Economic Development Organizations: Failing Upward.

This is NOT the Way for our Region.

In the last 60 days, we have had more than 20 conversations with actual builders of businesses (brick & mortar to high tech/high growth and everything in between) about the perceptions that our region consistently is securing funding or reportedly has abundant and accessible financial resources. However, the majority of their businesses don’t realize the benefits.

We have a hypothesis informed by our lived experience, but we would love to get your take.  Let’s first set up some background.

Economic development in Southwestern Pennsylvania is a complicated sport, given the constant narratives of yesteryear steel clashing with the newest bright, shiny objects (currently AI & Robotics). The infinite narrative of the most livable city with the reality that we don’t have policies and platforms that really lower the barrier to creating a company or service, let alone owning that real estate.  The fact that some people think we have more funding and the meritocracy needs to live independently of any organization, and those who feel we are effectively asking people to move to the coasts without better access to capital.  Whatever you believe, something should change for you or someone you know.  That’s an every-region problem. 

However, there’s a growing concern that when vital funding opportunities are won—whether from traditional government sources, philanthropic grants, or federal initiatives like Build Back Better—the distribution of these resources often falls short of its intended and promised impact. The problem isn’t with the organizations’ missions securing the funding; many are well-meaning and aligned with their goals. However, the individuals leading these efforts often lack the lived experience necessary to apply modern, nuanced strategies for entrepreneurship and small business activation.

Here's how we have observed this negative cycle playing out:

1. Winning the Funds: A well-intentioned organization, often mission-driven but not always deeply rooted in the communities it serves, has or applies for, and wins significant funds. These funds could transform grassroots entrepreneurship, Main Street businesses, and diverse business leadership. Still, the organizations distributing the funds frequently operate from a superficial understanding of the actual industry or sector. They are often stuck in a competitive dynamic with other economic development organizations rather than a collaborative one.

2. Resource Misalignment: Once the funds are secured, these organizations—despite their expertise in winning grants—lack hands-on experience in building or fostering small businesses or entrepreneurship. Instead of utilizing community members or grassroots experts with real-world experience, much of the funding is spent on administrative costs and program overhead. Even worse, they almost exclusively look to import talent, capacity, capability, or tech from other cities or regions to “fix” what was broken. This gets particularly spicy when those administering the programs often make high salaries while local experts, who could truly drive impact, are sidelined or unpaid.  I can’t tell you how many times we at PSN have been asked to host important visitors, organize ecosystem tours, create a hackathon, etc., doing 90% of the work for 0% of the resources allocated, and worse is that the system protects the administrators because they ultimately take the credit for what happens.

3. The Disconnect Between Administration and Community: There’s a growing trend where administrators of these funds, who may never have run a small business or have not been recently involved in entrepreneurship, are tasked with building sustainable economic programs. They often operate with an inflated budget but fail to pay for market-rate local expertise. A telling example of this pattern occurred when an organization hosted a hackathon—something they had no prior experience with—and spent thousands of dollars on swag and promotional materials while the speakers, often representing the very populations they claimed to serve, went underfunded or unpaid.

Now, here is where the real issue starts if you are still of the belief that success is subjective at the event level:

4. The Illusion of Success: After 1-2 years, these organizations typically present a set of metrics and outcomes that, on the surface, look successful. They point to their inflated resource pool and manipulate partnerships to prove their progress. In reality, these outcomes are often unsustainable because the people driving the work were, in essence, “tourists” in the entrepreneurial and small business space.

5. Failing Upward: As the program runs out of artificially inflated funding, many of the leaders behind these efforts have either quit or moved on to other regions and roles, often failing upward into bigger budgets and roles. This leaves the community with little to show for the millions of dollars spent, and it perpetuates a cycle where new, similarly underprepared organizations step in to repeat the process based on how well they wrote the request for funds.  We also see nearly endless amounts of inflated award ceremonies, celebrations, and “emperor wears no clothes” moments just because those very folks are nearly always and exclusively invested in “YES” people.  If you are someone who is mediocre, you love this because it means you don’t actually have to be effective with more than one thing: the decision-maker.  We witnessed this firsthand when one of the leading economic development organizations hired someone who had most recently been in retail to lead AI and robotics thinking; not only was it heartbreaking as practitioners of the craft, but it was apparent in 2 minutes or less that this person had absolutely no idea of how to sell the region.

