Looking Behind the Ranking Numbers


Two pieces of seemingly conflicting news that came out late last week:

Indiana ranks sixth overall and first in the Midwest on Area Development magazine’s list of “Top States for Doing Business,” but Forbes placed the state 29th on its “Best States for Business and Careers” list.

These are just two of the numerous state rankings that are published throughout the year, but why is Indiana ranked so highly by one publication while falling below the middle of the pack in another?

A little digging reveals that the way the data is compiled varies extensively. According to the Area Development web site, the magazine conducted a “flash survey” of a select group of respected consultants who work with a nationwide client base. The consultants were asked to name their top 10 state choices in eight selection criteria, which include lowest business costs, most business-friendly and corporate tax environment, to name a few. All of the criteria were given the same weighting. Find the complete article and rankings here.

For the Forbes list, the ranking measures six categories (none of which were the same as the Area Development list, with the exception of business costs). Then, 33 points of data were factored in to determine the rankings in the six main areas, with weight given to business costs. The data came from 10 sources (such as the Census Bureau, FBI, Tax Foundation, Department of Education) with research firm Moody’s Economy.com as the most-utilized resource. Find the complete article and rankings here.

Already, these are two dramatically dissimilar methods for calculating rankings. A little farther down in the Area Development article, the writer even admits that if the criteria were regrouped into three categories, the rankings would see significant change.

Just keep in mind that the way the data is interpreted is often subjective and that the rankings one sees may be utilizing very different measures.

The good news, however, is that in general Indiana is ranked very highly and the state boasts a business-friendly environment – evident by the new and expanding businesses around the state despite the difficult economic times. The Indiana Chamber will, of course, continue to be a key player in helping ensure the state’s business success.

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