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The Search Is On, But Should We Tell?

When site selecting, there are pros and cons to maintaining confidentiality as well as to making the search public; it all depends upon your company’s current situation.

Q4 2018
Last year, Amazon single-handedly turned the site selection profession into a household name. As everyone reading this article will recall, in late summer 2017, Seattle-based Amazon publicly announced its plans to establish a second headquarters in North America. News spread far and wide, precipitating a race among local communities to cobble together the most successful bid they could possibly dream up, and dream they did. The creative measures that were undertaken — one Georgia city offered to change its name to Amazon if chosen — fueled the media frenzy. For six full months, hardly a day went by without hearing something about Amazon HQ2.

Mind you, not all the news was positive. With more than 200 communities submitting bids, many critics railed on Amazon for pursuing a public search. The chief complaint was that it caused many unqualified communities to submit proposals, wasting precious local government resources in towns already strapped with underfunded services. In Amazon’s defense, though, its RFP was quite thorough, detailing minimum size requirements for available land, labor, and infrastructure needs.

Regardless, the question of whether to conduct a site search publicly or privately remains a matter of debate. There are three types of approaches:

Fully confidential. No one — other than a handful of employees, site selection consultants, and the final two to three communities and states under consideration — knows about the project until a formal announcement takes place. The majority of projects follow this approach.

Semi-confidential. In this situation, it is common knowledge that the company is looking for a site, but the public does not know precisely where. An example is Apple’s current search for a fourth U.S. campus.

Public. This is the Amazon HQ2 approach, where the company announces its plans to find a new location and conducts an open-bidding process to vet qualified communities.

The Advantages of Maintaining Confidentiality
There are many good reasons companies choose to keep their search confidential, but these four rise to the top: Human capital. If employees learn their company is considering a move, it can lead to anxiety that their jobs may somehow be affected. News of this magnitude can quickly spin out of control, and executives are eager to avoid distractions that might negatively impact productivity or morale. This complication is exacerbated if the current facility is unionized and possible locations under review are outside of union strongholds. Maintaining a “business as usual” approach, while keeping the site search confidential, is a better guarantee that productivity and profits stay on track.

Monty Turner is a senior consultant at Global Location Strategies, a site selection and incentive negotiations firm specializing in capital-, labor-, and resource-intensive industries. He has managed projects in the Americas, Europe, and Asia with a combined estimated capital investment of over $8.8 billion and new direct employment of over 3,000. He frequently consults with economic development organizations and speaks at conferences across the U.S. about location considerations.
Avoidance of political influence. Companies should select a site because it meets the needs of the project, not for political motives. Politics has a place in site selection, but maintaining confidentiality limits the potential for politics to completely sway a decision.

Time management. Anonymity can help avoid a mountain of phone calls, emails, and tweets from potential suitors. It’s an economic developer’s job to recruit companies, but public searches will draw attention from elected officials, well-meaning citizens, and others who will go to great lengths to promote the attributes of their community. While most try not to go overboard, the sheer number of competing communities can quickly overwhelm the inboxes of company executives.

Competitive advantage. If competition gets wind of a company’s plans to expand capacity, they may take measures to either derail or to leapfrog those plans and get to market first. If the company is considering a site near one of its competitors, a competitor may go to great lengths to prevent it from happening. Its longevity in a community gives that company certain political clout that could lead to roadblocks. Keeping the search private can thwart aggressive efforts to block corporate strategy and give you a competitive edge as a first-mover in your industry.

Anonymity can help avoid a mountain of phone calls, emails, and tweets from potential suitors. The Advantages of a Public Search
There are two sides to every story, and many believe there are as many good reasons for going public with a site search as there are for keeping it under wraps. Here are four counterpoints for an open search:

Investor confidence. Many people believe much of the reason Amazon conducted an open site search was to draw attention to the company and its enormous growth potential to secure more investment capital. The sheer novelty of having two corporate headquarters on the same continent — both employing more than 50,000 people — sends a strong signal that company executives have confidence in their long-term growth.

Choice sites. It is possible that the more competitive a search is, the more likely communities are to offer up their best sites. Companies that don’t have instant name recognition might especially benefit from announcing their search to better ensure the best available offerings.

Better incentives. Another widely held view about Amazon’s public bid process is that it opened the door to far better incentives from states and counties. Details provided in the initial RFP shed light on what was most important to Amazon, i.e., talent attraction, public transportation and infrastructure, and land availability. With a clear picture of corporate goals, communities can focus on offering incentive packages with purpose.

If competition gets wind of a company’s plans to expand capacity, they may take measures to either derail or to leapfrog those plans and get to market first. Comprehensive information. EDOs receive many RFIs every week. They are inclined to invest resources where they know they can be most impactful. Full disclosure of the search company breaks the barrier of secrecy and adds validity to the project, especially if the company is not using a trusted location advisor.

Which method is best? The answer depends upon the company’s current situation, its competitive landscape, and the industry in which it operates. In my experience, the benefits of maintaining confidentiality usually outweigh an open bid. Privacy helps eliminate unnecessary worry among employees and investors. It also keeps your competition in the dark.

Once you decide that a new location can be advantageous, you should carefully consider the pros and cons of your approach. Develop a comprehensive checklist (a site selection professional can provide this), making sure to focus on long-term gains. The outcome of your answers should lead you to determine the best approach for your company.
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