Featured In This Issue
The workplace is changing. Today’s employers can choose from a global pool of personnel. Technology has reshaped the skill sets needed for many positions and the days of being a company man or woman are over. Employees entering today’s workforce can expect to change jobs 10 to 15 times over the span of their working lives.
Spiraling college tuition and onerous student loan debt have quelled the idea that traditional four-year institutions are the goal for every student and forced students to look for options.
Preparing the more than 141,000 students of the Charlotte Mecklenburg Schools (CMS) for these new societal and economic realities is the job, goal and passion of its superintendent, Dr. Heath Morrison.
Morrison, who took over responsibility last July for the sprawling and culturally diverse district that in the 2012-2013 school year consisted of 159 schools with more than 18,000 employees and an operating budget of $1.3 billion, is up for the challenge.
He comes to CMS from Reno, Nevada, where he was superintendent of Washoe County School District, that state’s second largest district. During his tenure there, graduation rates rose from 56 percent to 70 percent and in 2011 he was named superintendent of the year by the Nevada Association of School Superintendents and Nevada Association of School Boards. In 2012 Morrison was honored as the national superintendent of the year by the American Association of School Administrators.
Morrison, who has a Ph.D. in educational policy and planning and a master’s in educational administration from the University of Maryland, is a strong believer in preparing students for what comes next.
“The biggest challenge for today’s graduates is the changing landscape of jobs now and in the future. We have to equip them with radically different skills than what I needed when I graduated high school.”
Morrison often quotes from influential business writers such as Thomas Friedman, Jim Collins and Stephen R. Covey and he’s brought a business-oriented approach to his job, commissioning three audits by independent consultants to review the way CMS is structured, how decisions are made, and how operations are managed.
Communication is key to his leadership style. Morrison was described as the “go-to guy” regarding public education for the Nevada legislation and considers it part of his job to be a voice in the community and in Raleigh for his students.
He began his tenure by listening. “I came into this position saying I wanted to listen and learn,” he explains. “I brought a lot of ideas but I wanted to start by creating business and faith-based partnerships and visiting schools in the district to make sure that everyone’s voice is part of our evolving strategic plan.”
As part of the listening process, Morrison visited the district schools and met with students, teachers, support and ancillary staff and principals. He also held 13 town hall meetings and met with public officials, civic and philanthropic groups and higher education leaders and conducted a survey to identify priorities which received 11,000 responses.
The Way Forward
From information learned through these efforts, Morrison prepared a strategy entitled The Way Forward enumerating eight goals and creating 22 task forces to identify ways to reach those goals.
Goals include narrowing academic achievement gaps, strengthening and expanding educational choices and providing better communication and customer service.
“But the first goal,” says Morrison, “is that every student graduates truly college and career-ready. I want to prepare students to be able to walk across that stage and get a diploma that’s a passport for a better tomorrow.”
Morrison points out a major complication to this goal: “Jobs are changing rapidly. We have to prepare students for entire careers that right now don’t even exist. That’s exciting but it’s challenging as well.
“What we need to do is equip students with the skills they’ll need to be part of a true 21st century workforce: problem-solving, critical thinking, financial literacy, entrepreneurship and collaborative abilities. These skills have to be embedded in what we do and how we approach education.
“Knowing the names of the first 10 presidents by memory is not as important as say, knowing what they did and how it still affects us today. The challenge I have and my frustration is that we need to shift focus to those high level skills, but we’re still testing for the old, rote way of learning.
“I’m a big believer in accountability. There should be an appropriate amount of testing to assess that kids are learning, but we need to test on the skills that are important and the testing needs to be at a healthy level where the ability for teachers to find time to really teach isn’t challenged.
“I was very pleased to have an opportunity to speak to the governor about this recently and I was very pleased that he’s now speaking about his concerns on the issue.”
Partnering for Success
Morrison also understands that education isn’t a “one size fits all” proposition. A benchmark of success in The Way Forward is that CMS graduates all students with a personalized post-secondary plan.
“By the time a student hits high school, they’re ready to make some choices about their future,” says Morrison. “Do they want to go to college? Do they want to enter the workforce or go into the military? I just want them to be successful in any venture they choose so I absolutely believe in having different opportunities to engage students in learning. We’ll continue to have a vibrant push toward college readiness but we’ll also focus on career readiness by expanding our Career Technical Education (CTE) programs.”
The CMS model for CTE programs is Olympic High School which, in 2006, split into five career-themed academy schools. Internships and apprenticeships with local businesses are key to the model.
“We believe in work-based learning,” explains Michael Realon, who has been the Career and Community Development Coordinator at Olympic for the past seven years. “We believe in getting children on pathways earlier in life so they can see the relevancy and why they need to learn and how that’s going to help them in the future.
“What’s hugely different at Olympic is the integration of the business community with what happens here. Our business partners have become critical as collaborators and true strategic partners.”
Olympic’s Math, Engineering, Technology and Science High School has an engineering career academy with a focus on energy that partners with big industry players like Siemens Energy, Duke Energy and Piedmont Natural Gas Company.
These companies work with the career academies and local colleges like CPCC to determine the requirements for special certifications. “So by the time they leave Olympic,” Realon explains, “students already have so many units from CPCC in one of these pathways. It could be mechatronics, or energy or HVAC but if a child gets a special certification from the career academy, those companies know the rigor that child has gone through to get the certification so that certificate actually has currency in the marketplace.”
Morrison pledges to continue to explore those partnerships and challenge the local business community to be involved: “Usually when the superintendent comes knocking, businesses ask how big a check do you need and I will absolutely accept their checks but I’m more interested in human capital. Come into our schools and help our principals think more entrepreneurially, help our district become more process and system-oriented, help us develop CTE programs that are tied to business’s workforce development needs.
“Charlotte is an amazing community where there’s a lot of opportunity for partnerships. We just have to be more intentional about asking.”
Morrison plans to expand the success of Olympic’s CTE with a cost-saving tweak. “Traditional CTE classes are very expensive and labor intensive so it’s hard to sustain a vibrant CTE program at a single high school. Starting next year we’re going to make North Mecklenburg High School a CTE hub.
“They’ll offer programs of auto mechanics, engineering, cosmetology and metal working but these programs will be available not only to North Mecklenburg students but also to students who attend Hopewell, Mallard Creek and Hough High School. They’ll be able to go to North Mecklenburg if one of those fields is what they want to study, so we’re giving more students access to those CTE fields at less expense.
“That ‘hub and spoke’ system is a model we want to expand throughout the district,” he affirms.
For students interested in advanced studies, CMS has partnered with Central Piedmont Community College (CPCC), creating an honors program giving students the opportunity to take college classes and earn college credit while still attending high school.
Since 2007 Cato Middle College High School has allowed students to complete their high school course requirements while working toward a college diploma, associate degree or industry or post-secondary certification. All college classes are free to Cato Middle College students and Morrison proudly points out that every senior year student of the school graduated this year.
“We’re going to open another middle college next year,” adds Morrison, “partnering up Hawthorne High School with CPCC to create a medical science academy. The medical field is a leading industry in the future. By tying into CPCC’s 14 medical programs we’re able to expose our students to this field.
“Because of the partnership we won’t have to build a 21st century science lab, which saves taxpayers’ money, and our students will be able to get some certification while at Hawthorne and go immediately into CPCC’s program after high school, possibly graduating early and becoming part of a workforce our community needs.”
An Advocate in Raleigh
The success of these partnerships has led Morrison to work with other state school districts to advocate for North Carolina State House Bill 902. HB 902 would offer grants through the North Carolina Education and Workforce Innovation Commission, providing incentives for businesses and communities to partner with schools.
“This is smart, quality legislation,” says Morrison. “I’ve worked with nine of the other largest school districts in the state—together we represent 43 percent of all the students in North Carolina—to support this bill.
“This type of legislation is forward thinking; it’s what our state needs. Here’s the challenge: it’s gotten great public accolades but in the budget, it’s not funded. It’s the type of legislation that doesn’t require a lot of funding. It’s kind of a venture capital funding—just enough incentive to get these entities working together. I really hope there is some reconsideration.”
