Myles Shaver of the
University of Minnesota’s Carlson School of Management
State's headquarters economy yields
managerial, professional talent base
A Civic Caucus
Focus on Human Capital
Interview September 4, 2015
John Adams, Steve
Anderson, Pat Davies, Paul Gilje (executive director), Randy
Johnson, Paul Ostrow, Dana Schroeder (associate director), Clarence
Shallbetter, Myles Shaver. By phone: Dan Loritz (chair).
On a per capita basis,
Minnesota is home to more Fortune 500 companies than any other state
in the country, cites Myles Shaver of the University of Minnesota's
Carlson School of Management. In 2011, Minnesota was home to 20
Fortune 500 companies. In addition, he says, in terms of the size of
the state's economy, it's the most headquartered state by an order
In 1955, Minnesota had 11 Fortune 500
companies in the state. The fact that Minnesota gained a net of nine
Fortune 500 companies between 1955 and 2011 is an experience
different from nearly every other northern industrialized state in
the country, Shaver points out. And Minnesota had the biggest growth
in Fortune 500 companies over that time period compared to its
population growth of any state in the country.
He says the net gain of nine of those
companies was almost entirely due to companies that organically grew
locally, rather than companies moving their headquarters to the
state. That experience is very different from that of other metro
areas that saw big growth in Fortune 500 companies during that time
period, such as Atlanta or Phoenix.
He points out that Fortune 500 companies
include only publicly traded firms. But there are many privately
held companies headquartered in Minnesota. In addition, the state
has a number of firms that are headquartered elsewhere, but have
major business divisions with high numbers of professional employees
The headquarters phenomenon in Minnesota
means there is a large population of managerial, administrative and
professional talent located here, Shaver says. It's hard to recruit
those people to the state, but once they are here, they don't want
to leave. From 2007 to 2011, the out-migration of that managerial
population was the lowest among the country's 25 largest metro
areas, he reports. The diversity of the state's economy allows that
population to jump across companies here, rather than to jump across
Myles Shaver is professor of
strategic management and entrepreneurship in the Carlson School of
Management at the University of Minnesota. There he holds the Pond
Family Chair in teaching and advancement of free enterprise
principles. In addition, he holds the 2015-2016 Fesler-Lampert Chair
in Urban and Regional Affairs at the University's Center for Urban
and Regional Affairs (CURA).
Shaver's areas of expertise include
corporate headquarters strategies, the management and economics of
international expansion, mergers and acquisitions, and investment
location choice. His research on firm strategies to profitably
expand is published in leading scholarly journals and he is invited
to present his research at conferences and universities around the
world. He has received numerous awards for his classes on corporate
strategy and corporate responsibility. In addition to other awards,
Poets and Quants (a news website devoted to the coverage of business
schools and MBA degrees) profiled him in its compilation of the
"World's 50 Best Business School Professors."
Born and raised in Edmonton, Alberta,
Shaver received his bachelor of commerce degree from the University
of Alberta and his Ph.D. degree in international business at the
University of Michigan.
Background. The Civic Caucus has
released two recent statements on human capital:
one in September 2014 laying
out the human-capital challenges facing the state today and in
coming years and a follow-up paper in
January 2015 offering
recommendations for maintaining a high-quality workforce in
Minnesota. The Civic Caucus interviewed Myles Shaver of the
University of Minnesota's Carlson School to learn more about the
highly educated managerial, administrative and professional
workforce in the Twin Cities area.
In 2011, the Twin Cities area was home to the headquarters of 19
Fortune 500 firms in 17 different industries.
Also, said Myles Shaver of the Carlson
School of Management at the University of Minnesota, the country's
biggest privately held company (Cargill, Inc.) is located here. "As
a business school professor, this is an amazing place to work," he
said, "because it's an amazing economy."
Shaver said there is no obvious reason for
those companies locating their headquarters in the Twin Cities. "We
have industry clusters (medical devices and big agribusiness, for
example) but none of those rules the economy," he said. "We have an
amazing diversity. There's a historical reason for every business
located here. But there's no obvious reason medical device or retail
companies have to be located here."
The Twin Cities is a headquarters town.
Shaver said when he started his research on comparing the Twin
Cities with other regions, he knew it was a headquarters town, but
soon learned exactly how much so. Looking at Minnesota in general,
in 2011, there were 20 Fortune 500 companies in the state, he said.
