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State of Urgency

AIM Action Plan Strives to Make the Commonwealth More Competitive

AIM coverChris Geehern says he didn’t contrive the phrase (or this particular application of it) — attribution belongs to a Baystate business owner requesting anonymity — but he certainly puts it to work liberally as he talks about the Commonwealth’s innumerable business regulations and the manner in which they are enforced.

“He called it the ‘bad-waiter syndrome,’” Geehern, executive vice president for the Associated Industries of Massachusetts (AIM), said of the individual in question. “He said doing business in Massachusetts is like going to a restaurant where you really like the food, the atmosphere is terrific, and the dessert and drinks are just what you wanted. But the whole experience gets ruined because the waiter is rude and doesn’t really care about whether you like the place or not.

“What we’ve heard repeatedly from employers is that it’s less about the regulations themselves,” he continued, “and much more about the way they are interpreted and enforced — which drives companies crazy.”

Bringing attention to this bad-waiter syndrome and actually doing something about it are two of the many stated goals in a document titled “Blueprint for the Next Century,” the drafting of which is one of several ways — and perhaps the most meaningful — AIM has chosen to mark its 100th anniversary this year.

Composed following extensive polling of the organization’s 4,500-odd members, the blueprint identifies four major public-policy issues, or areas of concern, that members say must be addressed if the state is to remain competitive in an increasingly global economy.

In addition to the need to establish what the report’s authors call a “world-class state regulatory system … that meets the highest standards of efficiency, predictability, transparency, and responsiveness,” these are:

• “Workforce,” meaning a system for educating and training workers and providing them with the skills necessary for companies to succeed;
• “A uniformly strong business climate.” Roughly translated, this involves taking the stunning success enjoyed by the Greater Boston region and expanding it to the rest of the Commonwealth, while also providing opportunity to all business sectors; and
• “Health insurance and energy costs” and the need to lower them to make the state more competitive.

AIM President and CEO Rick Lord, seen here with Gov. Charlie Baker

AIM President and CEO Rick Lord, seen here with Gov. Charlie Baker, says workforce issues are by far the number-one concern among the state’s employers.

None of these areas of concern would in any way be considered news, especially to anyone doing business in Western Mass., said AIM President Rick Lord, and collectively they will defy quick or easy resolution.

“None of these have easy solutions,” he noted. “But we hope to have a second release of this blueprint at the end of this year that will include recommendations that will hopefully move us forward.”

To illustrate these concerns, or challenges, and the threats they pose to the future of the state’s economy, AIM presents the example of a Western Mass. company, Northampton-based MachineMetrics.

Led by Eric Fogg, Bill Bither, and Jacob Lauzier, the venture has created a cloud software solution that improves the productivity of manufacturing facilities by collecting, analyzing, and visualizing data from machines, parts, and people. In many ways, its future is dependent on the health of the state’s manufacturing sector, its ability to attract and retain qualified help, and its proficiency with navigating the state’s costly and highly regulated business environment.

“MachineMetrics is the kind of company that may ultimately determine the ability of Masachusetts to build upon an economy that in many ways remains a paradox — an international center of technology, innovation, medical research, financial services, and higher learning near Greater Boston, but a more traditional, amorphous economy just outside of Route 128,” write the report’s authors. “Fogg, Bither, Lauzier, and innovators like them hold the unique promise of joining the ‘eds and meds’ economy of the 617 area code with existing industries struggling to create jobs for residents in the rest of the state.

“It is a promise that will be played out against a vibrant and unforgiving global economy in which investment, resources, jobs, people, and capital flow at blinding speed to the most competitive environments,” they go on. “States, regions, and nations no longer have the luxury of taking their job bases for granted — failure to nurture the business climate not only impedes the growth of existing companies, but also leads to a silent and corrosive flow of job expansions to other locations that provide employers with the best opportunities for success.”

For this issue, BusinessWest takes an indepth look at “Blueprint for the Next Century” and the challenges and opportunities it identifies for the Bay State moving forward.

History Lessons

Lord said AIM traces its roots to 1915, perhaps the apex of the state’s manufacturing sector, when 27 manufacturers came together in the belief that their interests would be better served by a statewide organization charged with advocating on their behalf.

“They felt they needed an organization that would be their voice in the State House,” said Lord, adding that several of those original 27 members were from the western part of the state, and four — Crane Paper in Dalton, Package Machinery in Holyoke, Hampden Papers in Holyoke, and GE, which had several locations, including a huge complex in Pittsfield — are still paying dues a century later.