In these economic times budget issues in general continue to be an issue for CMS. The district continues to grow—3,000 new students were added last year and this year the district will accommodate 3,000 more.
“It’s just like a family budget,” Morrison explains.” If you have more kids, you either have to spread your family resources thinner or you need to generate more revenue. At the end of the day, you get a budget and you have to do the best you can with what you have, but it means that there will be certain wants that aren’t able to be funded. That’s frustrating, especially when you fundamentally agree that you would love to have those things in our schools.
“Given North Carolina teachers are paid $10,000 below the national average, we were very pleased that the governor put a one percent raise in his budget for teachers. But because the House and Senate didn’t also put that in their budgets, the board and county commissioners are very unlikely to fund it. We also face a $12.5 million dollar reduction in teacher assistance.”
Teachers and Technology
Morrison continues, “Great teachers produce extraordinary results. We want to hire great people and create career ladders and build professional development to keep them in the classroom.
“When used effectively, technology can be an amazing tool to provide inspired learning. Through technology we can expose every student to a truly great teacher and help build the capacity of other teachers.
“One of the goals in The Way Forward is to increase access to technology. When I first got here, none of our schools were equipped with wireless technology at the level we need. We’re at 70 percent now and, by the end of the summer, we intend to have all our schools equipped with true wireless. This will support our ‘Bring Your Own Technology’ initiative.
“Students all around the globe are being taught using technology and they are the workforce of tomorrow. Either we’re going to invest in technology and make our students globally competitive or we’re not. I want to give our students that advantage.
“But I have an absolute fervent bias that technology can never replace a teacher. At its core, teaching is a human endeavor. Young people need to be nurtured and challenged and that only happens through human experience.”
Morrison reflects for a moment. “We fundamentally need to change how we teach and what we expect kids to know and be able to do. Charlotte is an amazing community that believes its best days are yet to come. Let’s be the community that demands that kind of education. Part of my job is to get the community and Raleigh excited about what we need to be doing.
“It’s a seminal moment. Either we’re going to make those changes because it’s the right thing to do or we’re going to miss this opportunity. The worst thing in the world would be, if 20 years from now in Charlotte Mecklenburg Schools, we tell our children to take out their paper and make a list of the first 10 presidents. That would be a missed opportunity.”
Photo: Fenix Fotography www.fenixfoto.com
With the issue of jobs reigning supreme in the minds of business, government and the American family, Charlotte Works has just one thing on its agenda—getting qualified people into suitable jobs. To accomplish this, however, means spending a great deal of time and effort working and collaborating with businesses and organizations, municipal governments and schools and colleges to develop a globally competitive workforce for employers in Charlotte and Mecklenburg County.
“We’ve just celebrated our first anniversary rebranded as Charlotte Works,” announces Steve Partridge, president and CEO of Charlotte’s newest one-stop, which is a consolidation of former offices.
The 501(c)(3) organization was established in 1998 as the Charlotte-Mecklenburg Workforce Development Board with the passage of the federal Workforce Investment Act. As in other states, federal funds are provided to the governor’s office and channeled through the Department of Commerce and down to local levels. In 2012, Charlotte’s Workforce Board was rebranded as Charlotte Works.
“Our goal is to get people out of unemployment and back to work,” says Partridge. “The rebranding was needed to improve employment-related services for both employers and potential employees.”
“Previously, we were a much smaller organization and subcontracted out most of our services,” explains Partridge. “We realized that to carry out our mission to upgrade and expand services, we were going to have to raise the bar on the qualifications of the people hired to deliver these services.”
Now, with 24 professional employees, Charlotte Works is directly engaged in a broad array of customized services including coaching, training and networking—all targeted to the ever-changing needs of the Charlotte-area employers.
“It all begins with the employer,” confirms Partridge. “In order to be effective, we have to know what they want and need by way of skill sets and experience. Perhaps they just need us to post a job for them or to help them find employees. The intensity of services goes up from there.”
Popular among employers are the screening services Charlotte Works offers whereby only the top, fully vetted candidates are presented to the employer. Charlotte Works also helps when companies seek to achieve mass hiring such as Siemens did in 2010, ramping up staff by 750 to 1,000 people.
“We set up a web portal for them and moved candidates through a vetting system. These are win-win situations because we own the data and can use it to work with other businesses,” touts Partridge.
Funding Skill Training
Services become especially critical when employers cannot find employment candidates with the specific skills needed. “You see this more in technical trades, advanced manufacturing and energy fields,” says Partridge. “In these cases, we have the training dollars to subsidize wages while an employee learns the job or earns a certificate for specific work.
“If a person is unemployed and seeking work, they may qualify for these dollars. It’s an expensive program but a win-win for the employer and candidate. Plus, the retention rate is very high.”
For small businesses, Charlotte Works can reimburse wages up to 90 percent; for large firms it drops to about 50 percent, according to Partridge.
“This program has really taken off. Two years ago we weren’t working with employers very closely. Our goal this year was to work with 200 employers. We’ve worked with 433. I’m afraid of the new goal the board will set for us,” says Partridge with a smile.
Charlotte Works has targeted several sectors for job development including information technology, energy, health care, advanced manufacturing and transportation/logistics as well as aviation, bioscience, defense, international business, tourism, nonprofits, media/advertising, staffing companies and more. Representative companies include Marbach, ClickFold Plastics, Maersk, BAE Systems, ABB, Chiquita, SPS and Siemens.
“We’re also aligning more with the Charlotte-Mecklenburg Schools and area community colleges because they represent the pipeline for talent. They are preparing the next generation of workers,” says Partridge, adding that the academic community is always adapting and growing curricula to meet the needs of a changing workplace.
“We help find the people and, together—we fund, they train—put them through a rigorous curriculum to get up to speed for the employers. The economic downturn has limited people’s abilities to invest in themselves,” Partridge points out. “We have training dollars. If a person is willing to go into a job in high demand, we will pay for them to go back and get training.”
The organization’s career counselors and training coordinators work individually, as well as in group and workshop settings, with people who are unemployed and underemployed.
“We teach people how to find a job and are honest with them about why they may be having trouble,” explains Partridge. “Sometimes people have skills but don’t know how to sell themselves. We offer instruction in networking, developing a personal brand, and other areas such as salary negotiation.”
Services for both employers and potential employees are free of charge. Charlotte Works operates on a $5.9 million budget funded by the federal government. Two-thirds of the money goes to help job seekers; one-third is designated for at-risk youth.
“Our efforts with youth are to either get them back into school or get them a job,” says Partridge. “If kids have dropped out, they probably aren’t excited about school. We try to expose them to high-demand areas in manufacturing and allow them to make some money.”
Charlotte Works operates under the direction of a 24-member board—all appointed by the mayor of Charlotte who, according to Partridge, has been very involved at both the local level and with the U. S. Conference of Mayors’ Workforce Council.
“The goal is to appoint people who are economic drivers in the community; people who can speak on behalf of their industry, whose businesses are large enough and connected enough to see shifts in employment and needs,” says Partridge.
The board currently has representation from Siemens; the Charlotte Area Fund; Charlotte-Mecklenburg Schools; Goodwill Industries; Wells Fargo; The Urban League; Charlotte Chamber; Duke Energy; Carolinas HealthCare System; Packard Place; Central Piedmont Community College; and several other businesses and organizations.
Each office is designed to be a full-service workforce preparedness center. “We want people to be able to go to one place for the services they need. We’re aspiring to have all offices standardized such that the public can expect the same high quality of service from each one,” says Partridge.
Charlotte Works has two offices in Charlotte; the second is located on South Boulevard. There are currently 23 workforce boards in North Carolina; more than 550 in the nation.
Also available are 30 SNAP (Share Network Access Points) sites in the Charlotte area that are collaborations with targeted area community partners to extend resources to local neighborhoods and faith-based organizations so that communication, transportation and other barriers to employment are reduced or eliminated.
Each site is equipped with computers, software and volunteers that offer clients convenient access to resources needed to become more employable and to find work. In the coming year, Charlotte Works will be piloting some programs that will allow people to meet with career counselors remotely.
Charlotte’s workforce professionals realize that the workforce doesn’t stop at the borders of Mecklenburg County. “The population swells by 20 percent during the work week,” says Partridge. We work closely with our Gaston County and Centrolina counterparts to align our services.”
