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HR Faces Distinct Issues in Rural Areas

June 1, 1994
On June 23, 1992, Bavarian Motor Works AG made an announcement: For the first time, the German automobile manufacturer planned to build a plant in the United States. But instead of choosing to build its $350 million factory in a major urban area, BMW selected the town of Spartanburg, South Carolina-population 43,467.

In September 1993, Mercedes Benz followed suit: Bypassing the large cities, this German manufacturer chose to build its $300 million plant in Vance, Alabama, a town of only 248 people.

Foreign manufacturers aren't the only ones going rural. Communities that have fewer than 50,000 people-from Spartanburg, South Carolina, to Grants Pass, Oregon-are finding new ways to compete with traditional urban centers, enticing hundreds of U.S. companies to make the move. Despite overall business incentives, there are major implications for human resources. In these rural locales, HR professionals are faced with new challenges, including a small labor pool from which to recruit and limited numbers of trained applicants. Nevertheless, through partnerships with local and state governments-eager for business-most HR professionals are finding ways of turning rural challenges into advantages.

When selecting a new location, HR can offer valuable input.
Just as there's no one rural destination, there's no single reason for businesses' attraction to the country. Instead, most companies credit their rural destinations with offering a package of incentives: from cost savings and less competition to a pleasant climate and an improved work ethic among employees.

Take BMW, for example. For convenience in exporting and importing goods, the company was searching for a U.S. location that was situated near a deep-water port. Spartanburg fit the bill: The city is less than three hours away from a major port in Charleston. But that wasn't all the city offered; there were financial benefits as well. In Spring 1992, South Carolina Governor Carroll A. Campbell Jr. signed a bill to provide $35 million worth of incentives for BMW to come to Spartanburg. Susan Crocker, vice president of HR at BMW Manufacturing Corp., says that in the end, it was the entire package that made the difference.

When making the final decision, most companies agree that HR input is valuable. Marsh Campbell, the vice president of human resources at Tucson, Arizona-based Magma Copper Co., served on the executive committee that decided whether to purchase a new mine in Ely, Nevada, a rural town of approximately 4,800. Campbell says that by contributing to those discussions, he was able to voice HR concerns (see "Operating Rurally Creates Special HR Considerations"). "Others on the committee asked whether I felt there were any kind of severe problems concerning labor relations or the ability to acquire and attract a work force," he says. "We talked to the chamber of commerce and others in the area and concluded that even though attracting a quality work force could pose some difficulty, we could operate the new mine successfully." Largely due to Campbell's input, Magma will begin recruitment earlier than it normally would to staff the Ely mine and will offer competitive benefits to attract quality workers.

Although Campbell was involved in the process from the start, HR professionals at some companies don't come on board until after sites are selected. Such was the case with Crocker at BMW. A human resources person from the corporate office served on the task force in Munich, Germany, but Crocker-who now works in the rural location-wasn't hired until after the decision was final. She says that the corporate HR representative was instrumental in ensuring that HR concerns were considered when the company was selecting a U.S. site. "The availability of training and funding for that training were the person's primary considerations," she says.

An intensive screening process-with state assistance-makes staffing easier.
Once a site is chosen, recruitment is a top concern. Although Spartanburg's BMW Manufacturing Corp. has hired only approximately 265 people so far, Crocker says that by the year 2000 the factory expects to employ more than 2,000 people who will produce approximately 90,000 cars annually. Most of these workers will be from the United States; the company plans to employ only 25 to 35 German nationals through temporary one- to two-year international assignments. Currently, the German expatriates are helping the U.S. subsidiary to start up operations. "The German nationals transfer the knowledge of BMW AG to this new location," Crocker explains. But some also will work at the U.S. site after it's up and running. "They'll continue to come over to share information between manufacturing facilities," says Crocker. "If we implement a successful practice here, for example, we want to have the ability for that to be carried back and put into practice in Germany."

When hiring its U.S. employees, BMW expects candidates to meet certain minimum requirements. Crocker says that to support the local community, the company wants to hire the bulk of its work force from within a 50-mile radius of the plant. It also prefers all applicants to be state residents, have high-school degrees or GED equivalents, be available for shift work and be willing to work in a tobacco-free environment. The only major exception to these requirements is in the area of equipment services. Because the company requires advanced degrees for this field, it sometimes has to recruit from other locations. "Even when we must recruit outside the 50-mile radius, we try to limit our search to South Carolinans," says Crocker.