6. Masked in Appearances: Perhaps most troubling is how difficult this pattern is to catch. The failures are often masked by performative press releases, superficial awards, and mutual back-patting from other organizations running the same playbook. From the outside, it can seem like real progress is being made, when in fact, the opposite is often true. You don’t have to look hard; just use Perplexity.ai or Google to look for it.  Look for celebratory posts without any actual quantification, or better yet, look for reports that only have broad numbers and not a single real testimonial of someone impacted.

So, here’s a quick reaction & guide to what we hope evolves:

1. Prioritize Community Voices: Fund grassroots leaders and organizations with deep ties to the community THAT ALREADY ARE DOING THE WORK. They are often better equipped to understand the needs of local entrepreneurs and can apply the funds in ways that have a lasting impact. Hire them, contract them, but don’t pay someone else to manage them with 90% of the resources in play.

2. Require Experience in the Space: Organizations applying for funding should demonstrate lived experience or a proven track record in the areas they are looking to support, whether it’s running a small business or working within a specific community. Don’t have administrators who are not authentic advocates for the industry or cause. This is particularly noticeable if you look for headlines where some “Valley” expert is flying in for 10s of thousands of dollars and thousands of free or low-cost real estate and resources to somehow activate an initiative but at the end of the funding walk away with almost never a sustainable business model.

3. Fund Local Experts at Market Rate: Allocate funding to pay local experts at market rates from the start. Expertise should be compensated fairly, especially when these individuals have the insights and lived experience necessary for actual community development. 

4. Create Collaboration Incentives: Shift the competitive funding model to one that rewards collaboration between organizations, particularly between larger, well-funded groups and smaller grassroots efforts. Why can’t technology associations work with actual community development groups, our universities, or the city?  Everyone seems to have very petty and big feelings about who they will or won’t work with, which is fundamentally opposed to them being servant leaders to the broader region.

5. Limit Administrative Overhead: Set caps on how much of the funding can be used for administrative costs. This ensures that more money flows directly into programs and initiatives that help entrepreneurs on the ground.

6. Establish Accountability Measures: Build in accountability frameworks that track not just the “outputs” of a program (like how many businesses were started) but also the sustainability and long-term viability of these businesses. Require that communities and other stakeholders participate in a “360-degree” review where everyone gets to weigh in with a trusted 3rd party.  You would be amazed at how often people self-grade.  We don’t let students grade themselves for a reason.

7. Foster Continuous Community Engagement: Ensure that organizations receiving funding are continuously engaging with the communities they serve through advisory boards, surveys, and feedback loops that include a diverse range of voices.  Make this a pre- and post-requirement for funding.

8. Provide Mentorship Programs: Set aside funding for mentorship programs that pair grassroots entrepreneurs with administrators. You read that right—make the administrators governed by people already doing the work.

9. Mandate Transparent Reporting: Enforce transparent reporting on how funds are spent and the impact they are having beyond just superficial metrics. Make this available on a monthly basis for annual programs.

10. Emphasize Long-Term Thinking: Encourage organizations to think long-term about the impact of their programs rather than focusing on short-term wins that look good in press releases.

11. Encourage Local Procurement: Ensure that the spending within these programs benefits local businesses and service providers rather than national or external firms that may have no vested interest in the region.

12. Distribute Funds More Equitably: Adopt funding structures that distribute resources more equitably among various regions within Southwestern Pennsylvania, especially those that have been historically underserved.

13. Measure Success Beyond Numbers: Redefine what success looks like for economic development programs. Rather than focusing solely on quantitative metrics (e.g., number of businesses started), look at qualitative outcomes such as the resilience and long-term growth of these businesses.  Look at how many people came to information sessions and how broad your attendance is in terms of lifestyle, life stage, etc.

14. Develop Local Talent Pipelines: Use part of the funding to develop local talent, training individuals from within the community to lead and manage programs rather than relying on outside administrators.  Train the trainers.

