Andrew H. Shapiro, Managing Director, Biggins Lacy Shapiro & Company (Spring 2011)
Measures of Attractiveness
These are the so-called "quality of life" variables. The challenge is to base evaluation on as many objective factors as possible. A number of strong indicators include:
• Cost of living
• Crime rate
• Public school quality
• Arts and recreational amenities
• Business climate
Business climate is the only 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 relate 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 work force
• Presence of "Big Four" and other audit and consulting firms
• Availability of corporate law firms
• Proximity to top tier advertising agencies
Headquarters tend to cluster, creating a strong labor pool. However, some companies prefer to be apart, particularly if a key competitor dominates a specific market.
Operating costs more greatly affect divisional and regional headquarters location strategies. As wages can comprise 70 percent of overhead, the focus is often on managerial positions, as most levels above that are compensated on a national basis, which would not uncover significant geographic differences.
Availability of economic development incentives is another important cost factor. States and localities use incentives as a pricing strategy because they can make a difference in a project's financial feasibility at the margin. Some destinations target headquarters with specific incentive programs. Others will use a general approach focused on job creation, as opposed to capital investment. Cash grants, or programs providing monetizable tax credits, are typically considered to be the most valuable.
Finding the right destination for your headquarters means starting with a vision. Then determine your business's driving factors and prioritize your objectives. Before you start thinking about locations, know what you want to achieve. Do you need to relocate critical talent? How easy will it be to migrate to a new location? Will future markets be the same as those you have now? These all affect your headquarters location decision-making process and the alternatives you should consider. Place all factors into perspective, and don't be lured by an attractive environment if you suspect it will not meet your broad performance requirements.
You should take equal care to organize and manage this process. Be certain to maintain thorough documentation, as a logical, defensible decision-making methodology is the best way to ensure consensus within your organization. And do not forget that location strategy, planning, and implementation are distinct but equally important phases. Each requires that you procure appropriate internal and external resources (real estate, human resources, information technology, communications, government relations) for management, information, communications, and approvals.