Employees Now Asking Companies to Leave California

Joseph Vranich
Joseph Vranich is the Principal of Spectrum Location Solutions LLC, a Site Selection firm that helps companies identify optimum locations to accommodate growth, to improve competitiveness, or escape difficult business environments.

If I hadn’t heard it from clients I wouldn’t have believed
it – Californians are asking their companies to leave the state.

Some time ago a decision-maker told me he had evaluated the
benefits of moving his department out of Los Angeles. He said: "When I
discovered how substantial the savings would be, I quipped in front of my
staff, ‘We should move to Texas.’ I was surprised by what happened next –
people approached me one by one, came in my office, closed the door, and asked
that we move to Texas. Once I saw the employee reactions, I’d like for the
relocation to occur."

Businesses relocate generally for cost factors (taxes, the
burdens of excessive regulations, high rents) but people move for life-style
reasons. Here is a sampling of employee motivations:

  • "I lived in Texas before and I’d like to go back
    – fewer traffic jams and I can afford to buy a house there."
  • "When the owner told me about the move to Nevada
    I jumped at the chance to go. The company can grow better there and I’ll have
    more opportunity to stay in this field and move up."
  • "One reason the owner liked Colorado was because
    of the better schools. I thought, well, we’re going to have kids and we don’t
    want them in the Los Angeles school system."
  • "My company is fabulous. I will move wherever it
    decides to go. If it’s someplace that’s cold, I’ll get used to it!"

What is the "staying power" for Californians in new places?
I don’t know. But a manager and his wife who grew up in Huntington Beach moved
to Pennsylvania and love it so much that she said, "We’ll never go back."

I’ve heard "I’ll never go back" from a number of people.

The message isn’t getting through in Sacramento. For
example, this week the Public Policy Institute of California (PPIC), will issue
a report about why the state fares poorly in many published state-level
business climate rankings or "indexes." The organization doesn’t like it that
California often ranks at or near the bottom of just about such rankings. One
of PPIC’s arguments is that "California’s poor ranking among the business
climate indexes focusing on taxes and costs is offset by natural advantages (in
particular, good weather), and these favorable factors enable California’s
economy to perform reasonably well."

Yes, California has good weather.

For those of you who plan to read the new PPIC report, print
out this list – Why do Companies Leave California? Here
Are Ten Reasons
(Updated) – put the documents side-by-side, and decide for
yourself which is more relevant to the state’s future.

Disclosure: I’ve written before about how PPIC’s work on the
state’s business environment is poor – see New
Think Tank Report
on California’s Business Exodus: Useless.

While Sacramento remains fuzzy-headed about California’s
hostile business climate, the state is experiencing the fastest rate of company
out-of-state and out-of-country relocations since I put a specialized tracking
system into place two years ago. Activity from Jan. 1 through April 12 of this
year shows that 69 California company disinvestment events have occurred, an
average of 4.7 per week – greater than the 3.9 average per week last year. See
more at Calif.
‘Disinvestment Events’ Reach New High
As Companies Opt for Other States,
Nations posted yesterday.

By the way, the number one location for California companies
to relocate to, or to divert capital for facilities that in the past used to be
built here, is Texas with 14 such events.

My list doesn’t overstate the case (we probably learn about
only one out of every five company departures), but others understate the
problem. One state agency employee in meeting with a moving company CEO said,
"Claims of businesses leaving are exaggerated. All we lost last year were seven
companies – here’s the list." The executive read the list and said, "Do you
realize you don’t have written down here even one of the companies that we
moved out of the state last year?"

This week, when PPIC issues its report, something more
important will be happening.

At any time during this week that I want to feel optimistic
about California ending it’s business-hostile ways, I won’t think of the PPIC
event on Wednesday. Instead, I’ll focus on the activities on Thursday and
Friday when Dan Logue, a member
of the state Assembly, and his colleagues meet with Texas Gov. Rick Perry and
also conduct a hearing on business issues.

He and some of his colleagues are taking the self-financed
trip to Texas to learn what California is doing wrong and what Texas is doing
right. The Orange County Register did a nice job explaining what the
trip is all about in California
politicians to check out Texas business

The fact-finding delegation will probably get an earful from
former California business owners who fled the state’s excessive regulations
and high taxes. But I wouldn’t be surprised if some rank-and-file employees
also showed up to say why they volunteered to leave California – or even
encouraged it.

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