Andrew H. Shapiro, Managing Director, Biggins Lacy Shapiro & Company (Spring 2011)
Every location decision, large or small, affects an organization's strategy and operations. Redeploying resources and positioning the company to compete can create great value. But the failure to do so may result in the irrevocable waste of time and resources.
Location strategies 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 concessions to all of the above. A cost-driven strategy emphasizes reductions in operating expenses and is frequently used 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 retail, also favor cost-driven location strategies. A performance-driven location strategy ranks cost containment second to factors that enhance value, such as talent and skills availability, accessibility, image, and other considerations related to the ongoing viability of a company. Performance factor-driven operations include headquarters, sales offices, research and development centers, and advanced manufacturing operations that require a highly skilled work force.
Critical Success Factors
Cost and tactical considerations alone rarely drive a corporate headquarters relocation engagement. Instead, these moves often:
• Involve subjective, intangible factors, such as quality of life
• Draw the attention of high-level executives
• Occur in a highly politicized environment
• Focus on critical success factors related to people, communications, and business synergies
Strategy and a focus on improving performance characterize headquarters moves. Here are some of the most common headquarters performance objectives:
• Culture Shift: One of the most common reasons for moving the headquarters is the opportunity to accomplish wide-scale culture change. A new environment - and new blood - can help increase productivity and heighten vigor among front-office employees.
• Organizational Talent Development: How can a location attract specialized talent dedicated to the organization's mission? How attractive is the community for future recruits?
• Image Cultivation: For many organizations, location can profoundly influence image. Wouldn't 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 so-called wizard of Omaha, resided in Las Vegas?
• Enhanced Communications: The factors that bear on business and achievement are complex and often tied to strategic vision. Thus, it is important for communications with stakeholders within and outside the company to be timely and clear.
• Improved Accessibility: Few factors promote communication better than access. And for a corporate headquarters, access often means the ability to travel anywhere in the world conveniently and economically.
• Access to Financial and Business Networks: The desire to be near the consultants, attorneys, and auditors that big corporations rely on for access to debt and capital markets motivated more than one headquarters move.
We have notably not addressed cost issues. Costs are often at the polar opposite of performance. That's not to say that you can't have both. However, it is often difficult to justify moving a headquarters predominantly to manage costs.