State Government Attracts Business by Practicing Good Business Strategies

Tom Peters

“Our customers are our reason for being,” touts the logo at the bottom of a magazine advertisement. The ad describes how worker Tom Tarleton went the extra mile for a valued customer, Zenith Electronic’s Computer Group.

The organization so interested in service is none other than the State of Michigan’s Department of Commerce. The self-styled Massachusetts miracle of Michael Dukakis garners headlines; but the more quiet Michigan miracle under Governor Jim Blanchard is perhaps more impressive, given the auto industry’s problems, the state’s lesser intellectual infrastructure (the University of Michigan is great, but doesn’t match the Cambridge-Boston concentration of talent) and few defense contracts.

The states, not Washington, are where the action—and innovation—is today. And the lead stories, from Michigan and Massachusetts (plus Pennsylvania and a handful of others), are not marked by giveaways, such as the obsequious, multi-state bidding for GM’s Saturn site in 1985. Instead, they feature a “value added” approach that emphasizes quality of the labor pool, capital availability, infrastructure (intellectual more than highways), ease of doing business, and patiently attracting smaller firms rather than frenetically going
after the huge, but often endangered, company job pie.

Back to Tom Tarleton. His “customers”, Zenith, needed close at hand masters-degree training in mechanical and electrical engineering. Mission impossible for a state bureaucrat? Not for Tarleton. In just a year, he quarterbacked a joint county-state higher education project that established both degree programs at Lake Michigan College, near Zenith.

The Michigan story reaches beyond the Department of Commerce. In 1982, a portion of the state pension fund was freed from conservative investment regulation in order to create a $300 million venture capital fund, then the largest public-sector venture capital pot available in the U.S. This clearly signaled the state’s intent not to put all of its eggs in the Big Three auto makers’ basket. Additional financial programs include the Strategic Fund, which financially supports bankers with insurance to backstop riskier-than-normal loans to innovative businesses. And the Labor and Education departments support and champion everything from innovative re-training programs to top-level conferences for business, labor, and government aimed at spurring partnership.

Commerce’s efforts, however, are the most complete, including the Michigan Modernization Service (MMS), modeled on the fabulously successful U.S. Agriculture Extension Service, and the Michigan Business Ombudsman (MBO). MMS’ “agents” are not state employees—who wouldn’t be credible as industrial consultants—but private-sector experts whose initial work, which always includes hard recommendations, is state supported. The MMS helps firms adopt new manufacturing technologies, and has targeted 1,000 “mid-size” businesses with 20 to 500 employees. (Michigan reinforced its intention to be the leader in sorely needed manufacturing technology enhancement by creating the Industrial Technology Institute and winning the contest to become the site for the National Center for Manufacturing Sciences.)

The ombudsman’s office is now called the Michigan Business Ombudsman, not, as it was a handful of years ago, the “Office of the Michigan Business Ombudsman (MBO).” The difference is not just semantic. Director Dick Allen explains, “Who wants to speak to an ‘Office of’ full of state employees? We dropped the first two words and answer the phone with ‘Mary,’ ‘Sam,’ etc.” The MBO continually cuts through red tape and also gets outdated laws tossed off the books. “Most [state employees’] response to a problem is ‘We can’t do it. It’s against the law,'” says Allen. “To begin with, it seldom is against the law. But even if it is, I gently remind them that the U.S. Constitution only restricts the people of Michigan from making war and interfering with interstate commerce. So, he concludes, “the important point is to get my associates to take individual responsibility and move to an emphasis on results rather than the usual state employee’s emphasis on process.” It seems to be working, spearheaded by a commitment to a 72-hour maximum before reply to any query.

While individual programs are important, Commerce Director Doug Ross always emphasizes the overall attitude of customer service. After much debate, he and his team of 300 found the right analog for their effort: “We [are] a large commercial development firm charged with increasing the level of private investment on the piece of property that [is] Michigan … owned by 9 million stockholders.” Ross also changed the “employee” designation to “associate,” and he calls front-line business advocates “account executives.” Furthermore, Commerce is a hotbed of entrepreneurial work teams, and Ross has significantly flattened its hierarchy. Now, Governor Blanchard and he are working on a substantial shift to pay for performance; one team bonus program will provide a $3,000 award to a top-performing six-person group.

As for living up to “Our Customers Are Our Reason for Being,” Ross regularly measures customer service via third-party surveys. And, as one observer notes, Michigan’s venture-capital division alone has produced more jobs than GM’s Saturn project, if the latter ever gets off the mark.

(c) 1988 TPG Communications.

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