August 13, 2018
By: Rich Branning, Managing Director, JLL
In today’s all out-war for talent, in one of the tightest labor markets in the history of this country, companies have to pull out all the stops to win.
Earlier this summer, Walmart Inc., the largest private employer in the U.S., became the latest US company to offer employees the perk of heavily subsidized college tuition. The Walmart program will give both part- and full-time employees the chance to take online college courses in business and supply chain management for $1 a day. Starbucks, McDonalds, Kroger, and Chick-fil-A are just some of the other major companies already offering tuition programs as perks to recruit and retain.
Finding a new gig
It isn’t just companies looking for workers either. Towns, cities, even states are increasingly experimenting with programs designed to expand their tax bases by attracting working-age adults. In 2019, Vermont will begin a grant program to pay $10,000 to remote workers who move to the state as full-time residents.
As more companies look to provide greater workplace flexibility as part of a recruit-and-retain strategy, look for more states to compete for remote workers, especially those in the so-called gig economy. Major targets of these programs will be the high cost of living cities and states, such as New York, Chicago, and right here in California.
States and secondary municipalities may have a receptive audience. As major job hubs and their education clusters reach critical mass, employers are reaching out to smaller employment centers, often close to major hubs for talent, and expanding their locational footprints, as a result. Among the benefits: cheaper real estate costs and access to a talent stream from two-year community colleges, rather than four-year colleges. This strategy may also, in turn, lead a company to look at other location options not yet on the radar for many employers. Some of these locations already are: take, Red Wing, Minnesota, for example, an hour southeast of Minneapolis-St. Paul International Airport and just 15 minutes further from downtown Minneapolis.
The housing dilemma
Housing prices in markets like Minneapolis, or Red Wing, are significantly lower than those of high cost of living states like California. The median price of a home in the Bay Area surged almost 10 percent in March from the prior month, to an all time high of $820,000. Compare this to $259,200 in Minneapolis and around $180,000 in Red Wing.
But it is lack of housing, not just affordability, which may be the biggest issue facing corporations.
According to the Wall Street Journal, while the U.S. economy is booming and jobs are plentiful, fewer homes are being built than at any time in the last 60 years. That isn’t just in “hot” markets like San Francisco, that’s nationwide. How to attract workers when there’s nowhere for them to live?
A holistic approach
Sometimes, some of the best “out-of-the-box ideas” are already in the box. One approach to the talent war being taken on a more targeted scale today is, in fact, not new. It’s an adaptation of the ‘company town’ strategy taken by numerous nineteenth century industrialists such as Francis Cabot Lowell (Lowell, MA) as well as entrepreneurial chocolate makers in the U.S and Europe like Milton S. Hershey (Hershey, PA), and the Cadbury family (Bournville, West Midlands, England).
Instead of creating ‘model villages’ for workers around factories in greenfield areas, as Hershey and others did, today’s companies are creating ‘digital villages’ for employees around headquarters and corporate campuses, chiefly in the center of major metropolitan areas, some by planning their own residential developments. Unlike Hershey, however, this isn’t a one-town strategy and these villages can’t house all of the company’s workers. Companies today must consider multiple locations around the country to capture the best talent, so the ‘digital village’ strategy is fast becoming a scalable company-wide necessity, not simply a headquarters strategy.
“Companies today must consider multiple locations around the country to capture the best talent, so the ‘digital village’ strategy is fast becoming a scalable company-wide necessity, not simply a headquarters strategy”.
In so doing, major employers are becoming active partners in the creation of communities, not just consumers of talent. It’s a smart move, because in addition to helping to create the housing stock to attract, recruit and retain their workers, today’s largest companies can also make sure their products, such as smart home technologies, are incorporated into that housing infrastructure further enhancing the digital nature of the community.
And, their participation isn’t restricted to housing. Employees need day care, retail amenities and schools for their families. And, increasingly, there’s a need for transit infrastructure to get employees living outside the immediate campus location to and from the workplace. Again, this strategy isn’t new. Henry J. Kaiser, founder of Kaiser Steel Corporation, built over 400 homes as well as several schools, sports facilities, a post office, medical clinic and grocery store at his Eagle Mountain, CA iron ore mining community after WWII. The community survived until the ore played out in the 1970s. Today, it is a ghost town.
However, the difference with today’s vision of the company town is that these mostly urban communities aren’t being built up around exhaustible natural resources and most aren’t conceived as discrete towns; instead, they are being woven into the fabric of the community.
Of course, this can take companies out of their core business comfort zone and into a new line of work: that of landlord, or master-plan residential developer. So, it’s not a step to be taken lightly or without the requisite planning or expert input. However, it’s a step more will have to take, for logistical and business development reasons. Even investors are forcing the issue. With all this pressure, companies looking to dominate the talent war have little option in today’s economy but to consider such strategies as part of a more holistic strategy.
Looking beyond the current iterations of the digital village – which is happening right here, right now – perhaps the next step is for companies to think bigger than education subsidies? Maybe having their own colleges within their expanding campus environments could not only provide existing employees with opportunities but also provide a continuous stream of talent, much like the minor leagues act as a farm system for Major League Baseball? Oh wait, Hershey and Cadbury already did that too.
I’ve had the honor of advising and representing the Bay Area’s top high growth companies on more than 20 million square feet of real estate transactions over the past 25+ years, offering creative negotiating strategies from an entrepreneurial point of view. To me, bringing integrity and value everyday to the client is the baseline. I specialize in software, professional services, finance, life science and semiconductor industry sectors with an emphasis on real estate strategy and negotiations.
You can reach me directly by email at email@example.com .