AIM remained an association of manufacturers until 1989, when membership was opened to all business sectors and the entity became an employers’ association. Today, there are more than 4,500 members, with roughly 30% of them in the manufacturing sector.

AIM will mark its first 100 years of service in a number of ways. The celebration began, unofficially, with the organization’s annual meeting in May, and will climax with a huge gala slated for Nov. 16 (close to the actual anniversary date) at the Boston Convention Center.

Between now and then, there were will be ceremonies in different regions of the state, staged to mark the centennial but also to honor companies and individuals that have made major contributions to the state’s business community and the cities and towns in which they are based.

One such ceremony will take place in Springfield, in the Lyman & Merrie Wood Museum of Springfield History, on June 15. The honorees will be MassMutual, Yankee Candle founder and Kringle Candle co-founder Michael Kittredge, and the Hampden County Sheriff’s Department’s vocational training program.

Meanwhile, in Dalton, on June 11, AIM honored Onyx Specialty Papers, Berkshire Health Systems, and SABIC Innovative Plastics.

But the most significant aspect of the centennial celebration is “Blueprint for the Next Century,” which attempts to not only identify the challenges facing business owners of all sizes, but also take on the much more difficult task of pinpointing potential solutions.

And this brings Lord and Geehern back to MachineMetrics, which, as they said, embodies both the promise of the future and the considerable obstacles to achieving that promise.

To put things in perspective, the report’s authors presented MachineMetrics’ case and asked a number of poignant questions that apply to most ventures doing business in the Bay State or looking to do so:

• Will the advanced-manufacturing companies to which they want to sell their idea survive in the relentlessly high-cost, high-regulation environment in Massachusetts?
• Will MachineMetrics find the skilled, educated, and motivated people it needs to grow and to develop new iterations of the company’s software?
• Will young companies located in Western Mass. and other areas outside the Cambridge/Boston innovation beltway develop the critical mass needed to extend opportunity throughout the state?
• Will the MachineMetrics platform make manufacturers so efficient that they will be able to increase business without creating new jobs?
• Will government regulators encourage the growth of companies like MachineMetrics, or will they set up bureaucratic impediments like the one that recently convinced a neighboring software company in Amherst to move to Texas?
• Finally, will the government research money that built Massachusetts into a world-class center of higher education, medical science, biotechnology, and defense technology continue to flow or slow to a trickle?

How the state — meaning its business leaders and especially its elected leaders — answer these and other questions will go a long way to determining how the next century, or at least the next few decades, will unfold, Lord said.

Help Wanted

There is probably no issue where the answers are more important than the broad issue of workforce, he went on, adding that virtually every business sector, and every individual business, will be challenged in the years to come with the task of attracting and retaining individuals with the skills needed for that business to succeed.

“This was by far the number-one concern among Massachusetts employers,” said Lord. “We heard it in all geographic areas of the state, from Boston to Western Mass., and we heard it in all industries — particularly, and quite loudly, in manufacturing.

“That’s because the age of the workforce is high — 50% of the sector’s workforce will retire in the next 10 years,” he went on. “So they’re facing a crisis in filling jobs that will become available.”

But the reality is that the word ‘crisis’ is not restricted to that industry, he told BusinessWest, adding that solutions to it lie mostly in the ability of the business community and the state’s education system — meaning preschool to college — to work together to ensure that businesses will have qualified workers.

Specific recommendations include, among other things, taking better advantage of the opportunities provided by the Workforce Innovation and Opportunity Act of 2014; elevating the role of vocational education; renewed emphasis on the fundamentals, such as math, science, and communications skills; and expanding performance-based funding for the state’s community colleges and public four-year institutions.

Beyond workforce issues, though, there are other issues challenging business sectors and individual ventures, said Lord and Geehern, adding that one of the most critical is the matter of creating a uniformly competitive structure across all industries, geographic regions, and populations.

Elaborating, Lord said that what the state has done in recent years amounts to picking winners and losers. And this phrase applies to both geography and business sectors.

“We’ve heard from a lot of companies that they believe we need to promote economic opportunity uniformly across the state,” he explained. “The Greater Boston area survived the recent economic downturn pretty well, but other areas of the state suffered more significantly, so economic opportunity is unevenly spread throughout Massachusetts. In addition, over time, the state has adopted policies or incentives that favor certain industries over others. The sense is that economic opportunity ought to be more evenly distributed.”