"We're of the philosophy that people don't have to know how to make cars before they come to work for us. We can train them to do that."
Susan Crocker,
BMW Manufacturing Corp.

So far, she says that finding applicants hasn't been a problem. Since the news about the factory's opening hit the press, she's received 15,000 unsolicited resumes. Crocker says that most of these candidates met the company's minimum requirements and had some experience related to the position for which they were interested. Still, the company has run several full-page ads in area newspapers to recruit for employees to work in production and equipment services.

The fact that most area people don't know how to put together a car doesn't bother BMW. Says Crocker: "We're of the philosophy that people don't have to know how to make cars before they come to work for us. We'll train them to do that. We need people who are flexible, who can think, who can use their brains and who are willing to work in a team environment."

To find this type of person, BMW uses an intensive selection process. From the initial application to the actual hire, the process for each employee takes up to 66 hours-hours in which the state takes an active role. In fact, potential employees apply first with a state office, which screens the candidates for BMW to find those who have the required skills for each position. In addition, the state administers aptitude tests to determine candidates' basic skills. Only those who score well go on to be evaluated by the company.

After the state screening, BMW conducts additional testing, including situational-judgment and job-fit inventories. "We try to find out if applicants can work in teams and are problem solvers," says Crocker. Applicants also participate in an assessment center, in which they're tested in team decision making, team problem solving, individual problem solving and production exercises.

For example, in one such exercise, potential workers are placed on a simulated assembly line and then fed a defective part. How they respond-whether they try to make do, alert others or analyze the problem and provide the proper feedback to the supplier-are important considerations in determining their qualifications for hire.

Finally, applicants must undergo reference checks, drug and alcohol testing, preplacement physicals and 44 hours of pre-employment training in such areas as computers, communication, teamwork and diversity before BMW makes its final hiring decisions. But neither HR's responsibilities nor South Carolina's assistance stops there-because after hiring comes post-employment and on-the-job training.

One of the things that attracts businesses such as BMW to South Carolina is the state's willingness to help companies with this intensive training process, says Meriwether Jones, director of the Rural Economic Policy Program for the Aspen Institute, a non-profit corporation for business and community leaders in Washington, D.C. Currently, South Carolina provides up to 400 hours of on-the-job training for each employee at BMW and other area industries. "The attitude is, 'You bring your people, or we'll use our people. We'll train them on the same machines on which they'll eventually work. You decide if you want to hire them; there's no obligation,'" Jones says.

Although this assistance attracts employers, Crocker says it's important to remember that the state benefits, too. "We'll be paying a considerable amount of taxes when we're up and running," she explains. "We also are bringing 25 system suppliers into the state." Most South Carolina economists agree that the partnership is a good deal. The plant could generate more than $500 million in revenues for the state over the next decade.

Local communities respond to business needs.
Because both the local community and the company benefit from a successful business-community partnership, it's vital that they work together. In Harlingen, Texas (population 48,735), the Texas State Technical College helps to establish a successful relationship between the city and its business by developing necessary vocational courses.

Stephen Vassberg, associate dean for economic development and industrial training at TSTC, remembers when General Dynamics first came to Harlingen. The company needed people who had skills working with air-frame sheet metal. The schools partnered with company trainers and developed outlines for training both on the TSTC campus and at the General Dynamics facility. Through this partnership, the company was able to utilize both the TSTC faculty and General Dynamics' trainers.

The city's assistance to business doesn't stop there. "We meet with companies to figure out what they want," says Vassberg. "We try to stay flexible. For instance, if a local bank gets a new network computer system, they'll ask us to teach them how to use it. We'll set up classes here, and then we'll go to the bank and follow up on the job."

Because workers always need additional training to learn new skills, Harlingen's job is never over, says Yvonne Browning, director of industrial and commercial development for the Harlingen Chamber of Commerce. "Technology is moving swiftly, and we have to continue to upgrade employee skills," Browning says. "The basic skills of today won't be the basic skills of tomorrow."

Such was the case with Pittsburgh, Pennsylvania-based ALCOA, an aluminum manufacturer that has an area facility. When company officials asked if TSTC could teach some of its people conduit bending, the college developed a 16-hour class on the subject within six days. Vassberg explains why: "To deal with industry, you have to respond the way industry responds, and that is right now."