Regional concerns such as the Charlotte Regional Partnership, which currently represents 16 counties around Mecklenburg County, can become frustrated with having to deal with numerous workforce boards. “Since their footprint is larger than Charlotte, they want one workforce system to work with. I think we are headed in the direction and will see some consolidations in the future,” says Partridge.
In other future plans, Charlotte Works hopes to diversify its funding, taking advantage of its nonprofit status and eligibility to receive grants. The organization was awarded a $150,000 grant for computer equipment by the Microsoft Foundation this past year.
The 1998 Workforce Investment Act is currently up for reauthorization. A bill has been passed in the House of Representatives and a Senate version is being crafted. Partridge hopes for a few changes. “The current law doesn’t really take into account how people today look for jobs and how they are screened. In 1998, the Internet was in its infancy. Monster.com launched just a year later.”
Politically, Partridge is optimistic. “Anything in Washington has politics around it but I think a well-prepared workforce is one of the unique things people can agree on. We’re committed to getting people back to work. If we [the United States] don’t train skilled workers, businesses will go elsewhere for talent.”
In a more recent development, the German federal nonprofit GIZ has announced the opening of its first United States branch office to be located in Charlotte at Charlotte Works. GIZ has worldwide operations supporting the German government in the field of international cooperation for sustainable development and in international education work.
Its clients include governments, companies, international institutions and private foundations worldwide, such as the Bill & Melinda Gates Foundation. GIZ helps people and societies improve their prospects and living conditions.
“Charlotte’s workforce system is an ideal fit for this new partnership with GIZ. We’re focused on developing relationships with employers, particularly here in this key North Carolina manufacturing hub, and with other collaborators, to fill the skills gap and get people back to work,” says Partridge. “We’re honored that GIZ chose to locate its first U.S. office in Charlotte in our Employer Engagement Center, and we’re excited to see where this venture takes us.”
“Sometime in the 1960s, in our schools, we started switching from career preparation to college preparation,” says Partridge. “We assumed the American dream was to get your bachelor’s degree and go on to a professional job. We all bought into that and we thought manufacturing was going away and that we weren’t going to make things anymore. But as we looked at the drop-out rate in colleges, we realized that there was something wrong with that model.
“Blue-collar work had become tainted; people moving into the workforce wanted ‘clean’ jobs. It’s ironic,” continues Partridge. “If you take a look at today’s manufacturing, technical and energy environments, they are super clean rooms with sophisticated equipment, robots, keyboards and mice everywhere. These aren’t the ‘dirty’ jobs that we heard about from our grandparents and parents. Today, there are a lot of college-educated professionals out of work. We can do a lot more to educate our kids earlier about career options.”
Partridge claims mass media hasn’t helped. “There are no CSI-type television shows that make manufacturing or technical jobs look cool,” laments Partridge. “The legal and medical professions both have shows that expose people to these careers and since these shows began, the numbers of graduates in those professions have gone through the roof. We don’t expose our children to many career options.
“Then, there is the inevitable lag between rapidly advancing technology and the necessary response from the academic world to develop new curricula. Business changes on a dime,” says Partridge. “This is not a Charlotte issue; this is the world of modern technology. Sometimes things have changed by the time a new program gets developed.”
Partridge is a native of Scottsdale, Arizona. He earned an interdisciplinary undergraduate degree in economics, political science and communications from the University of Arizona in Tucson. From there he went to Arizona State University in Phoenix to complete his graduate work in public policy. His work experience began in Arizona state government supporting small businesses through the Department of Commerce.
By age 29, he was heading up the state workforce system. Following a move to Charlotte in 2003, he worked for the Charlotte Chamber overseeing member value. After working with the Charlotte Workforce Board on a project basis, he was tapped to become its new president and CEO. In addition to his local role, Partridge serves as co-chairperson of the Policy Committee of the U. S. Conference of Mayors’ Workforce Council.
On average, people entering the workforce will have 11 jobs in their lifetime, according to Partridge. “It’s not a matter of ‘if’ you will be unemployed, but ‘when.’”
“Charlotte Works is set up to help anyone. People think of it as the unemployment office but we’re really the opposite,” says Partridge. “We may not be the ‘just in time’ solution all the time, but we can create a pipeline. I never want an employer to tell us that they are unhappy to be in the Charlotte community because they can’t find talent here.”
Photo: Fenix Fotography www.fenixfoto.com
When you listen to Charlotte developer Peter A. Pappas talk, it doesn’t take long to understand why he’s been so successful in the Charlotte real estate market. He absolutely loves what he does.
“I really enjoy real estate,” beams Pappas. “It’s not just my career. It’s my hobby and it’s my passion. I don’t feel like I’m going to work. I’m just going to do something I love doing every day.”
Over the last 25 years, Pappas has been at the center of some of the most transformative real estate projects in the Charlotte region—Phillips Place, Birkdale Village, Metropolitan, and now Sharon Square—all innovative developments that have changed the way area residents live, work, dine and shop.
Guided by two of the most influential real estate developers in Charlotte history—Johnny Harris and Smoky Bissell—Pappas learned the trade from the best and has continued to expand the boundaries with his own firm, Pappas Properties, and a new venture announced in May, Terwilliger Pappas Multifamily Partners.
Mixing It Up
A native of Charlotte, Peter Pappas joined The Bissell Companies in 1984, shortly after graduating from N.C. State University. Working for Bissell during a key period in Charlotte’s growth exposed Pappas to the full breadth of the real estate business, from marketing to land development.
“I had two terrific mentors in Smoky Bissell and Johnny Harris,” says Pappas. “It was the best of both worlds. Johnny was a tremendous marketer and advocate for Charlotte, and Smoky taught me the fundamentals of the development business, the numbers, and the financing. His instincts were outstanding, so he knew the right thing to do, and he knew when to do it.”
In 1991, Johnny Harris saw an opportunity to focus on corporate services, property management, and development. So Pappas joined with Harris, Pat Clayton, and Ben Trotter to form The Harris Group. A few years later, the Harris team had the opportunity to develop an exceptional piece of real estate owned by the Phillips family on Fairview Road near SouthPark.
“I called on Tom Phillips, who was a family friend, and suggested that when they were ready to do something with that property, The Harris Group wanted a chance to do something special there,” recalls Pappas.
“Tom called me one day and said they were ready to evaluate options, so I spent the better part of 12 months going around the country looking at different multi-use and mixed-used projects like Country Club Plaza in Kansas City, Reston Town Center outside of D.C., Lake Forest outside of Chicago, and Mizner Park in Boca Raton,” he continues.
Reston Town Center and Mizner Park were newer projects that particularly intrigued Pappas. Both included retail space situated along a main street, with housing and offices located above the retail. To him, this was the ideal concept for the Phillips property, but at the time, Charlotte had no suburban mixed-use zoning that seemed to allow residential to be located atop retail space.
“We showed Planning Director Martin Crampton our vision for the property and said we weren’t sure if there was a zoning category that would allow mixed-used development in the suburbs,” explains Pappas. “They [the planning staff] actually wrote a text amendment to the CC zoning category for Phillips Place.
“It was an exciting project for us because not only was it new in terms of mixing uses, but it also created a framework where we could go out and talk to some tenants who were not yet in the Charlotte market. The Harris Group was able to secure early commitments from Dean & DeLuca and The Palm, which helped make the project very successful.”
The Harris Group’s success with Phillips Place got Pappas even more interested in the trend toward mixed-use development. So in 1999, he decided to go out on his own to pursue those types of projects, and Pappas Properties was born.
National Recognition with Birkdale Village
As Pappas was transitioning out of Harris, he and Johnny Harris had already begun working with Allen Tate on a building adjacent to Phillips Place featuring high-end retail shops, office space for the Tate headquarters, and penthouse condominiums. He brought that project along with him into his new firm, as well as a golf course community located near Huntersville on which The Harris Group had begun development. That community was called Birkdale, and its residents were clamoring for more retail options in northern Mecklenburg.