Geehern agreed, noting that state government, in general, has a tendency to chase whatever the ‘sexy’ industry might be at the moment. In the ’80s, it was personal computers, and at the start of this century, it was Internet-based ventures, he went on, adding that, in recent years, it’s been biotech, a focus punctuated by former Gov. Deval Patrick’s commitment of $1 billion to that sector, an expenditure that primarily benefits the eastern part of the state.

“What we’re trying to say with this [blueprint] is that you can’t just chase after the cool industry, whatever that might be at the moment,” he continued. “You have to think about what industries match up with the skills that are available in Massachusetts and do your best to encourage business growth throughout — meaning throughout all industries and throughout all regions.”

As with the workforce initiative, however, stating the problem and finding solutions to it are two completely different things, they acknowledged.

The blueprint recommends a number of steps, but especially increased focus on the state’s so-called gateway cities, older manufacturing centers, including several in Western Mass., such as Springfield, Holyoke, Pittsfield, and Westfield.

“A lot of this inequity exists in our older, urban areas,” said Lord. “There has been some focus on the gateway cities, but I think there’s more that can be done there; I think the Baker administration will try to do some creative things.”

By Any Measure

Another major issue for the state moving forward is both the number of regulations on the books and the manner in which they are enforced, said Geehern, who drew upon the example of that aforementioned software company in Amherst — the one compelled to relocate to Texas — to get his point across.

“During their first few years in operation, companies usually lose money, and this one was no exception,” he explained. “And the Department of Revenue required them to file their return electronically. That’s fine, but the DOR would not let this company use any of the typical, commercially available online platforms to submit those returns.

“Instead, they had to go out and buy this specialized piece of software that I believe cost about $2,500,” he went on. “Things like this prompted this company — which was a medical software company run by an M.D., so it’s exactly the kind of company that’s in the wheelhouse of Western Mass. — to move to Texas. And when the founder sells in five or 10 years for lots and lots of money, all those capital gains are going to Texas, rather than Massachusetts, not to mention all those jobs.”

Such stories are hardly isolated incidents, said Geehern and Lord, adding that they are a key element in the prevalence of that bad-waiter syndrome described earlier.

“There’s a sense that Massachusetts is just a tough place to do business because of the multitude of government regulations that impact companies in all sorts of ways,” said Lord, adding that, by AIM’s count, there are roughly 2,200 of these regulations, and they are often not reviewed in anything approaching a systematic fashion.

Which is why business leaders were encouraged by the Baker administration’s imposition of a 90-day moratorium on new regulations (since extended) as well as a comprehensive review of all existing regulations announced in April.

“All agencies are in the process of looking at the regulations that their agency has promulgated, and they have to justify whether they should be kept, amended, or repealed,” said Lord. “And we’re soliciting input from our members to help in this process.”

The desired result, he said, are regulations and enforcement policies that protect society, but don’t punish businesses.

But while companies must cope with a highly regulated environment, they must also deal with high costs, especially when it comes to energy and health insurance, said Lord, adding that, as with the other public-policy initiatives, these do not constitute a recent phenomenon.

But they are becoming more of a factor, he said, adding that the Commonwealth now boasts (if that’s the right term) the second-highest per-capita healthcare costs in the nation (15% higher than the national average) and the third-highest electric rates.

“And these put us at a competitive disadvantage to lower-cost places, both in the United States and around the world,” said Lord, adding that relief from these costs will not come easily.

Steps toward progress outlined in the report include, for healthcare, everything from maintaining the current definition of ‘full-time employee’ — the state’s benchmark is 35 hours, while federal reforms put the number at 30 — to repealing the medical-device tax under federal health reform.

As for energy costs, the report recommends steps such as new pipelines to transport natural gas into the Commonwealth and reorganization of the Mass. Department of Public Utilities.

Getting a Tip

Ridding Massachusetts of the ‘bad-waiter syndrome’ is not an assignment for the faint of heart. Such perceptions about the Commonwealth and its general attitude toward business have existed for most all of the time AIM has been in existence.

Real progress is the goal, and AIM is striving to achieve some by not only stating the problems, but eventually providing a road map for finding improvement.

And if that destination can be reached, then this century-old organization will really have something to celebrate.

George O’Brien can be reached at [email protected]

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