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Call Center Subsidies
By
Gary Chambers
September/October, 2002
Like
it or loathe it, virtually every jurisdiction across North America offers some
form of tax-funded subsidy to attract new corporate citizens.
Yet when the largest luxury hotel chain on the continent chose to
locate its call center in New Brunswick, a cash investment by the government
was not a decisive factor.
The
range of incentives governments offer to entice new businesses into their
areas varies dramatically. In
some areas, development strategy is strictly a matter of political philosophy.
The farther public administrations lean toward the extreme left or
right, the less favorably they tend to view subsidy programs.
Other areas may simply be too impoverished to keep up in the race to
shower expensive gifts on potential new companies.
There are some indications, however, that the most effective bait to
lure prestigious technology rich businesses, like teleservice firms, may not
be a cash handout. Old-fashioned
good governance based on imagination and foresight may be more effective in
the end.
A
case in point is the province of New Brunswick.
Despite having a much smaller land mass than most Canadian provinces,
and a population only about three quarters of Rhode Island, New Brunswick has
become one of North America's most popular locations for new call center
enterprises ranging in size from ten to seven hundred employees.
There exists no better example of this business migration than the
Global Reservation Center (GRC) operated in Moncton, New Brunswick, by the
continent's largest luxury hotel chain, Fairmont Hotels and Resorts, Inc.
Moving to Moncton from Phoenix, Arizona, in 1995, made Fairmont's GRC
one of the first call centers located in the maritime city, but just seven
years later it has become only one of forty-five such operations.
Doug
Carr is Fairmont's Director of Global Support Systems and is based at the
company's Moncton facility. As
the executive in charge of the GRC, he has watched it grow from a staff of
sixty-eight in 1995 to almost three hundred today. He has also seen the operation outgrow its first 9,000 square
foot building forcing a move into a former supermarket with 32,000 square feet
of floor space. The expansion
obviously presented some challenges for Carr and his colleagues, but it is
clear the whole experience has made him something of a fan of New
Brunswick's leadership style. Carr
points to three of Canada's larger provinces, each of which have made
valiant efforts to draw call centers into their regions, then he uses some
boardroom straight talk to suggest why they did not succeed.
"In
Manitoba, Saskatchewan, and Alberta the governments have failed to attract the
call center industry, and they're jealous of what New Brunswick has
done," stated the hotel executive. He
noted that those three western provinces offered some substantial cash
investments and tax reductions, but he added: "It's not all about subsidy
incentives."
The
province's success is due in no small part to the foresight of Frank
McKenna, Premier of New Brunswick from 1987 to 1997.
Dubbed by Microsoft Corp. as a pioneering champion of e-government, it
was under his encouragement that NB Telecom installed AT&T's SONET fiber
optic technology throughout its service area; firms like Fairmont are now
realizing the benefits of that visionary approach.
Doug
Carr relates the story of what happened when Fairmont installed high-speed
Internet connections into offices in Moncton and Denver, Colorado. In
Denver the Internet service provider said it would take from fourteen to
twenty-eight days to install an ISDN line, while
in
Moncton the ISDN line was operational the day after it was ordered. Carr explains that Denver's fiber optic cable was installed
into many areas only when customers ordered the service, while in Moncton the
cable was already in place.
"Why
would you go and deal with a telecommunications system that is archaic?"
Carr posed. "It was
the infrastructure. That was a
huge draw for us and involved no financial incentive whatsoever."
Of
course, there is more to New Brunswick's success than miles of fiber optics.
There is a cash incentive, too, in the form of training grants, but the
top hotelier is quick to point out that money comes with strings attached.
Firms receiving funds to train their staff must commit to provide
long-term economic benefits through creation of stable employment conditions,
but it seems corporate executives at Fairmont Hotels and Resorts have no
argument with that scenario.
He
further illustrates the point by referring to Rogers Communications, one of
the other major corporations that has placed a call center in Moncton.
The province gave Rogers $2.5 million (CDN), or $1.58 million (US), to
assist with staff training, but in return the communications mammoth must
create seven hundred permanent jobs within five years.
If it fails to reach that target it must repay some of the money on a
pro-rated basis. "It is not a give away," Carr insists.
"Those are part of the conditions of this money."
It
must be noted, however, that although New Brunswick seems to be especially
adept at making teleservice companies welcome, similar incentive programs are
available elsewhere. The question
is, are your civic and regional leaders ready to jump aboard?