Browning agrees that immediate response to business concerns is the only way to attract industry. So the city begins its assistance when businesses first express an interest in coming to Harlingen. How do companies benefit? The city helps expedite permits and paper work. "We provide liaison services with the different agencies to coordinate and establish meetings and to get things rolling," says Browning. "If companies hit a snag anywhere, we try to jump in and help out."

Other cities use different methods of enticement. The city of Tupelo, Mississippi, for example, spends heavily to build a skilled work force and goes the extra mile to make outsiders feel welcome. This strategy helps the city of 30,685 people attract small to midsize companies that appreciate special treatment. Last year alone, Tupelo brought in 16 new factories with a total capital investment of $100 million.

One of the reasons businesses are attracted to Tupelo is Itawamba Community College. Two years ago, the college set up a robotics manufacturing center where local companies can train their employees on state-of-the-art equipment. But the college goes even further with its assistance: Officials at ICC spend much of their time working with companies on plant-specific programs.

ICC's training assistance was one of the primary reasons that Tecumseh Products Co. selected Tupelo as the site for its rotary-compressor production plant, says Wallace G. Stubbs, the company's vice president of industrial relations and personnel. He has high praise for the city: "I think it provides perhaps the best synergy we have in our organization among business, education, economic development, local government and state government.

Recruitment advantages include a strong work ethic among rural employees.
Liz Lonergan knows the many advantages and disadvantages of a rural corporate location. Lonergan is the human resources manager at Ben & Jerry's, a manufacturer of frozen desserts that employs about 550 workers. She started with the company in 1984, when it was headquartered in South Burlington, Vermont, a city of 12,809 people. In 1985, the company's corporate headquarters relocated to Waterbury, Vermont, a nearby town with a population of only 4,589.

To help Ben & Jerry's make the move, the state provided grants as well as employment assistance through state employment offices. Since the relocation, Lonergan says that obtaining employees with on-the-job training has been difficult. Thus, she recruits people from nearby cities such as Boston, New York and Philadelphia.

Lonergan attracts these employees to Waterbury by emphasizing the recreational opportunities, which include hiking, biking and fishing. She says: "From where I'm sitting, I can be in a ski area in 20 minutes. I can be at a beach at a huge lake in a half hour or at a smaller lake in 10 minutes. I could walk down to the river, catch a fish and be back before lunch was over."

To help ensure that prospective workers will adapt to the area, Ben & Jerry's lets them have a good look before signing on the dotted line. "We bring the whole family up for a trip, let them have a few days to look at the town and check out the housing and the school system," Lonergan says. Not many leave: The company's turnover rate is only 3%.

Still, it's sometimes difficult in the beginning for new employees to integrate into the small town. Lonergan says that people who have children get involved in the community through their kids, but singles have a harder time adjusting. Those working at Ben & Jerry's try to make the transition phase easier for their new co-workers. For instance, Lonergan says that when her boss moved from Philadelphia, the employees made a concerted effort to welcome him to the community by inviting him to dinner and social events.

Because of the influx of new employees, the town's population has grown since the headquarters relocated. This has taxed local services. "The town has an extremely supportive city council that has worked with us to accommodate growth in terms of mail services, sewage systems, road plowing and telephone lines," Lonergan says. "We've stated our needs, and they've been receptive. It's sometimes a strain at first, but it's worked to the benefit of both of us."

Gerald Preler agrees with Lonergan about the benefits of rural locations. As human resources manager for the General Dynamics plant in Harlingen, Texas, he sees a marked difference between the work ethic in Harlingen and that in Providence, Rhode Island, his previous home of 27 years. "It's a whole different culture," he says. "Absenteeism where I come from averages about 12%, but down here it's 2% or less." Preler adds that people in Harlingen like to come to work: "They care about producing a quality product in a reasonable amount of time. We've trained about 85% of our mechanics, and they've all become artisans."

Others agree that Harlingen is special. An environmental program at one of the city's junior high schools was designated President Bush's 744th Point of Light, and in 1993, both the district's superintendent and school board were selected best in Texas. The city's 11% unemployment rate is high by national standards, but it's the lowest in the region. In 1992, the National Civic League declared Harlingen one of the nation's 10 most progressive and innovative cities through its All-America City awards program.