Almost immediately, the opportunity emerged to buy what Pappas felt was the premier development site in the Huntersville/Cornelius market, located on Sam Furr Road near Interstate 77, just across from the Birkdale community. Developing the site to its potential was a larger project than the new firm could undertake alone, so the Crosland Group came on board as a joint venture partner.
Combining Pappas’s experience with Phillips Place and Crosland’s extensive retail connections, the result was Birkdale Village, a mixed-use project with retail, office and residential. Like Phillips Place, the project included a multitude of smaller shops and restaurants organized around a main street and village “Green,” with apartments located above the retail. But unlike Phillips Place, the new development also featured larger retailers like Barnes and Noble and Dick’s Sporting Goods.
“Birkdale Village appealed to a different demographic than Phillips Place,” explains Pappas. “The public realm at Birkdale Village was the Green, and the interactive fountain in the center of the project became a great gathering spot for families. We organized the restaurants around the Green with outdoor seating, and the project met the needs of that area very well.”
Pappas and Crosland earned recognition for Birkdale Village’s mixed-use community including an International Design and Development Award from the International Council of Shopping Centers as one of nine developments around the world recognizing “outstanding shopping center projects that have successfully solved many different problems and can truly be held up as examples of what can be accomplished with a lot of hard work and creativity.”
Birkdale Village was also honored by the National Association of Home Builders with its Pillars of the Industry Award as the best mixed-use development in America, It was also an international finalist for the Urban Land Institute’s prestigious Award for Excellence.
Adding Metropolitan Value
In 2001, the Midtown Square Mall property between Kings Drive and Kenilworth came on the market. The Rouse Company owned the mall itself, and the Episcopal Diocese owned the land. Home Depot was interested in the site for an Expo Design Center, so Pappas worked out a partnership with Home Depot to redevelop the site into a new mixed-use development called Metropolitan.
For many years, city and county leaders had envisioned a park and greenway along Little Sugar Creek between Freedom Park and CPCC. The creek had been capped over for decades to create surface parking for the old mall, but Pappas saw an opportunity to help leaders realize the vision by uncapping the creek and incorporating the greenway into the redevelopment plan. Over the next few years, Pappas worked closely with the city and county to create a project that would be an asset to the larger community.
“Our vision at Pappas Properties is to create places and build communities that add value to the cities that we work in,” says Pappas. “We’ve always said that any project that we undertake would need to check that box or we wouldn’t do it.”
It took several years to get the existing mall leases terminated, negotiate public participation in the parking decks, insure the greenway was going to be built, and get the surrounding public infrastructure improved. The mall was demolished, Colonial Properties Trust and Collett & Associates entered the partnership and helped secure Target as a second anchor, and the project broke ground in 2006. Target and Home Depot opened in 2007, but the 101 residential units came to market just as housing was falling off of a cliff.
“We were very fortunate to get the retail and office space stabilized very quickly with a good tenant mix and a great collection of restaurants and other merchants,” says Pappas. “It took us a while to move through the housing because of the economy, but all of the residential condominiums are now sold, and the office and retail was sold to JP Morgan in February of this year.”
Another Pappas project, Charlotte Cotton Mills, is a mixed-use complex located near Fifth Street and Graham in uptown Charlotte. It was developed in conjunction with the Historic Landmarks Commission and Crescent Resources to save two historic cotton mills and build high-density apartments behind the old mills.
In addition, Pappas is developing Berewick, a suburban master-planned community in southwest Mecklenburg near Lake Wylie featuring first-time move-up housing. He also hopes to break ground within 18 months on a transit-oriented residential development at the Scaleybark Station on the Lynx Blue Line.
Sharon Square and Terwilliger
In 2008, Pappas, Allen Tate, and four other limited partners acquired a prime piece of property in SouthPark at Sharon Road and Fairview for future development as a mixed-use project. Since 2008 wasn’t the best time to break ground on a new project, the team was patient, waiting for the right anchor tenants to come forward. Whole Foods emerged as that anchor, and in August 2012, they opened their first Charlotte store on the Fairview Road side of the property.
As soon as Whole Foods opened in August, Pappas and Tate broke ground for the apartment units, which will also feature 21,000 square feet of restaurant and retail space on the street level. On the Sharon Road frontage, steel framing is now rising on SouthPark’s first new Class A office building since 2007. By the second quarter of 2014, the new 100,000 square foot building will house Sun Trust Bank’s regional headquarters. Pappas sees Sharon Square as a very walkable mixed-use environment, featuring restaurants with outdoor seating, small boutiques, and other retailers.
Pappas also sees more people choosing to rent rather than own, as they make a lifestyle choice to spend their time and money traveling or socializing with the friends rather than maintaining a home. In response to that trend, Pappas has recently announced Terwilliger Pappas Multifamily Partners with former Trammel Crow Residential CEO J. Ronald Terwilliger. The partnership will develop multifamily projects in the Southeast’s fastest growing markets.
Terwilliger Pappas is currently underway with construction on Crabtree Village, a 292-unit apartment community adjacent to the Crabtree Valley Mall in Raleigh. In Charlotte, they are developing 239 luxury units that are a part of Sharon Square. The partnership also has two sites under contract in Atlanta, has begun to explore opportunities in the Nashville market, and hopes to acquire additional sites in Charlotte and Raleigh.
Southeastern Growth Opportunities
Pappas sees good things ahead for the Charlotte real estate market as the economy continues its recovery from the recession. He says Charlotte’s well-coordinated economic development efforts that have landed new employers like Chiquita and MetLife are getting results.
“Charlotte’s enjoying strong job growth, and I think that’s why we’re seeing such positive indicators on the housing front,” explains Pappas. “The for-sale housing market is improving, and the apartment market is very active. In retail, specialty retail and infill retail are beginning to improve. We have not seen a lot of new retail development in the suburbs yet, but retail follows the rooftops, so now that housing starts are picking up dramatically, I think you will soon see more activity in the suburbs.”
“The infill markets have had a lot of activity recently,” he continues. “Young people are leasing apartments along the transit line, and there is high quality development for empty nesters that want to stay in the neighborhood but don’t want to continue to maintain a large home. But we’re also seeing good communities develop in the areas around the outer belt for families who need more space and seek different amenities. So you really have both types of offerings in this market. I think that is very healthy for Charlotte.”
“In about four months we’ve put together a really strong team,” says Pappas. “Terwilliger Pappas is going to be synergistic with Pappas Properties. As we find mixed-use sites, our team at Pappas will work on the retail and the office, and Terwilliger Pappas will work on the apartments. We’ll also be able to pursue standalone multi-family opportunities in all of these markets.”
“It’s a great opportunity to be involved in a community as exciting as Charlotte,” concludes Pappas. “As the past chair of the Charlotte Chamber, I love Charlotte, and I really enjoy seeing all of these very positive things happening in our community. Charlotte has a tremendous amount to offer, and we’re excited to be a part of that. We want to make sure that whatever we do here is an asset to this community.”
Photo: Fenix Fotography www.fenixfoto.com
Finding a job is still tough in North Carolina. The state’s May unemployment rate was 8.8 percent, slightly improved from earlier in the year, but still higher than the national unemployment rate of 7.6 percent. Unemployment rates in North Carolina have been consistently higher than the national average during the Great Recession and its recovery.
For workers with low skills or spotty work histories, finding employment can be very frustrating. One avenue to full-time employment is temporary work, and Latin Labor Staffing excels in finding temporary work opportunities that can often provide a regular employment record and lead to full-time employment.
Irma Garcia lost her job when she had to take time off to care for her sick baby. She was not sure how to get back into the workforce until a friend suggested she contact Latin Labor Staffing.
Garcia, who lives in Charlotte, was placed in a temporary position with GiftTree, a company based in the state of Washington that recently located a packing warehouse in Charlotte.
“I started working there in September,” says Garcia. “I was working one shift, filling baskets and putting together towers. It was a good job and I had steady work.
“In March, I got a full-time job with GiftTree. Now, I’m doing set-ups,” beams Garcia, who credits her new job to her work with Latin Labor Staffing.
“To find a job, you got to know the companies really well, and I didn’t know any,” she continues. “I really like them [Latin Labor Staffing] and I enjoyed working with them. They helped me get this job.”
