bls & co - siting a headquarters office - area development magazine, 2011

8/6/2019 BLS & Co - Siting a Headquarters Office - Area Development Magazine, 2011

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Every location decision, whether large or small, has implications for an organizations strategy and

operations. Redeploying resources and positioning the company to compete can create tremendous

value while the failure to do so at a critical juncture may result in the unfortunate waste of both time and

precious resources, often irrecoverably.

Location strategies often fall somewhere along a continuum. At one end of the spectrum are tactical,

cost-driven decisions; at the other end are strategic, performance-driven decisions. In between are

choices that make various concessions to all of the above.

By Andy Shapiro, Biggins Lacy Shapiro & Company

Article in Area Development Magazine, 2011

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Designing Your Roadmap for Headquarters Relocation

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The Key Trade-off: Cost Versus Performance

StrategicTactical

Performance

Driven

Cost Driven

A cost-driven strategy is one that emphasizes reductions in operating expenses and is frequently

employed when locating internal and external back office functions such as shared services and

customer contact centers and certain manufacturing operations. Industries sensitive to costs, such as

retailing, also will favor cost-driven location strategies.

A performance-driven location strategy is one where cost containment is secondary to factors that can

enhance value such as talent and skills availability, accessibility, image, and other factors related to the

ongoing viability of a company. Corporate operations driven by performance factors include

headquarters, sales offices and research and development centers and certain advanced manufacturing

operations requiring a highly skilled and experienced work force
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Designing Your Roadmap for Headquarters Relocation (CONTD

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I. WHAT ARE THE HEADQUARTERS CRITICAL SUCCESS FACTORS?

As noted above, cost and tactical considerations rarely drive a corporate headquarters relocation engagement. In fact, these

types of moves often:

Involve subjective, intangible decision factors such as quality of life;

Draw the attention of high level executives;

Occur in a highly politicized environment; and

Focus on critical success factors related to people, communications and business synergies.

Headquarters moves are thus distinguished by their strategic nature and their emphasis on performance improvement. Here

are but a few of the most common headquarters performance objectives:

A Shift in Culture: One of the most popular rationales for moving the headquarters is the opportunity to accomplish wide-

scale culture change. A new environment and an influx of new blood can help achieve increased productivity and a

heightened level of vigor among front office employees.

Organizational Talent Development: How can a location attract specialized talent dedicated to the organizations mission?

How attractive is the community for future recruits?

Cultivation of Image: For many organizations location can exert a profound influence on image. Wouldnt our perceptions

of Apple be quite different if it were not located in Silicon Valley? What would happen to the reputation of Berkshire

Hathaway if Warren Buffett, the wizard of Omaha, resided instead in Las Vegas?

Enhance Communications: Factors bearing on business and achievement are complex and often tied to strategic vision. Thus

it is important that communications with stakeholders within and outside of the company be timely and be understood.

Improve Accessibility: Few factors promote communications better than access. And for a corporate headquarters, access

most often means the ability to travel almost anywhere in the world conveniently and economically.

Access to Financial and Business Networks: More than one headquarters move was motivated by the desire to be

proximate to the network of consultants, attorneys and auditors that big corporation rely upon for access to debt and capital

markets.

Notice that we have not addressed issues related to cost. Again, costs are often at an opposite pole from performance. That is

not to say that you cannot have both. However, for reasons that we hope to make abundantly clear, it is often difficult to justify

moving a headquarters solely, or principally to manage costs.

II. WHAT CITIES SHOULD YOU CONSIDER?

Corporate headquarters have historically congregated in large, tier one metros such as New York, Chicago or Los Angeles or

traditional business centers like Cleveland or Pittsburgh. Yet one of the most striking location dynamics of the last twenty years

has been the gradual shift of corporate headquarters to popular new metros, frequently in the Sunbelt, such as Atlanta and

Dallas as they close the business infrastructure gap with the more traditional headquarters locations. All of these locations

generally have superior air access, full business support services, strong managerial and executive labor markets, a modern

communications infrastructure, and the range of quality of life assets that executives typically demand.

Then there are the second tier metropolitan areas, including regional market center cities such as Charlotte, Phoenix and Denver

that are becoming a more common choice for headquarters, particularly at the divisional level. Often these cities will feature a

cluster of locally-grown and dominant companies (though Charlottes big banks now have a national presence), and they have

become regional magnets for talent and thus a good fit for some types of corporate or divisional headquarters.


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There also are those few third tier communities that can offer a specific set of performance factors that create a niche

environment for particular headquarters. These can include cites such as Austin and Raleigh - university communities, R&D

centers and also state capitols that feature an attractive quality of life and revolve around a relatively narrow cluster of

economic activity (life sciences in Raleigh and software/technology in Austin).

IV. LOCATION EVALUATION AND SELECTION

How then does one go about finding the optimal headquarters location? The classical decision-making model translates a

companys objectives into quantifiable headquarters location criteria that would enable the comparison of alternative

destinations with the ultimate goal of selecting the best balanced location. As we are expecting that headquarters relocation

will drive performance improvement, the location screening should focus on quantifiable, geographically-variable

performance factors and not necessarily cost metrics, unless we were working on behalf of a divisional or regional

headquarters. These factors can be grouped based on overall project objectives and might look something like this:

Measures of Access and Connectivity

The best proxies for connectivity are usually airport status and flight offerings, including

Proximity to a major hub airport

Number of non-stop flights to key destinations

Ability to perform one day turnaround

In all but a very few instances, global headquarters cannot afford to be far from a major hub (as designated by the FAA).

The number of available non-stops usually correlates closely with hub status.

Measures of Attractiveness

These are the so-called quality of life variables. The challenge is to base your evaluation on as many objective factors as

possible. A number of consistently good quality of life indicators include:

Cost of Living

Crime rate

Congestion

Public school quality

Arts and Recreational amenities

Business climate

Business climate is the one non-quality of life measure here, but it can be an important consideration particularly for

headquarters in highly-regulated or highly-taxed industries.

Measures of Depth

These may be the most important performance measures as they related directly to your ability to secure specialized

headquarters talent.

Proximity to Fortune 1000 headquarters

Size and share of labor market by key managerial occupations

Educational attainment of workforce

Presence of Big Four and other audit/consulting firms

Availability of corporate law firms

Proximity to top tier advertising agencies

Headquarters tend to cluster with one another, thus creating a uniquely qualified and fungible labor pool. However, some

companies prefer to be apart, particularly if a key competitor dominates a specific market.

Designing Your Roadmap for Headquarters Relocation (CONTD


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bls & co - siting a headquarters office - area development magazine, 2011

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