I kept asking myself how they sleep at night. But slick sells…..
I do a lot of impact assessment in my work (IMPLAN-based mostly)….but I try to use the analysis as a chance to engage the community in a discussion about the local economy.
Someone mentioned “it depends” as a response…unfortunately its true. One of my objectives in my graduate course in community economic development is to try to get students to understand it is never “black and white.” It’s shades of gray…”it depends” on where on that spectrum of gray the community is And in discussing “it depends,” we create a teachable moment about how the economy is put together and the fact that how it may play out in one community may not be how it plays out in another…. enough ranting…
Al Jones • We always learn something when you’re ranting, Steve. Please continue.
By the way, remember Arthur Anderson lied enough about Enron’s financial condition to lenders and regulators that it took that accounting firm down….
Steven Deller • Al, be careful what you ask for….never give a professor the microphone and say please continue! I am working on a paper for a conference right now about how to use impact assessment as an educational tool…it’s a chance to talk about how the economy functions. I’ll be using a couple of examples of how consultants have gone around stating, “For every job in this development there will be 8-10 jobs created through the multiplier effect.” Communities then let the get away with anything because of the promised huge economic impact…an impact that never occurs.
I am on a mission from God (said in my best Blues Brothers voice) to refute any multiplier bigger than two.
Al Jones • Being a complete pain in the patoot, I ask the consultant which jobs exactly, and then I do some quick tracing from specific people/jobs/functions. The multipliers then fall apart immediately. If the wages are high enough, the new hires will buy a lot of consumer services locally, but many of those are sparsely provided by part-timers or as a small part of a business’s client base (lawn mowing, home repairs, housepainting, babysitting, trash hauling, etc.).
Manufacturing jobs and sometimes heavy industry, natural resources or production agriculture can get exciting as a result of the actual supply chain jobs tied to them (job machine shops, industrial electricians, trucking, equipment rebuilding, consumed supplies provision, accounting, etc.), but for most other types of businesses you just don’t find those actual jobs when you peak behind the Wizard of Oz’s curtain.,
Maybe the multiplier is based on personal servants afforded, and it’s just a Third World metric we shouldn’t be using here?
Steven Deller • Al, most consultants can’t answer those questions because they use RIMS II multipliers which do not allow you to decompose [understand and twiddle with the inputs to] the multipliers as you describe.
Al Jones • I use that lump of mostly inert tissue between my ears, a pencil and legal pad, and a lot of questions to do the calculations. Even with several hundred or a thousand plus jobs, they will be clustered by job titles/functions/pay rates, so you’re usually looking at 5-10 groupings. So it’s a half hour or less of calculation depending on how many cups of coffee I’ve had…often done during the boring parts of the meeting itself while I’m being told how this business may well change the course of civilization itself into a Golden Age.
The key is lots of strong coffee rather than software, it usually doesn’t merit an Excel spreadsheet when you look at the amount of wild ass guesses under their job numbers themselves. Heck, if it ends in 00’s, I know it is a wild ass guess… when they show me a hiring plan broken down by jobs, number, training, and payroll cost, then I know it’s a real figure.
My deeply obnoxious verification method is to ask how many employee parking spaces they’ll need and mention the paving/site cost per spot so it’s clearly a budget and land-use question – that way, it’s not a throwaway number of “why 1 for every employee I just told you about, you befuddled bumpkin!”
Often the number of employees doesn’t match available local housing in that price point (taking the wages and figuring out what kind of rent or houses the employees can afford is basic realtor/mortgage lender math — I use a cheat sheet mortgage book table). If most of them won’t be living in your community, you’ve just lost most of the mulitplier jobs to whereever they will live.
And when you look at their supply chain and how your community lines up next to it, you often find some version of this: “Oh crap, we don’t do that here. We don’t stock that, nobody has that, that work goes to the next town or city down the road.” Those realities knock down the multiplier further, as well as telling you what capacity might make a lot of sense to get going locally if you want to capture those dollars.
I’ve put a lot of facilities together over the years and it makes it really easy to separate out how fully thought out the project is. A simple way to do that is to have some general contractors and subs (electricians, HVAC, etc.) sit in instead of an architect or lender. Let them ask the practical questions –they can recognize B.S. or just early-stage fuzziness right away (“Oh I suppose we’ll need a lavatory for 500 people on site, you’re sure that HAS to be hooked up to city sewer?).
I’ve also worked on plenty of agriculture processing facilities, and I learned quickly that if you talk to the farmers/ranchers to see what the job multipliers might actually be from the inputs side, those claims really fall apart fast…”Might buy another piece of equipment but sure wouldn’t be hiring anybody for that crop or additional critters!”
That’s a common answer. I guess otherwise we’re going back to the time when Pharaoh would have to go declare war on a neighbor to get enough fresh slaves for all the extra irrigation ditches to be dug and redug for more cropland.
Della Rucker, AICP, CEcD • Man, you guys went to _town_ on this… and it’s not only an informative read, but darn funny. One doesn’t often find a thread with the Blues Brothers, RIMS II and Pharaoh all worked into it!
Would you all mind if I crib from your comments (with proper attribution) and make a follow-up blog post out of it? You’ve all done a great job of illustrating the deep workings of these kinds of studies and how to spot the analytical holes and half-baked assumptions. I’d like to share that insight with the people who read the blog and aren’t on this group.
Al Jones • Fine with me if you make us all funnier and smarter in our quotes than we really are.
Steven Deller • The more humor we can work into our work with communities the better…..
Judi Keller, MBA • I’d like a copy to laminate.