The area isn't only known for its business innovation. Located in the Rio Grande Valley not far from the Gulf of Mexico, the community also is famous for its fishing, hunting and water sports. Attractions include a newly renovated auditorium, a new library and a modern civic center. Despite all of this, the cost of living is low: A two-bedroom home sells for $65,000 to $85,000.

Because Harlingen is near the Mexican border, the majority of the people in the community-and therefore the majority of employees at General Dynamics-are of Hispanic background. This may contribute to cultural differences that sometimes are noticeable when employees relocate from other parts of the country. Preler says that he noticed this when he first came to Harlingen from Rhode Island in 1989. He says he felt a certain distance between himself and the employees. "In less than a year, I was accepted. The key, I think, was trust. We maintained an open-door policy for any problems that employees had. Eventually, they learned that when I committed to something, I kept my word."

Rural areas offer productive workers and lower costs in a calmer environment.
Such Southern towns as Tupelo and Harlingen aren't the only ones out looking for business. Bruce Laird, regional development officer for the Oregon Economic Development Department, spends about one out of every six weeks in Southern California trying to convince companies in Los Angeles, Orange and San Diego counties to ditch the smog, crime and traffic and move to Oregon. His typical Southern California clients are light manufacturers that have national markets and active local competition. Why do they decide to move to rural Oregon? Laird says it's primarily a cost issue. "The cost of the building, the insurance costs, the people costs, workers' compensation, plus the high crime rates-they come to realize they just don't have to tolerate it," he says. This realization on the part of business makes Laird's job easier: "Lately, I haven't had to spend as much time down there. Southern California businesses are coming to us."

Once in Oregon, however, some Californians find life too calm. "Life in Southern California is fast paced and inundated with the best in music and culture. There's a certain attraction to all that excitement. Californians who move to Oregon usually miss it."

This may be true, but most employers don't miss the excitement enough to move back to California. Laird believes that the rural workers-with low absenteeism, strong loyalty and low turnover rates-help Oregon attract and retain industry. Laird cites one example in which the state enlisted a California information-processing company to do a trial of seven Oregon people and compare their performance with the company's work force in California. The company found that the productivity of the seven employees was 35% above that at the company's operation in Southern California, says Laird. "And they were doing so at a total effective cost of about 60% of the company's costs at home," he adds. "These guys looked at this, did the numbers and said 'We have to move.' "

Jim Wittkopp is the chief financial officer and personnel director for Met One Inc., a high-tech firm in Grants Pass, Oregon, a town of 17,488 people. He says that the high unemployment rate in Southern Oregon translates into worker loyalty at his company. "Employees can't go across the street and get a job as they can in Los Angeles," he says. Wittkopp appreciates this lack of competition: "We expect a lot out of our employees. Still, our turnover rate here is virtually zero."

Wittkopp says that his firm moved to Grants Pass from Sunnyvale, California-a populous city near San Jose-because management was seeking a lifestyle change. Wittkopp himself was recruited from Orange County, California, another highly congested area. He says he took to the Grants Pass lifestyle like "a duck to water."

Because Met One manufactures a particle counter for air- and liquid-borne environments, principally for the semiconductor and pharmaceutical industries, Wittkopp recruits a lot of his engineers from the Oregon Institute of Technology, approximately 100 miles from Grants Pass. "They have an outstanding engineering program there," he explains. From time to time, however, he goes out of Oregon to find someone with a lot of optics experience. "We've gone to Seattle, Portland, Los Angeles or Orange County to get people out of aerospace or the Star Wars program," he says. "But that's the exception rather than the rule."

Wittkopp is happy that that technological advances and incentives from rural areas have made it possible for him to leave the city. He was raised in a rural area in Michigan but spent 27 years in Southern California. "I always longed to get out of the big city and back into a more rural environment," he says. "I find there are a lot of opportunities in small cities or towns. People have this image that small towns are backwoodish, but they're not."

Companies may need to work to find a suitable rural location, but Wittkopp claims that these efforts are worthwhile. "Right now I'm looking out my window at some Canadian geese just out front. I'd never see that in Orange County," he says. "I'd be looking down about five stories to a black-top parking lot. Up here we don't even have lines in our parking lot. You can park anywhere you want."

Personnel Journal, June 1994, Vol. 73, No. 6, pp. 112-120.