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Brewer, Cardon proclaim a new day at Commerce Department

Commerce Director Don Cardon (Photo by Bill Coates)

Commerce Director Don Cardon (Photo by Bill Coates)

For much of its existence, the Arizona Department of Commerce has served as a political punching bag for those who believe the agency’s work is inefficient, its mission vague and its credibility questionable.

Don Cardon doesn’t deny that some of those things have been true in the past, but a transformation is underway.

Cardon, who took over the Department of Commerce in early June, is bringing with him a sea change to the agency, he said. Historically, the department has been too reactionary, too management-oriented and too politically driven. As the former president and CEO of a company that built low-income housing projects, Cardon is reorganizing the agency under a private-sector philosophy.

“To be blunt … we have been challenged with credibility. We haven’t been as credible within the Legislature. We’ve had a variety of senators believe that we should suspend the department,” Cardon said. “The reason we haven’t been credible is because we haven’t had specific focus. It’s too broad.”

Speaking at an Arizona Chamber of Commerce and Industry luncheon in late June, Gov. Jan Brewer announced her vision for the agency.

“It must be more credible for the business community, our local governments and the Legislature. It must be focused. Gone is the day of Commerce’s ambiguous missions and limited results. It must efficient,” Brewer told the crowd at the luncheon.

In late May, Brewer ousted interim Commerce Director Kent Ennis and replaced him with Cardon, who had been appointed to lead the Arizona Department of Housing. Brewer spokesman Paul Senseman said “the administration was simply moving in another direction” than Ennis.

Cardon’s arrival at Commerce included some turmoil. Commerce was one of the last state agencies to submit a budget for fiscal 2010, and Cardon lost about 85 percent of his department’s state funding in his first month on the job as a result of the economic slump and ongoing budget crisis.

The cut dropped the agency’s budget from about $3.5 million a year to around $500,000, a cut that led Commerce to lay off 19 employees, including some long-time staff members who were nearing retirement, and eliminate 20 unfilled positions.

Cardon, however, said the loss of funding and personnel gives the agency a chance to reorganize more efficiently. Under its old organizational structure, Commerce was divided into seven divisions, or “silos,” that oversaw a total of 31 subdivisions. Many of those silos and subdivisions had overlapping responsibilities, and a lack of communication between them led to inefficiencies, Cardon said.

Under the new structure, there are five divisions with 10 sub-units, which Cardon said will increase communication and eliminate many redundancies. For example, the agency’s film office, which would receive no money this year under the budgets proposed by the Legislature and the governor, was downsized from three people to one. The responsibilities and duties of the remaining employees have been expanded, a change necessitated by budget cuts as much as organizational philosophy.

“For example, before we had Workforce & Business Development and then we had Marketing & Business Attraction. Well, there was a lot of redundancy and similarities between those two (divisions), and yet they were operating kind of independent of each other. So we put them together and formed one group,” Cardon said.

But the changes Cardon is bringing with him to Commerce are about more than just organization and structure, Cardon said. It’s about changing the culture of the department. Historically, Commerce has been a reactionary agency, he said, assisting businesses that are interested in moving to Arizona and the communities that are interested in attracting them, but generally only when help is sought.

Instead, Cardon wants Commerce to seek out businesses that it feels would be a good fit for Arizona. This is true especially in industries such as aerospace and defense, which Brewer said account for about 57,000 jobs in the state, and renewable energy and biosciences, which many view as an area in which Arizona could become a global leader.

“We’re very much trying to get ahead of a company showing up and inquiring. We’re trying to find out which companies are thinking about inquiring in other cities. We want to get before them before they get to us, ideally, because a lot of times, by the time we hear about them, we’re competing with three or four other states,” Cardon said. “It’s very strategic. It’s non-reactionary. It’s very intentional and very, very focused.”

In addition to seeking out companies that may be looking to set up shop in Arizona, Cardon said he wants Commerce to work more closely with companies that are already here to make sure their needs are being met and to ensure they are aware of resources that are available to them.

“I think we really are on the brink of being vulnerable to taking a position of not retaining the companies that we have, huge companies with huge capital investments,” he said. “I want to the state to be able to be perceived by these companies as somebody that serves their presence here. And so I’m seeking out the CEOs of our major corporations and saying, ‘How can Commerce serve you?’”

Business development – attracting, retaining and expanding companies in Arizona – is the first prong of what is essentially a two-pronged strategy for Cardon. The second is a focus on community development, especially in rural areas that are seeking to grow their business communities.

Many smaller cities don’t have the resources to take on infrastructure projects or other measures designed to attract businesses, Cardon said. But Commerce can assist them in utilizing grants, economic development programs and federal stimulus money that is available. Cardon wants Commerce to approach cities and find out what their aspirations are, and then help them achieve those goals.

One big change Cardon wants to make from Commerce’s old way of doing things is in the way it distributes financial resources to communities. In the past, when Commerce had resources for community development, they were often allocated equally, with no regard for which cities are best positioned to attract new business development. Instead of dividing resources equally among cities, Cardon wants Commerce to evaluate which will see the greatest benefits, and allocate accordingly.

Why give four cities $25,000 apiece, Cardon asks, when three of them are unlikely to attract new businesses? A more effective use would be to identify which city can make the best use of the money, and give it $100,000.

“It’s very much a private sector approach,” Cardon said. “We may make some people upset with us, but we have limited resources.”

Cardon’s appointment and subsequent plans have been met with enthusiasm from many in the business community. But some people may need a lot more convincing, especially those who view grants for businesses and other government involvement in economic development as unnecessary interference into the private sector.

Sen. Jack Harper said the Department of Commerce was an agency in need of reorganization, but his vision for the department is probably a bit more Spartan than anything the new structure will bring about.

“Other than the staff they need to fill these volunteer positions on boards and commissions, they should have one or two people answering the phone telling businesses that they’re welcome in Arizona,” the Surprise Republican said. “Their economic development tools are just taking from some to give to others. They’re really not necessary.”

Sen. Ron Gould, a Lake Havasu Republican, said he isn’t sure what, if any, benefits Arizona gets from the Department of Commerce.

“I think somebody does need to take a look at the Department of Commerce,” Gould said. “Things get protected in the Legislature without any real scientific basis. That’s not really the best way to operate.”

Still, groups such as the Arizona Chamber of Commerce and Industry and the Greater Phoenix Economic Council like what they have seen and believe Cardon can make a real difference at the Department of Commerce. GPEC president and CEO Barry Broome said the agency had a credibility problem because it was viewed as an institution that was “treated politically instead of run like a business.”

“You know the old saying by President Reagan – government should be run more like a business. And within the government, state government, the Department of Commerce is a business and has to run like a business,” Broome said.

Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, is pleased about the intended focus on industries like aerospace, defense and energy.

“The Department of Commerce, it’s been a little bit like musical chairs for the last five or six years. They’ve had some great people go through it, but it hasn’t had the focus or discipline necessary to be as effective as a state department of commerce needs to be in this global economy,” Hamer said.

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