Location has always been a central tenet of real estate strategy. Yet, changes driven by economic, social, demographic and technology shifts are rapidly transforming what “location” really means to businesses.
In the latest issue of Knowledge Leader, I share several outdated assumptions about location strategy that persist today despite these changes. These include:
- Cheaper labor and real estate are the most important drivers of location decisions
- When a company moves, its workforce will follow
- Locate where the executives live, and the workforce will commute
In today’s environment, more employees are resistant to relocation and this can present significant costs to companies. For example, there is usually a several-year payback to replace employees once severance and recruitment costs are factored in.
And when it comes to finding the elusive high-quality, lower-cost locations, many companies discover that they do exist—but are far away from major coastal metropolitan centers that often present other benefits.
While types of location decisions vary greatly, I think there is value in understanding the characteristics of the most common types of location initiatives today:
- Pick Up and Go: A large component of a company moves to a new area, along with its employees
- Consolidate to Beachhead: Multiple locations are consolidated into one location where some corporate facilities are already present, employing a mix of current and new personnel.
- New Horizons: A start-up, new division or existing function is moved to a new area, hiring mostly new employees.
Each of these situations requires a careful examination of options and potential hidden costs. Whether your company is looking to pick up and go, consolidate or head for new horizons it can pay to ensure you are factoring in the right assumptions to your corporate location strategy.
To learn more about corporate location strategy, download the Fall 2016 Knowledge Leader magazine.
As Executive Managing Director, Head of Consulting, Corporate Solutions for the Americas region, Martha and her team provide advisory services in the disciplines of management consulting, portfolio planning and location strategy. Earlier in her career, Dr. O’Mara ran her own consulting firm and was a professor at Harvard University for nine years.