Corporate Headquarters Moves

They happen. Companies move their front offices much like they move other parts of the business.

Headquarter operations remain a favored business development target in many communities. Usually, they offer a number of good-paying jobs, many of which are "knowledge jobs." Landing a major corporate headquarters operation is often an "image boost" for the community landing the deal, and an "image spill" for the one on the losing end of the stick. There are many other benefits associated with having corporate headquarters in your community, such as being the command and control center of the company, and in many cases having the company's R&D operation.

Corporate restructuring is a major driver in corporate headquarters relocation. It has been for some time. Cleveland is fretting the loss of Office Max, a local success story in the retail office supply industry, which was recently acquired by Boise-Cascade. While the exact impact on Office Max's Cleveland operations is not known, the turned over cards on the table point to more losses than gains for the Cleveland area.

My friend Mark Sweeney of McCallum Sweeny Consulting said in a recent Business Facility's article that "major headquarters relocation projects are still relatively rare, but are high profile decisions. They capture the attention of the business world and the economic development community, as well as the company's stockholders and employees. Behind the headlines, though, headquarters relocation projects are difficult decisions for companies. They have immense consequences for a company's long-term identity as well as short-term continuity. Many firms will consider the possibility of a headquarters relocation, but few will get beyond preliminary consideration, and only a very few of these companies will actually make the decision to relocate."

Sweeney cites three major reasons why companies move their headquarters operation: 1) image and branding; 2) mergers and acquisitions; and 3) cost-reduction. Some times the decision embodies all three driving factors.

My experience points to the need to understand the mindset of the CEO and the Board of Directors on decisions like this. As economic developers, we need to do a better job in this department. In some cases, you can see it coming. In other cases, you have to be skilled at reading the tea leaves. There are key vital signs to watch for with corporate headquarters: 1) corporate stock value and overall financial health; 2) major management changes; 3) strategic redirection of the company's business; 4) struggles finding the talent needed to run the business in the current headquarters location; 5) rising costs of doing business in the current headquarters location; and 6) a surge in M&A activity in a particular industry to achieve consolidation and improve industry profitability. These are some I advise watching for.

Stay tuned. I will be returning to this topic again shortly in the future.