Indiana turns up schmoozing efforts

April 16, 2007

Before getting down to the nitty-gritty business of site selection and tax incentive negotiations, Indiana Secretary of Commerce Nathan Feltman wants corporate executives to relax and enjoy themselves.

That's why he often takes them out to a ballgame. Yankee Stadium is a favorite venue. So is U.S. Cellular Field, home of the Chicago White Sox.

"There's no substitute for relationship-building face to face," Feltman said. "When you're in a more informal setting, you learn more."

Economic development officials say networking is the first step in a process that, when successful, leads to industrial plant expansions and company headquarters relocations. Travel, food, gifts and entertainment, they argue, are a necessary cost of attracting jobs to Indiana.

From Feb. 1, 2005, to Feb. 28, 2007, Indiana's price tag for greasing the wheels of progress was $1.06 million.

Indiana Economic Development Corp.'s foundation--established in early 2005 in conjunction with Gov. Mitch Daniels' formation of IEDC--exists to accept donations from companies, then underwrite the softer expenses of nurturing new businesses.

Before the foundation formed, Feltman said, tax dollars paid the tab. As a result, state economic development officials did far less networking. He said the contacts and referrals that result are worth much more than their token costs underwritten by the foundation's corporate contributors.

IEDC says the newfound flexibility has helped accelerate job-creation efforts in the state. In its 2006 annual report, the group says it won 37,402 job commitments in 2005 and 2006--more than double the number the prior two years, a period when the economic conditions were less robust.

Foundation records reviewed by IBJ show it raised $1.4 million, then spent 74 percent of that on a wide array of goods and services, including fine chocolates, wine, restaurant meals, limousine rides, professional sports suites and translation services.

Preparing for IEDC's next two years of activity, Feltman now is approaching corporations again to solicit foundation funding. He'll likely start with energy utilities, which have provided more than $1 million--or more than two-thirds--of its money so far.

Charlotte, N.C.-based Duke Energy Corp. was the foundation's largest donor, providing $368,500. Columbus, Ohio-based American Electric Power gave another $250,200. And Indianapolis Power & Light Co. kicked in $125,000. Donations from utilities averaged $112,034, compared with the average of just $15,806 for all contributors.

Utilities stand to benefit if large industrial companies come to Indiana, because such firms use lots of electricity. However, the utilities say they're not trying to steer IEDC's agenda toward certain types of projects. They also say their strong support is not aimed at winning more favorable state oversight for their heavily regulated industry.

"Our philosophy has historically been, we are a partner with the state," said Marie-Christine Pence, Duke Energy's Indiana director of economic development. "As the state of Indiana grows and is successful, we are successful as a business. So we support their economic development activities."

The second-biggest supporters of the foundation are local governments and economic development organizations, which chipped in $206,532. Local officials often accompany IEDC on its trade missions around the globe.

Muncie-based Energize-ECI, for instance, gave $20,000 to foster IEDC's efforts on behalf of east-central Indiana.

Before IEDC began aggressively courting face time with site-selection consultants and executives, those folks seldom thought about Indiana, said E. Roy Budd, Energize-ECI's executive director.

"It's helping us rebrand the state by getting in front of these people, building relationships and telling the Indiana story," Budd said. "You can only do that sometimes by breaking bread together."

"Once I've had dinner with somebody, or we've enjoyed a basketball or baseball game, it's very easy to pick up the phone and get by the gatekeeper," he added. "Usually, it's the secretary. Before then, I'd probably never get by."

Sometimes, IEDC plays host at local events, such as the Indianapolis 500 or at Indianapolis Colts games. Other times, Feltman said, IEDC only can persuade executives to attend events in their own back yards.

No matter what the venue, IEDC goes out of its way to offer reminders of its encounters with decision makers.

They can be modest marketing trinkets, such as pens, key chains, or ties stamped with Indiana's seal. Or they can be much more lavish, such as the signed, framed Peyton Manning jersey Gov. Mitch Daniels gave a Japanese official. Daniels gave another a commemorative brick taken from the Indianapolis Motor Speedway.

When IEDC hosted a networking event in a Yankee Stadium suite, everyone in attendance received baseball jerseys reading "Indiana" and stamped with the number 19--to signify its status as the 19th state to join the union.

IEDC has followed the same playbook around the country at Colorado Rockies, Atlanta Braves, Chicago White Sox and Dallas Mavericks games.

"If you don't get out and about in cities where companies and their advisers are based, you're at a disadvantage, because other states are doing so," Feltman said. "If you're not top of mind with the people making decisions, somebody else may be."

Networking events alert IEDC leaders about potential business expansions--sometimes even in their own community.

Feltman said he first heard about Indianapolis-based WellPoint Inc.'s growth plans through a site consultant at a White Sox game. The tip ultimately led to WellPoint's December decision to add 1,200 jobs at Indianapolis International Airport.

And entertainment is just one part of a multi-pronged attack, Feltman said. Every aspect is designed to get a foot in the door. When IEDC officials visit other cities, he said, they typically break into small teams, each slated with an itinerary of meetings scattered across the city. Catered dinners or hors d'oeuvres at sporting events cap the day and provide yet another opportunity to make a connection.

"We're starting to hear that Indiana is aggressive," he said. "The more repetition we have meeting people and building a relationship, the more top of mind Indiana is and the more opportunities we get."

Larry Gigerich, a local site selection consultant with the firm Ginovus LLC, said Indiana has little choice but to spend money to wine and dine executives. Other states are doing the same thing--and lavishing far more resources on the effort. They even frequently come here to prospect.

"It's not every week, but probably every other week, we get a request from a state or regional economic development group that's coming to Indiana and wants to stop in and see us, to tell us about the developments in their area," said Gigerich, who led Indianapolis' economic-development efforts under Mayor Steve Goldsmith. "Some states do it very well."

Tom Miller, whose Greenfield-based economic-development consultancy, Thomas P. Miller & Associates, advises local governments, agreed.

IEDC's board has to be careful how it spends foundation money, he said. Unchecked, lavish spending to entertain business prospects could devolve into a boondoggle.

But Miller said the IEDC foundation is clearly far from that territory.

"Where do you draw the line between enjoyable and extravagant? There's no precise scientific answer. But face time is valuable," he said. "And I can assure you that others are spending a lot more than Indiana does on this."

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