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Where the Modern CEO Should Invest

Worried about the labour shortage? Start investing in your local communities again.

That's the message from Dr Ethan Karp, President and CEO of The Manufacturing Advocacy and Growth Network, who tells The Industry Leaders why thinking local is in everybody's best interest.

As I watched the flurry of memes and tweets hail down on Jeff Bezos after his space flight last month, one, in particular, caught my eye:

It may be a viral tweet, but it speaks to a genuine truth: that, even with the pandemic ushering in a new age of corporate responsibility, business leaders' local civic engagement – a la Andrew Carnegie, who seeded funds for over 2,500 public libraries along the Rust Belt – has been waning for decades. There are a myriad of reasons for this, globalisation, deregulation, corporate Mergers and Acquisitions, and the decline of hometown banks and other headquarters, to name a few.

But the fact that Bezos – whose global, online company has profited from such trends – would spend his billions on a trip to what is arguably the least "local" place there is (see: space) perfectly symbolises this shift.

It doesn't have to be this way.

Especially now, when so many companies are fighting to build new talent pipelines while hiring and retaining workers, local civic engagement and community investment isn't just the right thing to do – it's an opportunity to bring in and nurture the best employees out there.

How We Got Here

In the early 20th century on through the post-World War II period, CEO-led organisations – i.e., rotary clubs, local business roundtables and other civic organisations -- played a vital role in cities across America. As detailed in this Brookings Institution study, their power and resources supported civic initiatives ranging from community development projects to changes to public policy to bond referendums and mayoral campaigns.

But this began to change in the mid-1970s, thanks to a Mergers and Acquisitions frenzy, HQs moving to nearby suburbs and increased executive turnover. Then, in the '80s, beset by globalisation, consolidation and deregulation, more and more cities lost their local banks, newspapers, utilities, and manufacturing companies.

This meant fewer top executives were around to engage in local civic work. Those who remained often lacked the interest, experience, or power to do so even if they could.

Another feature of the time meant few women involved, and the men were overwhelmingly white. The need remains today, with more diversity needed in our CEO ranks and those with money, influence, and power to engage more diverse stakeholders in local issues.

Simultaneously, the pressures of global economies mean the participation of many business leaders must be spread nationally and internationally. This puts more of an impetus on local companies to step up with less help from their peers.

Why CEOs Should Invest in Local Communities

After a decades-long shift away from localism, executives are changing course. This is especially true in the wake of COVID-19, which called attention to the potentially disruptive effects of far-flung supply chains and the crucial role corporations can play in supporting their communities in times of need.

But investing in local communities and civic initiatives isn't (and never has been) all about altruism. Harvard Business School research, for instance, found that companies with more community engagement significantly outperform their counterparts over the long term. Critically, these practices can also go a long way toward hiring and retaining skilled workers, which companies are struggling to do amid a worldwide labour shortage.

In a survey of millions of employees, The Corporate Executive Board Company found that, on average, every employee who participates in corporate community engagement activities adds $2,400 of value to the company due to decreased turnover and increased employee engagement.

But don't just take these studies' words for it. Look at the CEOs who, even before COVID-19, stayed true to their local communities, and you'll see firsthand how their efforts paid dividends during a crisis.

For instance, Jack Schron Jr., CEO of Jergens Inc. – a Northeast Ohio-based manufacturer – could have gone to any number of states that wanted to headquarter his growing business. Instead, Schron, like his father and grandfather before him, chose to stay local and build Jergens' new HQ on a former brownfield site in Cleveland. His decision jumpstarted a virtuous cycle: soon, a food bank was built next door, then the Cleveland Clinic moved in, then a Social Security office.

The site also catalysed globalisation management with the local community, whether that entailed leading an effort to clean up brownfield sites, hosting inner-city students for tours, internships, and apprenticeship programs, or creating a first-of-its-kind program for local special-needs students. This longtime investment in his community creates a strong, trusting, and sustainable culture that drives employee retention: 77 employees have been with Jergens for more than 25 years.

That kind of loyalty is desirable, especially now, but we've seen it play out in numerous other instances.

Lincoln Electric, for example, invested $30 million in a tech training centre in Euclid, Ohio, that focuses on addressing the rising demand for career pathways in welding and advanced manufacturing. Their investment has helped build a strong, local talent pipeline for years to come.

Thinking Big at a Local Level

Today's issues are as global as so many of our companies, so it can be tempting to think big – even "trip to space" big. But sometimes, the most significant difference you can make comes from thinking big on the local level, especially at a moment when communities, non-profits, and those looking for jobs need it more than ever.

Now, as we look to rebound from COVID-19 and navigate a labour shortage, it's time for action. There's no better time to take a leadership role in local activities that have a real impact: on your communities, your employees, and your business.

About The Author

Dr. Ethan Karp is the President and CEO of non-profit consulting group MAGNET, the Manufacturing Advocacy and Growth Network.

Prior to joining MAGNET in 2013, Ethan worked with Fortune 500 companies at McKinsey & Co. He received undergraduate degrees in biochemistry and physics from Miami University and a PhD in Chemical Biology from Harvard University.

Find Dr Karp on LinkedIn


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