Why TAAF Works
The Trade Adjustment Assistance for Firms program (TAAF), which we run here in Michigan, Ohio, and Indiana, is successful for many reasons. Numerous studies and evaluations of TAAF have been done over the years. These have consistently found the program to be effective and efficient – but none of them have ever fully identified why it works.
The TAAF program works well because the business assistance model it uses is strong. And what makes it strong? I’m glad you asked.
The key components of the TAAF service model responsible for driving the program’s success are discussed below.
- Client company management team dedicated to long-term success. Firms that aren’t serious about rebuilding their business simply don’t use our program. We ultimately help small manufacturers invest in themselves, strengthening their capabilities more efficiently and effectively than they could without our assistance. This requires a substantial commitment of time, effort, and money from companies and their leaders. So TAAF isn’t a good match for firms that aren’t clearly committed to the future.
- Flexibility. There is great flexibility in (a) the projects firms can undertake through the program and (b) the service providers that can be used. (service providers = consultants, engineers, trainers, and other outside expertise.) The first enables clients to implement whatever improvements they need through the program, be they in sales, marketing, production, quality, finance, accounting, management, or something else. It also means projects can be highly targeted, focused only on precisely what is needed, which yields high impact, low cost projects. Regarding b, flexibility in the consultants used means client companies can always get the best fit possible for each and every TAAF project they do.
- Up-front planning. Before undertaking any projects, GLTAAC guides firms through a planning process to develop an Adjustment Plan (which is a recovery plan designed to help them “adjust” to the import competition they face). This enables firms to codify and prioritize changes that must be made to improve their overall competitiveness. Importantly, this process identifies which improvements the company can do internally, using their own personnel (independent of the program), and which ones they need outside expertise to accomplish (utilizing TAAF co-funding).
- Unbiased assistance. Because GLTAAC staff don’t do the actual project implementations, we have no incentive to advocate for any particular course of action (during the planning process) or to promote any specific service provider (for projects). We are uniquely positioned to be neutral in our perspective. This leads to a customized recovery plan, and the best provider for each project.
- Strong professional staff. GLTAAC is staffed by business professionals, not academics or government employees. Our Project Managers all have substantial manufacturing experience (an average 15 years each), in a variety of positions. So we understand the challenges small manufacturing firms face.
- Partnership relationship. Still, we know we will never understand a company as well as the firm’s management team does. And that’s just fine. TAAF functions as a partnership, with the firm bringing their knowledge of the business to the relationship, and GLTAAC providing a fresh set of eyes, plus the experience of working with hundreds of other manufacturers that have similarly been hurt by imports. Importantly, GLTAAC also has expertise successfully working with consultants (on all sorts of business improvement projects), and structuring these projects to deliver real results.
- Cost-sharing. Client companies must pay part of the cost of all services provided to them (typically 25% of the planning and 50% of project implementations). This has 2 important effects. First, it ensures that only firms committed to recovery participate in the program; and second, it stretches program resources for all companies. (That firms pay for 50% of the consultant costs for their projects obviously increases the volume of projects GLTAAC can do. Further, however, all client payments collected for Adjustment Plan development are earmarked to fund additional client projects.)
- Long-term engagements. To qualify for TAAF, firms must be losing sales and employees (as well as losing business to imports), so all of the small manufacturers we work with are challenged, and many are seriously distressed. Trade-injured firms have significant issues and usually must make considerable changes to their business. This takes time. And the TAAF program provides that time. Most companies are in the program for 4-6 years or more. For example, so far in 2015, 10 GLTAAC clients have completed the program – they did an average of 5.1 projects in 5.7 years.
What does Success Look Like?
Ultimately, the answer to that is simple – improved client company performance. Each year we collect info on all of our established current clients and recent program grads. We particularly look at firm survival, profitability, sales, and employment. Here’s what the data show.
- High firm survival rate. 96% of all of the companies we’ve worked with over the past 5 years are still in business. (This is particularly impressive given their condition before starting the TAAF program – only half were making a profit from operations, they had lost an average of 15% of their sales in just the prior year, and they’d been forced to lay off an average of 18% of their employees during the past 12 months.)
- Immediate improvement. After their first year in the program, the 75 companies included in our 2015 survey had averaged a 5% increase in both sales and employment (regardless of the calendar year). Furthermore, the number generating a profit from operations jumped from 51% to 78%. (See chart to right.)
- Sustained performance. Company growth over time has been strong. These firms have averaged a 4.3% increase in sales per year since starting TAAF, and a 3.5% CAGR in employment.
- Broadening impact. By the end of their 5th year in the program, 78% of the 2015 surveyees were rebuilding sales, 70% were adding jobs, and 90% were turning a profit from operations.
The following 2 graphs illustrate the improvement in GLTAAC client performance by program year (iow, by how long they’ve been in the TAAF program), using year-over-year employment changes. (Sales and profitability numbers follow the same trend, though they are a bit more bumpy.) The first graph shows the percentage of firms in GLTAAC’s client base that added jobs each year. And the second one provides their average job growth during that year.
These numbers look good, but it’s hard to evaluate them without some sort of benchmark. So below is a look at job growth by calendar year for GLTAAC’s client base compared to the annual change in total U.S. manufacturing employment. (The U.S. data comes from the Bureau of Labor Statistics – the December over December change in BLS series CES3000000001. The GLTAAC numbers are the current versus prior year change from our annual client performance surveys from 2004 – 2015.)
As can be seen, in terms of job growth, GLTAAC’s client base has outperformed the overall manufacturing sector in 10 of the last 11 years (with 2008 being the exception). And in most of those years, the difference was quite large.
The TAAF program works. It works because the program service model is strong. And TAAF’s strength shows in the success of our clients: year after year after year after year.
(Want to know more about how the TAAF program works? Have a look at our web site – including my post How TAAF Works.)