All Who Want to Work
Latin Labor Staffing offers staffing services in the Charlotte region for companies who need immediate help to fill labor needs. With offices in Charlotte, Gastonia, and Fort Mill, Latin Labor Staffing provides temporary workers to fill the production, manufacturing, and light industrial needs of companies in the metro Charlotte area. It also has an Atlanta office.
“Oscar Covarrubias and Ray Hosseini started the company in 2005 as a staffing agency,” explains Ruben Arce, operations manager of the Charlotte office located on South Boulevard.
“At that time, with a booming construction market, we would get calls from companies asking us for ‘Latin’ workers. So, we took advantage of that opportunity and coined the name, ‘Latin Labor Staffing.’”
“We employ anyone who wants to work,” contributes Frank Colunga, senior account manager, who adds that employees must be legally able to work in the U.S. “Latin, Asian, African-American—any ethnicity is welcome.”
The concept is simple. Employers contact Latin Labor Staffing with their needs. Latin Labor Staffing consults its database of employees and links its employees to a new temporary job.
“What makes Latin Labor different from other employment agencies is our ‘personal touch,’” says Oscar Covarrubias, owner and president. “We give 120 percent to whatever we do.”
The company employs around 850 people. With the growth of light industrial companies and business opportunities, Latin Labor Staffing has expanded its employee base and maintains a robust database of about 158,000 potential employees in the Carolinas.
In the Charlotte region, Latin Labor Staffing has its employees segmented by zip code. It can contact about 60,000 potential employees through text message in just one zip code.
Most employees come to the company through referrals. While Latin Labor Staffing advertises in ethnic channels such as Hispanic and Asian newspapers, Colunga says most people find out about the staffing company from friends.
“We discourage applying online,” says Colunga. “We want people to come in and talk to us while they fill out an application. This gives us the chance to find out more about them—their skills and their needs. Our goal is to put people at ease—to get them to tell us their story.
“That’s the secret of recruiting—understanding a person’s attitude. It’s gut and instinct and 25 percent of it is guesswork,” Colunga says, who adds that Latin Labor Staffing’s in-house recruiters are former plant managers and supervisors who understand the skills and attitudes needed by their client companies. “We take a brand-new person with limited skills and start them off at the lower-skilled jobs and see if the company can train them for other positions.”
Fulfilling All Needs
With a database of roughly 50-50 men and women, most between the ages of 20 to 35, Colunga says Latin Labor Staffing is able to screen candidates for appropriate job placements. Some may need translators, others may need help filling out documents, and others may need rides to the job.
“We know that many of our employees can’t work in the summer because their children are off from school,” points out Arce. “Others may only be able to work the third shift. Whatever their needs, we want to become part of their strategy.”
That might include driving employees to work. Latin Labor Staffing started out driving employees in cars and then vans to worksites. It became such a popular service that the company now uses 66-passenger buses to take people to work.
“We can deliver the employees for an entire shift in one bus,” says Colunga. “We can get them all to work on time, and improve the quality of their life by making sure that the other parent can have a vehicle at home for transporting children or other needs.”
“They may need help with banking and guidance on how to deposit their paychecks,” says Colunga. “We’ll even take checks out to the worksite to make weekly payrolls. We’ve even delivered overtime checks for less than $30. It may be the difference between paying for food or their rent that month,” he points out
“These are the proving ground jobs,” says Arce. “It’s a temporary work position with a company in which you can prove how well you can work. Many of these jobs can lead to permanent positions with the company.”
Latin Labor Staffing also offers benefits to its employees and intends to include the Affordable Care Act as part of its benefit package.
“We’re looking forward to being able to offer employees health insurance that includes health education, wellness programs, and preventative health visits,” says Colunga. “We can keep our employees healthy and help prevent turnover. Not only will it be a help to us, but we can help out other companies by assisting them as they work to implement the requirements of the new law.”
With an in-depth understanding of their employees and skill levels, Latin Labor Staffing is able to seek out and meet the needs of local companies, says Covarrubias.
Companies contact Latin Labor Staffing for assistance, and Latin Labor Staffing reaches out to new companies to offer assistance in staffing. Currently, Latin Labor Staffing works regularly with companies between 100 to 300 employees and approximately 30 companies that regularly use between 8 to 150 employees.
The first step is to learn the company business and what its job needs are. Arce says he learns his customer’s business so that he can get to know and analyze if the company is a good fit for Latin Labor Staffing’s employees.
“We find out the skills needed and how to operate the equipment, so we can provide on-the-job training to our employees,” says Arce. “First, we might go over the information at our office. We explain what’s expected and the business climate.”
Freirich Foods, Inc., a meat processing plant in Salisbury, has used Latin Labor Staffing for its staffing needs for the past three years, according to CFO Doug Sokolowsk.
“Latin Labor Staffing helps fill our seasonal labor needs. We add a second shift at our manufacturing facility for two months every winter and rely on them to recruit and provide the 40 to 50 people that we need for this short period of time,” says Sokolowski. “They have a track record of successfully recruiting a productive temporary labor force and also an excellent track record of following all employment regulations and laws.”
Sokolowski says that Latin Labor Staffing is “hands-on in the training process and safety training, and that is important in the food manufacturing industry.”
“They have been successful at providing repeat experienced and trained workers for each annual season,” adds Sokolowski. “This is important to us because training employees is an investment and we experience a savings when the same workers return the following year.”
All Response Team
Latin Labor Staffing’s success in working with local companies also comes from its accessibility in the employment process.
“Our hours are 6 a.m. to 6 p.m., Monday through Friday, and we are open on Saturday,” says Arce. “Our account managers provide a lot of personal attention; we’re all involved in the customer service end. We work until we get the job done; we stay late and we work on weekends. We stay until the order is filled.”
Latin Labor Staffing’s work with GiftTree, the transplant company from Washington State, is a prime example. It included the provision of staffing to ramp up to begin employment and then staffing to provide employees to do the work.
Latin Labor Staffing worked to set-up the company’s warehouse in October to fill orders for the upcoming Christmas season. In just 30 days, its employees helped set up shelving and rooms to bring in a workforce of 158 people to fill orders for the holiday rush season, relates Colunga. He says Latin Labor Staffing also consulted on pay rates, hours and shifts for the company.
Wendi Estrada from GiftTree says the company began working with Latin Labor Staffing in June 2012, and picked the company because “its managers came out to visit, had competitive pricing, and they seemed like they would fit our needs.
“We were new to the area and decided to give them a try,” Estrada says. “Latin Labor Staffing has very good service. They are very responsive to filling our staffing needs, many which are last minute. During the holidays when the amount of temps grew, they came on site and brought a time clock and badges to help simplify the process of tracking hours.”
Overall, Estrada says, Latin Labor Staffing employees are hard working, friendly, and perhaps the highest compliment, “help us achieve our goals as a company.”
“I also appreciate the fact that they listen to our feedback and really strive to send us employees well suited to our needs,” continues Estrada.
“Every one of our employees has someone from our company go with him or her to the first day of work. It doesn’t matter if the start time is 5 a.m. or 12 p.m., we take them and introduce them to the job,” says Colunga. “We show the employee how to get to the job, what door to use, how to clock in, how to do the job, and where to go for breaks and lunch.
“We want to make it an easy transition for them into the company,” he says. “Companies appreciate our effort, and it’s key for our employees to be successful.”
“Light industrial work is growing in the Carolinas,” maintains Arce. “According to the Chamber of Commerce, manufacturing, assembly, and product assembly work is increasing. A recent study by the Urban Land Institute predicted that Charlotte will be transformed by 2050 by new businesses in light industrial and factory work, and subsequent changes in workforce development and transportation.
“Companies will be seeking a trained and skilled workforce, offering even more opportunities for Latin Labor Staffing. Whatever the need, we will be ready to meet it,” affirms Arce.
“Our success comes from knowing our industry,” says Covarrubias. “Flexibility in the workplace is the key. We will provide staffing for our customers based on the skill sets needed by both the companies and meeting the needs of our employees.”
According to Covarrubias, 30 to 40 percent of his employees get permanent jobs through their temporary work with Latin Labor Staffing.