As
an arm of the executive branch of the US government, the head office of the
Economic Development Administration (EDA) is in the White House, but it has
regional offices and operations personnel all over the country.
Among them is Al Ames, who works for the EDA in Idaho.
Ames' job is to work with business and political leaders in his area to
foster economic growth. He
reveals that the EDA's approach is reminiscent of the New Deal philosophy
championed by the late President Franklin D. Roosevelt.
It is a strategy that favors infrastructure enhancement over cash
handouts. It worked for F.D.R. just as it worked on a smaller scale for
New Brunswick's Frank McKenna.
"We
try to help them by putting in an industrial park or perhaps extending water
and sewer," Ames explained. "We
are doing a high tech industrial park in Lewiston."
Ames
says call centers are among the new style businesses his agency tries to
attract, although he cautions that some call center jobs are not highly paid.
It depends on the type of calls the center handles and he points to one
of the EDA's better results in St. Anthony, Idaho.
"We have a call center in St. Anthony called MK Technologies.
They do technical support for software makers.
That call center generates some highly paid jobs."
Creating
centers, like MK Technologies, requires the availability of a local work force
capable of providing services like software help desk.
The EDA and other agencies will help with that too, offering training
schemes and even limited direct wage subsidies.
But while the EDA seems to try to focus mainly on infrastructure
projects like buildings, roads, public utilities, vocational schools, and
business incubators, a search on the World Wide Web for "economic
incentives" shows that many state and local governments follow a
different course. Like those
Canadian provinces of Alberta, Saskatchewan, and Manitoba, they tend to put
more faith in tax rebates that can last for decades or even in making large
cash investments directly into corporate coffers.
These multi-million dollar handouts sound impressive to the average
voter taking home a worker's wage, but its infrastructure that leaves people
like Doug Carr energized and enthused, not a quick cash grab.
"If
anyone is making multi-million dollar decisions based on a short term
financial win, they are not meeting their responsibilities to their
employer," Carr stated, adding that while cash training subsidies might
enter the decision making process: "It is not a primary deciding
factor."
In
total, Fairmont calculates that its reservation agents receive 180 hours of
training before handling their first customer call. And an additional ninety hours of training per year is
scheduled to maintain and enhance their skills.
Carr admits the training subsidy helps meet these costs, but like the
need to buy computers and telephone headsets, the need for good staff remains
regardless of who pays for their training.
This is another reason why Fairmont looked for a place like New
Brunswick for its GRC.
The
suitability of Moncton workers to Fairmont's needs was determined partly by
historical chance and partly by visionary design. New Brunswickers are often called Acadians, after the early
French farmers who settled the area in the 1700s. Thousands of francophone Acadians were forced into exile in
1755 to escape the bloodshed of the French-English wars. Some went to Louisiana, others returned to France, but many
simply fled to the coastline of what is now New Brunswick.
Over the next hundred years they were joined by English refugees
fleeing the aftermath of the American Revolution, and later by Scottish,
Irish, and Danish settlers. The
result was a population in which bilingualism is common and this was another
major draw for Fairmont Hotels & Resorts. They have many
employees who not only speak English and French, but also do both so fluently
that there is no detectable accent.
Creating
such a workforce with training alone would have been virtually impossible, so
it was also fortuitous that New Brunswick recognized the value of its
citizens. Although Canada has two
national languages, only one of the country's ten provinces has bothered to
entrench them both in provincial law and that place is New Brunswick.
The legal recognition of both languages may have been more a matter of
civil rights than a business strategy, but this egalitarian style of
governance is certainly paying dividends in the call center industry today.
Had New Brunswick's leaders ignored the language rights of its
citizens, it would certainly have been more difficult for both languages to
survive in such equal measure.
Another
advantage for Fairmont was the Greater Moncton Economic Commission.
Carr notes that in most places, the managers of a new call center would
have to spend many hours coordinating services or making agreements with
government and the telephone company. The
commission eliminated much of that work by offering a truly coordinated
organization which allows businesses to access information and make agreements
through just one agency, rather than having to deal separately with at least
two levels of government plus a telephone company.
It
is easy to see why this small province, long considered one of Canada's
have-not regions, is managing to turn its fortunes around. It has accomplished the feat with a tiny ration of good luck,
coupled with whopping doses of visionary planning, superior organization, and
responsible public spending carefully targeted at developing state-of-the-art
teleservice infrastructure. It is
a performance that could be repeated by other people in other places, yet
sadly remains out of sight in many jurisdictions – perhaps out of sight but
within foresight.
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