On a per capita basis, Minnesota had the most Fortune 500
headquarters in the country in 2011. And in terms of the size of the
economy, it was the most headquartered state by an order of
magnitude. In 1955, there were 11 Fortune 500 companies in the
state. "We've been a headquarters state for awhile," he said.
The fact that Minnesota gained a net of
nine Fortune 500 companies between 1955 and 2011 is an experience
different from just about every other northern industrialized state
in the country, Shaver said. For example, Wisconsin had 11 Fortune
500 companies in 1955 and nine in 2011. Minnesota's net gain of nine
companies during that time, he said, was actually the result of the
state adding 40 Fortune 500 companies and losing 31. "There is a lot
of churn in the Fortune 500 companies," he said.
He called "striking" the fact that only
one of the 40 companies added was from a headquarters move to
Minnesota. "The rest are companies that organically grew locally,"
he said. That experience is very different from that of other metro
areas that saw big growth in Fortune 500 companies during that time
period, such as Atlanta or Phoenix. "Places like that get lots of
headquarter movement in."
He noted that only a small fraction of the
loss of 31 Fortune 500 companies over that time period involved
companies moving their headquarters elsewhere. Many companies also
dropped off the list as they were overtaken or acquired by other
A lot of explanations for location of
headquarters companies don't really hold here. "We need a new
explanation," Shaver said. "Anything about headquarters has to be a
story about human capital." The one kind of capital that is in every
headquarters company is professional management and administrative
skills. "The headquarters is the control center," he said.
States where the number of Fortune 500
companies grew very quickly from 1955 to 2011 include Texas and
California, he said. But Minnesota had the biggest growth in the
number of Fortune 500 companies compared to its population growth
during that time period. He said Nebraska also ranked high on that
measure. In response to an interviewer's question, Shaver said in
2011, Seattle (with eight) and Denver (with 10) both had a number of
headquarters companies, while Portland only had two, Nike and
Fortune 500 companies include only
publicly traded firms, he said. But there are lots of privately held
companies headquartered in Minnesota, some of them large, with
Cargill, Carlson Companies, Andersen Windows, Mortenson Construction
and Holiday Stationstores each having over $2 billion in annual
sales. And Shaver said companies that get completely overlooked in
this discussion are firms that are headquartered elsewhere, but have
major business divisions with high numbers of professional employees
located in Minnesota. They have the same associated type of talent
here that the Minnesota headquarters companies have.
For example, he noted that Wells Fargo has
over 20,000 employees here; Thomson Reuters has 7,500; Boston
Scientific has 2,500; and Cummins Power Generation has 2,000.
There are unique attributes that have
helped define the business culture in Minnesota. An interviewer
commented that over time those attributes have included:
1. The attitudes and values brought here
early on from New England;
2. The state's very homogeneous population
over the years; and
3. The lack of regional competition, since
the Twin Cities' trade area extends west to
the Rocky Mountains,
down to Kansas City and out to Denver.
Shaver agreed that the Twin Cities'
geographic location was "an important part of the seed" for the
growth of headquarters companies here. The metro area draws a
workforce from a large area, he said. The Twin Cities are a magnet
for professionals leaving the Dakotas, Iowa, Wisconsin and Nebraska.
In 2012, the Twin Cities ranked 10th on
per capita income among the largest 25 metro areas in the country
and ninth when adjusted for the cost of living. Shaver
said the median household income for the Twin Cities ranks fifth
highest and second highest when adjusted for the cost of living.
He asserted that there are three possible
explanations why the Twin Cities are 10th in per capita income, but
fifth in median household income:
1. There are disproportionately more
dual-income families here. If you're college
educated, it's 90
percent likely that your spouse is also college educated.
2. There are more households with
children here, lowering per capita income.
3. Per capita and median household income will deviate massively if
there are huge income
disparities and we don't have that here.
Managerial and administrative talent is
often not industry-bound.
Shaver said there are very high-profile examples of people moving
across industries in the Twin Cities, often bringing managerial
practices with them. One example is when Medtronic was struggling in
the mid-1980s, it brought in Win Wallin as CEO. He had been
president and COO of Pillsbury.
This does not happen everywhere, Shaver
said. He said it's difficult to recruit people to Minnesota, but
recruiters say it's impossible to get them to leave. That results in
a managerial and professional talent base more likely to jump across
companies here, rather than to jump across regions.