“It’s not about keeping a person as a temporary employee forever,” says Covarrubias. “Most companies have a period, usually 30 to 90 days, when they will review work performance, offer them jobs and raise salaries. One of our recent clients hired 90 percent of our employees.
“If we can help our employees find temporary jobs that lead to full-time positions, we’ve done our job.”
Photo: Fenix Fotography www.fenixfoto.com
To say that Ken Andujar has a natural affinity for building is an understatement.
“When I was nine years old, I used to go into the woods and build two-story forts. I’ve always been able to use my hands in ways that I didn’t need to learn from other people,” says Andujar, owner of Andujar Construction, Inc. “Construction just made sense to me from day one.”
Andujar has taken his talent and put it together with a “Never say no” mantra to build a multi-million dollar commercial construction business that has successfully weathered the economic storms that have impacted the building industry over the past several years.
Designing a Business
Based in Charlotte, Andujar Construction is a full-service design+build commercial contracting company offering services ranging from feasibility studies, design adaptation analysis, extensive value engineering through the complete building experience.
The company is licensed to work in North Carolina, South Carolina, Virginia, Georgia, Tennessee and Arkansas, and will soon be licensed in Alabama. Since 1994, it has focused primarily on office, medical, restaurant and retail buildings, although Andujar emphasizes that he doesn’t like to be pigeon-holed into one niche.
“We’ve done hundreds of office builds and upfits—all types. I love to do base building work and also to build out the interiors. A building is a building is a building—sticks, bricks, concrete, electrical and mechanical, whether the sign on the outside is medical or retail.”
Examples of completed works include Colony Professional Center, The Arbors, Baxter Place, multiple Auto Bell locations, over 15 daycare facilities and over 200,000 square feet of retail space.
The company manages each phase of a building project so that there is one point of contact and one point of accountability, according to Andujar: “We aim for a higher level of project delivery by having a unified professional team in charge of all phases of development.”
“The typical method of an owner hiring an architect to design a project according to the owner’s wish list is flawed,” maintains Andujar. “This approach can cause budget overruns and take valuable time redesigning the project around cost cuts.”
Instead, Andujar starts with a budget and then prepares a preliminary design in-house. “When the owner and the budget are in sync, then we contract with an architect,” says Andujar. “People should go in asking what they can get for a certain amount of money versus requesting a design of what they want without knowing the cost.”
Andujar explains that the average person won’t know the huge variance in cost of materials or that paint is cheaper than wall-coverings; carpet less expensive than hardwood floors and has a secondary value in absorbing sound. Bricks can cost $200 per thousand or $500 per thousand.
“Most people think that things are cheaper than they are,” explains Andujar. “In a commercial setting, the most expensive aspects are the exterior elevations: cast stone, brick or EFIS (exterior finishing insulation system or stucco). There are many ways to build: wood, light gauge steel, structural steel or structural concrete. Everything is done on an economy of scale.”
Andujar is also critical of the competitive “bid and build” system that is prevalent. “When owners are trying to get a quality project but are always using low-bid contractors and sub-contractors, well, that is a flawed approach and is a risky choice for the owners,” says Andujar.
“It’s far better to use a design+build contractor who will use sub-contractors with whom they work regularly and have long-term relationships.”
Often, the low-bid contractors and subcontractors can submit a low bid because they have little overhead but they may not have the financial fortitude to complete projects or may have difficulty meeting warranty expectations, according to Andujar. “The design+build approach allows us to pursue design quality while controlling costs and schedules.”
Ken Andujar is the sole owner of Andujar Construction but is joined by his brother Anthony who serves as senior project manager and helps to run the business. Fifteen other employees make up the staff which includes a controller, estimators, field superintendents, project managers and office staff. Many of these employees have been with the company for 20 years or more.
Building a Business
Andujar was raised in Bergen County, New Jersey, just outside of New York City. He graduated from Kutztown University in Pennsylvania with a degree in business administration, but soon after found himself working for a master carpenter.
“I always put myself in environments where building was taking place—where I could work with my hands,” he says.
In 1985, he moved to Charlotte after visiting his mother who had moved here previously. “I loved it from the start,” says Andujar. “It was lots quieter and less congested. I was young and it was easy to meet and get to know people. Within months I felt like I had lived here all my life.”
His first job in Charlotte was as a mason laborer and was short-lived. He then worked with a pool and deck builder, gaining experience. Andujar wanted more and, in 1989, he started his own business called Woodtech Builders.
“It was the end of the savings and loan crisis, banks were shutting down, rates were high but I didn’t know any better. I had been doing consumer building (under $30,000) so I was operating under the radar, with no license needed.” His former boss became his first client as he built decks and swimming pools.
Then, this client asked him to build a garage. “I never said no to anything,” remembers Andujar. “I built that garage and then built 75 more.”
This work led to home remodels and then building entire houses through the early 1990s. “I did all the carpentry and masonry myself,” says Andujar, adding, “I’m primarily self-taught.”
In 1994, Andujar was asked to build an office building, so he obtained his unlimited general contractor license and highway license at the same time. With this accomplished, he started doing commercial work and has never returned to residential work.
He quickly learned two things: There was a real need among owners for general contractors to manage their building projects from design through construction; and it is unwise to attempt to self-perform the construction work.
“Basically, a contractor should be a middle man to sub out work,” says Andujar. “It’s a simple philosophy: You can’t ever have enough work or enough people to have that balance where you can make money out of it [self-performing]. It’s better to use other people’s resources for skilled labor.”
Andujar continues, “Every year got better and better. A commercial broker in Charlotte gave me an opportunity to build several small office buildings over in Crown Pointe. That launched my commercial career.”
Andujar Construction earned $4.5 million in 2004; $30 million by 2006.
Maintaining the Business
Relatively unscathed by the recession in 2008, 2009 and 2010, Andujar felt its impact towards the end of 2011 and 2012 when work really slowed down and margins dropped.
“Up to that point we were sustained by projects in the pipeline and development work,” says Andujar. “After that, we weathered it by cutting back on overhead.”
Andujar reports that 2013 has been much better and that the industry is hiring again. “We haven’t hired in years but are beginning to now.” With earnings above target, Andujar estimates revenue this year at around $15 million.
But he worries that the improved economic picture won’t last long.
“Estimates are that there will be a recession in 2016, worse than we’ve ever had. Everyday I hear about the next recession due to the U.S. spending and printing money we don’t have,” says Andujar. “Anytime things get to an elevated peak like the .coms and the housing market, they have to come crashing down. The trigger will be when we can’t borrow money anymore; when our national credit rating is downgraded.”
Andujar’s plan to survive includes maintaining great relationships, banking as much cash as possible, and engaging in a diversity of work, for instance, service industries. “When people can’t buy new, they will maintain what they have.”
“People have a misunderstanding of contractors—think contractors are in it to make a lot of change orders and a lot of money. The truth is that construction is not a very lucrative business—but if you do it right, you can make a fair profit,” says Andujar. Contractor earnings are based on a percentage of building costs plus management fees. In other industries, a fair profit is 25 to 40 percent. In construction, it is 5 percent, according to Andujar.
Andujar Construction is LEED certified and has completed several green projects in the Charlotte region. “The good aspect of LEED is the energy envelope that you have to design in—much more efficient—and the methods of disposal for waste and recyclable material,” says Andujar.
“A downside is that often you are required to use methods and materials that you would use anyway but they cost more than they should because suppliers take advantage of the fact that they are required and charge more, driving up building costs. Many people in the private sector (as opposed to public or institutional building) do not see the value of it,” says Andujar.
Charlotte is business friendly and has a good business environment but the building industry is cliquish, according to Andujar. “Even though I’ve been doing it for 20 years, it’s still who you know. Some people know me and will work with me without thinking about it. With others that don’t know me, I have to prove myself everyday.”
Andujar finds Mecklenburg County to be one of the more difficult building environments. “It’s difficult to get permits, but you can’t fault the municipality because growth is so rapid and so huge, they have to be careful and avoid mistakes.”
Committed to helping children who are underprivileged, orphans, dealing with cancer or the incarceration of parents, Andujar supports several organizations that provide care or services to these groups.
He has been a board member with the Scott Hannon Memorial Foundation for the past five years. Hannon was a fraternity brother to Andujar’s brother and did a lot of work with youth charities before he died in an automobile accident 22 years ago. Established to further Hannon’s work, the organization now hosts a golf tournament each year. The tournament raised $250,000 last year and has raised $1.7 million since inception of the tournament and other charitable giving.
The Foundation has partnered with Clemson University’s Youth Learning Institute and The Cliffs in Greenville, S.C.; the latter has donated 18 acres for the development of the Scott Hannon Camp in the foothills outside of Greenville. Two dormitory cabins have been constructed and work on the activities center has begun. The beautiful camp with its 100-foot waterfall welcomes children from all over North and South Carolina.
Andujar lives in Charlotte with his wife of 22 years and their twin sons, age 11. With a four-handicap, Andujar considers himself to be a pretty good golfer and spends a fair amount of time at the Carmel Country Club. He and his family also enjoy being in the Charleston area where he likes to fish off-shore.
Work and pleasure unite when he is in his woodshop in the back of his office. “This is the way I stay hands on,” says Andujar who has built all of his kids’ beds along with other furniture and helps friends with their projects. “Once I stopped doing residential building, it became more difficult to be hands on with work projects; with commercial, it’s impossible to both self-perform and manage projects.”
Nevertheless, with his never-say-no philosophy, it would be hard to predict what Andujar may get his hands on.
Photo: Fenix Fotography www.fenixfoto.com
Hindsight, though not always 20/20, helps us see more clearly the mass casualties of the undeclared war we’ve found ourselves in with the global economy, leveling the inequalities of wages and production. As we try to resurrect ourselves, and reconstitute our jobs and our businesses from the destruction of the Great Recession, we keep hoping that the worst is behind us.
Not so for college graduates, however, who are experiencing an all-time high in unemployment with no immediate prospects for improvement. Not so for the displaced workers, misfortunes of business failures and layoffs, wondering themselves if they are any longer employable. Not so for the vital industries in this new economy who rue the dearth of qualified workers for positions left unfilled.
We’re not done reeling from the damage, but with the precious resources we have left, it is important to assess the forces at work and put our available resources to the best use possible in negotiating this new terrain. First off—what is this new world of work and how does it work?
How Technology is Destroying Jobs
A recent analysis by two academics summarized in the MIT Technology Review and quoted from herein quite frankly describe the current phenomenon as “How Technology is Destroying Jobs.”1
“Impressive advances in computer technology—from improved industrial robotics to automated translation services—are largely behind the sluggish employment growth of the last 10 to 15 years.
“Even more ominous for workers, the MIT academics foresee dismal prospects for many types of jobs as these powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work but in professions such as law, financial services, education, and medicine.
“They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.”
For the most damning piece of evidence, they point to productivity—the amount of economic value created for a given unit of input, such as an hour of labor—as a crucial indicator of growth and wealth creation and progress.
“For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity…As businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs.
“Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation.” The MIT academics call it the “great decoupling,” concluding that technology is behind both the healthy growth in productivity and the weak growth in jobs.
“It’s a startling assertion because it threatens the faith that many economists place in technological progress. They assert that technology boosts productivity and makes societies wealthier, but they think that it can also have a dark side: technological progress is eliminating the need for many types of jobs and leaving the typical worker worse off than before.”
They add to it the fact that median income is failing to rise even as the gross domestic product soars.
“It’s the great paradox of our era. Productivity is at record levels, innovation has never been faster, and yet at the same time, we have a falling median income and we have fewer jobs. People are falling behind because technology is advancing so fast and our skills and organizations aren’t keeping up.”
In addition to the automation of manufacturing, the academics point to a less dramatic change, but one with a potentially far larger impact on employment that is taking place in clerical work and professional services. “Technologies like the Web, artificial intelligence, big data, and improved analytics…are automating many routine tasks. Countless traditional white-collar jobs, such as many in the post office and in customer service, have disappeared.
And, they say, “‘Digital versions of human intelligence’ are increasingly replacing even those jobs once thought to require people. It will change every profession in ways we have barely seen yet.”
Some academics and economists have doubts that technology could account for such an abrupt change in total employment, but they do agree that computer technologies are changing the types of jobs available, replacing jobs which typically provided middle-class pay while at the same time creating higher-paying jobs requiring creativity and problem-solving skills, often aided by computers. Meanwhile, low-skill jobs demand has increased for others doing service work that is nearly impossible to automate.
David Autor, an economist at MIT, says, those changes are resulting in a “‘polarization of the workforce’ and a ‘hollowing out’ of the middle class—something that has been happening in numerous industrialized countries for the last several decades.”
Some argue that even if today’s digital technologies are holding down job creation, history suggests that it is most likely a temporary, albeit painful, shock; as workers adjust their skills and entrepreneurs create opportunities based on the new technologies, the number of jobs will rebound. The question, then, is whether today’s computing technologies will be different, be “disruptive,” creating long-term involuntary unemployment.
Not everyone agrees with the MIT academics’ conclusions—“particularly the contention that the impact of recent technological change could be different from anything seen before. But it’s hard to ignore their warning that technology is widening the income gap between the tech-savvy and everyone else. And even if the economy is only going through a transition similar to those it’s endured before, it is an extremely painful one for many workers, and that will have to be addressed somehow.”
Lawrence Katz, a Harvard economist, has shown that the United States prospered in the early 1900s in large part because secondary education became accessible to many people at a time when employment in agriculture was drying up. The result, at least through the 1980s, was an increase in educated workers who found jobs in the industrial sectors, boosting incomes and reducing inequality. That would suggest that a possible route to recovery may be investing more in the training and education of workers.
Recession Accelerating Need for Postsecondary Education
Another powerhouse of education and workforce analysis, Georgetown University’s Center on Education in the Workforce, has released a comprehensive analysis of the jobs front in its report Help Wanted: Projections of Jobs and Education Requirements Through 2018. The report maintains that the recession is accelerating the shift to jobs requiring postsecondary education.
The purpose of the report was to provide a detailed forecast of jobs and their education requirements because they believe that the ability of individuals to connect education, training and careers has become key to employability and to attaining and maintaining middle class status, and that in spite of its growing importance, our ability to match education alternatives with career options is woefully underdeveloped.
Quoting liberally: “These are the wrong times for inadequate information on jobs and skill requirements. Not only is the United States climbing out of the worst downturn since the Great Depression, it has transformed from an industrial to a services economy, with all of the pain and upheaval that accompanies such change. Educational and career planning need to catch up and adjust to this new reality.”
“[P]ostsecondary education and training is critical to helping our nation’s workers navigate this transformation successfully.” Education is a gateway to further training and greater earning potential.
“One key to understanding this issue is an appreciation of the overall landscape of postsecondary education and training. College is only one piece of the puzzle. In fact, colleges and universities represent only 35 percent of the entire postsecondary education and training system. The rest consists of on-the-job training, formal employer-provided education programs, military training, apprenticeships, and a variety of other programs.
“Still, the role of colleges and universities is vital. Among other things, higher education acts as an important gateway to other parts of the postsecondary learning system. Postsecondary education provides entry to the jobs offering the most employer-provided training, plus access to the most powerful, flexible workplace technology. This is reflected in the positive correlation between employer-provided training and employee education levels. College graduates are almost twice as likely as high school graduates to receive formal training from their employers.”
Matching Skills to Jobs: Critical Skill Assessment
We develop our workforce in a number of ways by helping both individuals and organizations to identify and cultivate their abilities and competencies. Tests and assessments are often key tools in achieving this important goal.
One such tool is the ACT WorkKeys job skill assessment used by professional associations, businesses, and government agencies to measure workplace skills of employees and job applicants, helping employers select, hire, train, develop, and retain a high-performance workforce to increase global competitiveness, and assisting individuals in developing successful career pathways.
This ACT WorkKeys series of tests measures foundational and soft skills and offers specialized assessments to target institutional needs. ACT has one of the largest, most robust occupational profiles databases available. It contains more than 19,000 job titles, ranging from white-collar professional to blue-collar technical positions, that have been profiled and extensively researched to identify the essential skills and skill levels for employee selection, hiring, and training.
ACT, Inc. has also developed a World-of-Work Map (see front cover), an empirically based system for summarizing and displaying basic similarities and differences between occupations.
To help individuals navigate among hundreds of occupations, the World-of-Work Map organizes 555 occupations into 26 groups of similar occupations (career areas). The Map serves as a visual bridge, linking people (via career assessment results) to personally relevant occupations. Used together with the ACT Interest Inventory, the World-of-Work Map can help people see the connections between the work world and the activities they like to do. Find more information at: www.act.org/wwm.
What Conclusions Can Be Drawn?
The Carolinas in particular have suffered shocking losses in the manufacturing sector, ranking second only to Michigan. In fact, according to the Information Technology and Innovation Foundation (ITIF), during the period between 2000 and 2012, North Carolina lost 43.5 percent of its manufacturing jobs, while Michigan lost 46.7 percent. South Carolina ranked 10th losing 37.7 percent.
The ITIF discovered that the American manufacturing decline has actually been worse during the last five years than during the Great Depression. Their numbers show a 30.9 percent decline in manufacturing employment during the years 1929-1933 compared to a 33.1 percent manufacturing job loss in the recent decline. Approximately 7 of 10 jobs have been lost in apparel; 6 of 10 in textiles; and 5 of 10 in furniture.
Postsecondary education and training is critical to helping workers navigate this transformation successfully. In fact, if anything, this recession is accelerating the shift to jobs requiring postsecondary education. Since 1973, the number of jobs that require at least some college has more than tripled, while those requiring a high school diploma or less have flatlined.
We have to do more to bring industry and education together—it is the chemistry of this collaboration that will keep expanding the job opportunities and the economy. If we can stimulate an active and exciting relationship between area businesses and educational resources, we can add substantial value that will propel us through these cataclysmic times.
1 David Rotman, MIT Technology Review Magazine, July/August 2013
2 Georgetown University Center on Education in the Workforce, Help Wanted: Projections of Jobs and Education Requirements Through 2018
The Affordable Care Act of 2010 set in place gradual reforms to America’s health care system, and some of the most impactful changes are scheduled for 2014. The Act’s provisions are intended to provide comprehensive health care insurance coverage by imposing policy requirements for certain employers and also creating health care exchanges (or marketplaces) for individuals who remain uncovered.
A full discussion of the health care changes is well beyond the scope of this article. However, we present the following to help establish or strengthen a foundation that you can build a better understanding on.
The health insurance exchanges will be available October 1, 2013, and can be state or federally based. Both the North and South Carolina exchanges will be federally based. The year 2013 will usher in call centers, mall kiosks, radio ads, TV ads, and Internet sites dedicated to providing information about health insurance options for individuals.
These plans will allow some flexibility in price and coverage through the creation of platinum, gold, silver, and bronze levels. Individuals will be required to obtain minimum essential coverage, with all options offered by the exchanges meeting this requirement. Individuals who do not purchase insurance will pay a penalty through their 2014 tax returns at a rate of 1 percent of household income over a threshold amount (minimum $95 penalty). Through 2016 the penalty will increase to 2.5 percent of household income above a threshold amount (minimum $695 penalty).
Purchasers of insurance through an exchange may be eligible for a premium assistance credit if income is less than 400 percent of the poverty level. Currently, a family of four with income less than $92,200 would qualify for some level of assistance. Some people will be exempt from the mandate, primarily those who are not required to file an income tax return and those who would have to pay more than 8 percent of household income for minimum health insurance.
Some employers will be mandated to provide minimum essential coverage to employees. Beginning in 2014, an employer would be subject to this mandate if it had at least 50 full-time employees for the previous calendar year (2013). A full-time employee is considered to be one who averages at least 30 hours a week. However, part-time employees’ hours are added together to make more full-time equivalents. In other words, cutting all of a business’s employees’ hours back to 29 would not circumvent the mandate.
There are two potential penalties to not complying with this law:
The first penalty is imposed if the employer does not offer minimum essential insurance to at least 95 percent of employees. If at least one employee obtains insurance from an exchange using an assistance credit, a $2,000 annual penalty will be charged. The penalty is based on the number of employees that exceed 30 for the employer.
An employee obtaining insurance from an exchange will have to complete a questionnaire including information about his/her employer. The IRS will contact employers to inform them of their potential liability and provide them with an opportunity to respond before any liability is assessed. The contact for a given year will not occur until after employees’ individual tax returns are due for that year claiming premium assistance credits and after the due date for employers meeting the 50-employee threshold to file information returns regarding insurance coverage.
The second penalty is for unaffordable insurance. “Affordable” is defined as the employee-paid portion being 9.5 percent or less of his/her household income. If an employee’s cost of insurance provided by an employer is greater than 9.5 percent of their household income, this penalty would be imposed on the employer.
If the employer offers insurance to at least 95percent of employees and one employee obtains insurance from an exchange using an assistance credit, there is a $3,000 annual penalty for each such employee that is deemed to being provided unaffordable insurance. This penalty is capped at the penalty that would apply if coverage were not offered (see the minimum essential penalty discussed above).
With the changing environment for health care in the United States, employers need to evaluate how the new provisions affect them and when. Any changes, of course, will need time for implementation and communication to the workforce.
The regulations implementing the law are voluminous, complex, and contain many provisions not mentioned above. In order to make sure your company is in compliance, it is recommended that you include your employee benefits consultants and certified public accountants in the evaluation and planning process.
If you simply are not emotionally ready to sell, if there is still fire in your belly—enough fire to fuel your continued investment in the company—or if you ultimately want to leave the business to family members or employees, then you may not be in a position to sell your business—yet. If you and the business are ready to sell, but you still hesitate, let’s look at typical reasons for that hesitation and what you may be able to do about it.
The premise of this article is that owners typically don’t sell when they should because they procrastinate, or they fear the unknown and, perhaps more specifically, they fear losing the known.
Procrastination on the part of an owner is not uncommon and can arise for one of several reasons. First, some owners just don’t know where or how to start planning an exit. If you are one of those owners, then reading the remainder of this article is a good start. The next step is to contact an exit planning professional to begin the process of creating an exit plan that allows you to cash out of your business and maximize your after tax proceeds when you are ready to do so.
Second, some owners think that they can sell later, but as we have been discussing, when most baby boomers reach retirement age, the glut of companies in the marketplace is projected to drive prices down. There will be many more sellers than buyers; hence, a buyer’s market. Further, the merger and acquisition cycle can have a huge effect on the sale price of a company.
In the third group of procrastinating owners are those who believe that because they have “good” businesses, the process will take care of itself. When they think about selling, they simply assume that there isn’t much for them to do. They believe that when the time is right, the right buyer will appear and pay them a great price for their company.
It does happen, though quite rarely, that the right buyer appears and pays a great price for a great company. However, it can be much better to prepare for the biggest financial transaction of your life, instead of leaving the success of your business exit to the luck of the draw.
In our experience, the owners who suffer from the fear of the unknown usually hold one (or more) of the following opinions:
· “I don’t think the business is worth enough to satisfy my financial needs and objectives during retirement.”
· “If the employees discover I’m trying to sell, they will all quit and I will have nothing to sell.”
· “Because I’m indispensable to the company (the company can’t run without me), I’ll be required to work years for a new owner and I don’t like working for anyone!”
· “The sale process will take too long and cost too much.”
On the other hand, the fear of losing the known is usually based on the following:
· “The business has been my life—or at least it has given my life a great deal of meaning and focus; without it I may feel lost.”
· “The government will take too much in taxes—it’s easier, less risky and more lucrative to stay, enjoy the cash flow and then leave getting paid over time.”
· “What will I do after I sell and leave the business? I don’t know what my life will look like if I leave.”
If one of these concerns resonates with you, then the time may be now to squarely assess these concerns. Your burdens can be greatly eased if you seek out an exit planning professional with substantial experience in assisting business owners in creating a customized exit plan which meets their personal and business objectives.
That professional can help you identify which concerns may be truly “real” and which ones may be easily resolved. Also, he or she can help guide you through the process of reviewing all of the factors associated with exiting your business—along with various options to consider—leading to a comprehensive exit plan that can help you remove the common roadblocks and take appropriate action now to meet your objectives.