15. Foster Public-Private Partnerships: Build partnerships between local governments, private businesses, and community organizations to ensure that funding is utilized in ways that create real, lasting value.

16. Create Realistic Timelines: Shift away from a single event or even short, 3-6 month programs to at least mid-if not longer-term initiatives that have the time and space to generate meaningful change.

17. Support Ecosystem Resources that Centralize: Fund projects that focus on avoiding duplicative efforts. I can’t believe we are still funding people to create yet another directory or pop-up space serving so few.

18. Promote Diversity and Inclusion: Ensure that diversity and inclusion are central to the distribution of funds and the leadership of programs, bringing in voices from underrepresented communities to lead these efforts.

19. Adopt a Regional Approach: Rather than hyper-focusing on certain pockets of Southwestern Pennsylvania, adopt a broader regional approach to ensure that funding benefits a wider swath of the population. That means counties outside of Allegheny where genius is evenly distributed, but privilege is not.

20. Engage in Regular Audits: Conduct independent audits of programs receiving funding to ensure transparency, efficiency, and true community impact.  Have people who know how to actually call out good and bad results on the committee.

21. It will never be too late, but this is perhaps the biggest threat to our region that people aren’t fully talking about.  If you have one of these fluffy do-nothing jobs, you should be ashamed if you brag about how you are really helping.  Take responsibility beyond your paycheck if you care for outcomes, not just efforts.  Finally, stop this meritless recognition culture where we award without meaningful outcomes and this inflationary praise system where it stops mattering to people actually doing the work because 50 or fewer people control the money that controls messaging.

We can be better, but only if we start calling these things out.  What can you do to help curb this?

Here’s how leaders can begin transforming the region and counteracting a culture of meritless recognition by focusing on meaningful change and impact:

Set Clear, High Standards for Success: Leaders should establish measurable goals that emphasize real, long-lasting impact rather than participation. Publicly celebrate achievements based on these criteria to encourage others to align their efforts with genuine value creation.

Champion Transparency in Awarding and Recognition: Promote open and transparent processes for how awards, grants, and funding are distributed. This builds trust and ensures recognition goes to those making substantive contributions, not just symbolic gestures.

Highlight Authentic Success Stories: Regularly showcase the stories of individuals and organizations that demonstrate true innovation and perseverance. Highlighting real impact encourages others to strive for meaningful success instead of superficial outcomes.

Discourage Performative Recognition: Encourage a shift away from rewarding superficial achievements. Call attention to instances where recognition is based on inflated metrics or mere participation and push for recognition tied to genuine community advancement.

Create Systems for Continuous Feedback: Leaders should build spaces for ongoing feedback from the grassroots level, allowing communities to directly inform recognition and funding decisions. This ensures that success is evaluated by those who understand the challenges and realities on the ground.

Reward Long-Term Impact Over Short-Term Wins: Focus recognition and funding on initiatives that demonstrate sustainable, long-term results rather than short-term victories. This shift encourages a focus on building something lasting, not just on temporary visibility.

Empower Grassroots Leaders and Local Experts: Prioritize elevating and funding grassroots leaders who have lived experience in the community. These local experts often have actual insights needed to drive real change and should be engaged and recognized accordingly.

Develop Mentorship and Support Networks: Foster mentorship programs that connect experienced business leaders and community advocates with emerging entrepreneurs. Recognizing and valuing these networks ensures that expertise is rewarded and passed down.

Implement Accountability and Audits for Outcomes: Establish mechanisms for independent audits that evaluate the true impact of programs. By exposing inflated metrics, leaders can ensure that resources are directed towards efforts with real, measurable outcomes.

Lead by Example: Leaders should model these behaviors themselves, ensuring their own recognition and funding efforts are merit-based, transparent, and focused on community outcomes. They should also publicly commit to continuous improvement and course correction when necessary.

Now, here is where it gets spicy: Reflect on the above, and then, with Perplexity.ai (or another search) in hand, reflect on the economic development organizations you work with or know about, their press releases, the public outcomes, etc. 

Do they live up to these north stars of the region or not?

- The PSN Editorial Team