The roiling world economy is shaking up traditional ED board roles
As the long grind out of the economic malaise of 2008 continues for countries, regions and communities around the world, economic development practitioners and institutions find themselves faced with a burgeoning set of new on-the-ground normals.
Forces of economic good -- for example, the blistering pace of innovation in western countries creating new industries in months instead of decades (see Uber and Jet.com) -- are meeting those of prospective bad, such as stagnant wage growth in many bellwether global economies, which is causing unprecedented levels of political instability with wide-ranging effects on global business (see Brexit and the recent chartering of the Asia Infrastructure Investment Bank).
The simultaneous convergence of unprecedented economic opportunity and the weakening of U.S.-led, postwar institutions (per Brexit: the weakening of the EU; per Asia II Bank: the marginalization of the World Bank) means that the picture of what job and economic growth will look like in the future for communities and regions everywhere is more opaque than ever. This creates spectacular challenges for strategic planning and the assembly of accurate and reliable individual and organizational performance measures for economic developers everywhere.
Enter the new board of directors. For decades, boards of directors of local and regional economic development organizations for the most part served a handful of functions: offer credibility in the community for the organization; provide fiscal, legal and other organizational oversight; and hire and fire the chief executive. For a nice list of typical nonprofit1 board roles and responsibilities, click here.
The role of a board member on an economic development board differed in substance and responsibility not much from a board seat on any number of local or regional nonprofit boards. Hospital boards, library boards, tourism boards, etc. -- all generally, in years past, called on a similar set of skills in their board members. Content differed, but the role didn’t.
No longer. As nonprofits diversify their income streams and become increasingly organizationally sophisticated to take on more and more of the work once reserved for or led by government as public finances are squeezed (with mixed results), the complexity and breadth of mission has exploded for organizations in a number of nonprofit sectors, including social services, health care -- and economic development.
For some industries, the expansion of services by nonprofits has been driven by demographics and the economy -- health care activity has been and is projected to continue to tick upward as America’s population gets grayer faster, and many social service organizations have expanded to serve a growing needy population in the wake of the recession. This expansion of revenues and programmatic offerings places fresh demands on the boards that oversee nonprofits in growth sectors -- in most cases creating demand for more experienced and capable board members.
Trickle-down challenges; from global headline to the ED board room
While the nonprofit economic development sector does not appear to be measurably growing nationwide (the industry has an identity crisis on its hands, but that’s another blog), the job of a board member on any local or regional economic development organization of any complexity has become immeasurably more challenging -- and important.
We noted earlier that as the world’s economic order roils in a period of unprecedented resetting, the faraway challenges and opportunities we’ve become accustomed to reading about in The Wall Street Journal or The Economist are all of a sudden before us, locally and regionally. Consider:
- The unprecedented pace of merger and acquisition activity in the marketplace. Driven by ready access to capital, rock-bottom interest rates and an increasingly impatient investor class starved for yield following a near decade of middling market returns, 2015 was the biggest year for M&A in history, with more than $4.3 trillion in activity in the sector. Due in part to a federal clampdown on corporate inversions, it is likely that 2016 M&A activity will not outpace 2015, but it still likely will end up as another of the strongest years ever.
- The most uncertain trade environment in at least a generation. The U.S. alone faces a frightening roster of problems on the trade front today -- a stubbornly strong dollar; political and economic near-chaos in the Eurozone, a historic trade partner that is today historically weak; the very real possibility of Congress failing to act on the Trans-Pacific Partnership trade deal, which might be our last chance to prevent China from rewriting the rules of trade in Southeast Asia for a generation; and presidential nominees from both major political parties who are both proudly anti-trade2.
- A completely unworkable immigration policy. Dan Culhane, CEO of the Ames Chamber, crafted a great piece last year on the lunacy of an H1-B immigration policy that helps ensure that virtually all of the 4,800 foreign-born students who graduate from Iowa State University annually -- many with degrees in a STEM field -- will leave the country after graduation. In a state with enormous supply/demand imbalances for jobs in the STEM field, the deadlock in Congress on immigration inflicts more damage every day that goes by.
Now consider how the preceding three major national challenges affect your community’s ability to grow and prosper today in Central Iowa. Each one does. Every day.
No such thing as a free lunch
And so, local and regional economic development organizations are turning to their boards of directors not only for legitimacy, oversight and their money. We are increasingly turning to them to contribute a new way of thinking to the most complicated and challenging market road map any economic developer has ever seen.
Successful economic development boards are not just hoarding CEOs around their board tables just for the sake of it, as in years past; they are diversifying their board makeups to include executives in a diversity of industries and specialties -- including executives in marketing, tax, finance, supply chain, public policy and entrepreneurs. The challenges local and regional economies face are diverse, global and more complex than ever; boards must begin to reflect the reality. No longer can a board member of a successful economic development organization expect to show up monthly for the free lunch and nothing else. We're asking members to work.
By asking more diverse boards to actively help interpret the forces that are affecting wealth creation and quality of place in their communities to solve problems and help develop strategic solutions, successful economic development organizations today are acknowledging that the world is not the same place it was in 2008 and never will be again. And neither will their boards.
This blog first appeared on July 29, 2016 on IowaBiz.com.
1In referencing ‘nonprofit’ organizations, I include both fully privately funded organizations and those that are considered public-private -- organizations that receive some funding from the public sector.
2Read this op-ed by the two co-chairs of the Greater Des Moines Partnership’s International Trade Council for more on what needs to change in our immigration system to benefit states like Iowa