Three Mistakes CEOs Must Avoid When Relocating a Business
The smooth transition from one location to another demands careful planning, management, and execution.
James T. Berger (Summer 2012)
An improving economy means that more and more industrial firms will be expanding and seeking more space. Unfortunately, relocations can be traumatic, and the smooth transition from one location to another demands careful planning, management, and execution.
Chicago area relocation consultant Joseph Cavolick has managed more than 35 moves and projects in the United States and Internationally. Cavolick's clients have included the U.S. Army, Prudential Insurance Co., GlaxoWellcome, TAP Pharmaceuticals, Shure Inc., OmniBus Systems, and Maine Plastics. His approach is to work with the CEO and staff to identify all the tasks that need to be accomplished and then organize employee project teams with responsibilities, timelines, and budgets.
"We manage the project to insure that the people, equipment, and business operations continue smoothly during preparation and project implementation, and then stabilize quickly in the new configuration in a way that is easy on both employees and customers," Cavolick says. He has systemized the process and has identified three mistakes to avoid in business relocation:
- 1. Incomplete planning and budgeting
- 2. Underestimating lead times and employee time commitments
- 3. Failure to assign one person accountable for all aspects of the project
Mistake #1: Incomplete planning and budgeting
According to Cavolick, after the decision to move has been made, the next critical questions become:
- What tasks have to be done?
- How long will each task take?
- When must work begin on each task?
- Who will be responsible?
- What will it cost to accomplish each task?
- How will the business stay operational during the process?
Cavolick then provides a systematic approach to managing the project. "We often begin by doing a complete inventory of tasks typical to most relocations," he says, adding it is important to assign two individuals. "The first is accountable for seeing the task is accomplished, and the second is responsible for completing the task," he explains. The failure to assign these individuals and/or their inability to work together can spell disaster. Here is an example of a situation where there was a lack of cooperation and the ramifications:
The CEO of a company in the food business was relocating its headquarters, production, and distribution operations into a large new facility. The executive VP had accountability for design and construction of the new facility. That VP assigned responsibility for design to the production manager, who worked closely with the architect to develop the construction plans. Unfortunately, these two individuals failed to involve the warehouse manager on an ongoing basis, and proceeded with the design on the basis of the total number of truck loading docks they expected to be needed. All of the docks were designed at ground level. Not until later, after construction had begun, did they realize that only two of the truck docks could be on ground level. The remaining 10 docks needed to be ramped down below ground.
Correcting this problem ended up costing more than $100,000 and added months of delay to the completion schedule. One of the management executives lost his job over the incident, and the company nearly went out of business because of the inability to complete booked orders on time. This problem should have been avoided by involving all the key stakeholders on a continuing and regular basis.
Mistake #2: Underestimating lead times and employee time commitments
"Companies invite trouble when they begin the relocation process with an incomplete appreciation of the details, the required lead times, and especially the time necessary to coordinate and manage them," Cavolick says. "The solution is to assign additional people with proper expertise right from the outset."
Existing staff organizations often are instinctively given these responsibilities, he adds, but far too often such staffs are kept lean for normal operations and for facility maintenance, but this is not adequate for relocation projects. He points out that by the time problems surface, the project may be out of control in terms of costs and scheduling. Making matters worse, some decisions may have been made hastily in order to maintain a schedule. "Such ill-considered decisions can be extremely detrimental to the company," he says.
Cavolick also points out that experience has shown that employees faced with conflicting demands generally put their priorities on their primary job responsibilities, and relocation project responsibilities are considered secondarily.
Cavolick further explains that consummating a successful relocation in some ways is similar to hosting a successful party. Guests who are coming from different locations need to leave at different times so that everyone arrives at the party at the same time. In a relocation project, the accountable and responsible individuals need to appreciate not only lead times needed by each vendor or subcontractor, but more importantly how those schedules are interdependent. He provides the following example of underestimating lead times and employee time commitments and the ramifications:
The CEO of an industrial company was moving into a new facility twice its current size. The VP accountable for the move assigned one manager responsible for the computer systems, one responsible for selecting a new telephone system, and a third manager responsible for selecting service providers for voice, for data, and another for backup, should either of the first two services fail during operations.
Several weeks prior to the scheduled completion and move, the VP who was accountable found it necessary to delay the new occupancy date by two weeks. He notified the managers responsible for computer and telephone systems, but decided to wait a week to notify the manager handling service providers for voice, data, and backup service until that manager returned from vacation a week later.
Working with the schedule they had been given, the voice/data/backup vendors already had coordinated their systems work to terminate service in the old location and bring it up in the new location without any downtime. Unfortunately the week's delay in notifying them added an additional six weeks until they could re-coordinate their work schedules to guarantee a smooth transition.
Mistake #3: Failure to assign one person accountable for all aspects of the project
Cavolick maintains that the relocation process involves four phases: planning, preparing, relocating, and recovering in the new facility. The process can last from a few months to several years. Preparing the plan is a necessary first step but only the beginning. The remaining steps must be continually managed because of the hundreds of details and tasks. Most of these details and tasks affect more than one department and, therefore, require "continuous cross-departmental coordination."
For this reason, Cavolick maintains that assigning overall project accountability to one person is critical for success. This might be an executive within the firm or a temporary project manager hired from outside the firm. The old adage, "When everyone is in charge, no one is charge, applies here," according to Cavolick. He gives the following example of a relocation that almost got derailed for lack of an individual who needed to step up:
The CEO of a manufacturing firm was moving the company into a much larger facility, in order to co-locate headquarters, R&D, production, and warehouse operations. The VP who was accountable assigned relocation planning responsibilities to each of the managers responsible for those four areas. For the first several weeks they worked their relocation schedules independently, with the assumption that the critical path would be determined by the schedule for move and set up of the production equipment. When the managers met initially, they could not agree on exactly how to coordinate the scheduled movements. So they created a compromise plan that had many loose ends. Had that plan been used, the relocation would have been a disaster. Fortunately the CEO recognized the difficulty the managers were having, and the amount of time that was being diverted from their primary responsibilities. This coordination resulted in a new plan that properly identified the critical path as being determined by when the raw materials would be delivered to either the current or new location.
"The key to success of this and every relocation is the CEO's recognition that one person must be accountable for - and knowledgeable of - all aspects of the move, not only during the initial planning, but also during the preparation, move, and recovery in the new facility," says Cavolick.