Because this talent pool tends to be well
educated and well compensated, he examined the migration pattern of
people with four or more years of college, who are employed and have
households earning over $100,000 per year. According to the American
Community Survey, from 2007 to 2011, the out-migration of that
managerial population from the Twin Cities area was the lowest among
the country's 25 largest metro areas.
The metro area's outflow rate for its
managerial population is extremely low, Shaver said, as is the
inflow rate, which ranks 19th. That pattern, however, does not hold
as strongly for the population in general here. This population
inflow/outflow difference between the general and managerial
populations becomes even more magnified when narrowing the
managerial population to that having a school-aged child. "We look
different from the other major metros in the U.S.," he said.
The outmigration of managerial talent from
the Twin Cities has been extremely low for at least 30 to 40 years,
he said. Even though the inflow has also been low, there has been a
net positive gain in that population.
The managerial population is not attracted
to an area because it's a nice place to live; they move because of
jobs and economic opportunities. Once they're here, though,
Shaver said quality-of-life factors play a bigger role as an anchor.
The way in which the Twin Cities' economy
is growing means we must rely on in-migration. "There's no way
this location could generate that much talent," Shaver said. The
colleges and universities here do a great job, he said, but
sometimes companies require particular skills and, as they become
more international, different worldviews. "Our ability to attract
talent like that is hugely important."
People come here for college and they
stay. Shaver said that trend hurts the Carlson School in
national rankings of business schools. National recruiters come to
town and offer upcoming graduates jobs that a large share of them
decline in order to take jobs locally. "The fact that they don't
have to move to get a good job hurts our national reputation,
because the rest of the world doesn't see our graduates," he said.
We're not doing well in recruiting African
American talent here. Many people tell me this is a hard place
to get people of color to move to, Shaver said. "It's a hard place
to break into for nonwhite professionals, because social circles
here are so tight." When talking about the achievement gap, he said,
it's important we make sure every person already here has an
opportunity to contribute. "This economy in particular draws
disproportionately on highly educated people in terms of the
required skill sets," he said. "To be a full participant in this
economy, you have to look like that. That raises policy questions if
we want to see advancement."
He commented that if social circles here
are so tight, we risk becoming myopic. "You break that by
immigration and by having students who've grown up here spend part
of their lives elsewhere, such as going to college and then coming
Looking historically at the businesses in
the Twin Cities, it's astonishing how the University of Minnesota (U
of M) has touched those businesses directly or indirectly. "It's
a really striking influence," Shaver said. "It still continues to
play that role. We are a magnet for students from all over the
world." He said restricting the discussion of the impact of the U of
M only to technology is myopic. "If you take a look at any major
corporation in the world, people in managerial and professional
ranks come from all kinds of backgrounds. Business school grads are
only a part of the managerial population."
The Twin Cities has an impressive talent
base that a lot of other regions don't have. Shaver said that
makes him more optimistic about the metro area's economic future
than some other people are. He said our education system competes
well internationally. "If we do nothing, we'll be in trouble, but we
start from a good spot. It's better to build on that. But there are
lots of places that are not starting from the same spot we are.
That's why I'm optimistic."
In response to an interviewer's question,
Shaver said that if he were governor, his single most important job
would be to look at what he's doing to support and develop human
capital in Minnesota's economy. "Are we an inviting place for human
capital from around the world? Are we doing what we can to retain
the human capital we have here? Are we giving every person the
chance to advance his or her human capital? It's not the same as
putting a bet on this industry or that industry. I want to put a bet
on bright people."
The way we ensure companies in the Twin
Cities don't move is to make them believe they can't, because they'd
lose too much. "Companies that stay here don't stay out of the
goodness of their hearts," Shaver said. "There's an economic reason.
It's too costly to move because of what they'll lose in talent."
Allowing states to use economic incentives
to try to attract businesses from elsewhere results in a net loss.
"In the abstract, I don't like it," Shaver said. "In reality,
according to the New York Times, Minnesota ranks 41st on
state spending on attracting business (45th on a per capita basis),
while Texas ranks number one. It's a net loss if we let states throw
money at businesses, but if we let somebody else do it, what does it
mean if we don't?"
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (executive director), Dwight Johnson, Randy Johnson, Sallie
Kemper, Ted Kolderie,
Dan Loritz (chair), Tim McDonald, Bruce Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmermany,