Location Strategy Decision Chain

By: Area Development | May 27, 2009

Successful projects for expanding, consolidating, or relocating a company’s geographic operating footprint share a common grounding. They are guided by a logical, defendable process to build a case for, and to guide the decision, based on underlying business needs and critical project success factors. An equally important dimension is a clear project command, communication, and decision structure. This structure constitutes—to borrow and augment a well-known term—the supply (and demand) decision chain of corporate site selection and economic development.

The key groups in this decision chain comprise three categories: demand-side, supply-side, and a third group that evaluates, or otherwise influences, the decision. The views and motivation of each of these groups toward alternative solutions and factors of importance will likely vary. The underlying process needs to be grounded in the project objectives, but flexible enough to anticipate the actions and reactions of each of these parties.

Demand: We need to make the right decision and (for some) live with the decision.

The demand for changing a location footprint can be viewed in the context of broader organizational considerations such as talent sourcing, market penetration, process improvement, and revenue enhancement. Here are some of the key parties in the decision chain from the demand side:

1. Corporate end-users—These are personnel who will be most directly impacted by the decision. They and their families may need to move, or perhaps a new site represents a huge increase in travel and responsibility due to the distance to the new site and the criticality of start-up.

2. Internal project team—This comprises corporate real estate, strategic planning, human resources, or other team members charged with managing the location selection project and insuring that the decision is aligned to company goals.

3. Customers/suppliers—Often directly influencing the decision, both groups may control criteria related to pricing margin, service delivery metrics, quality, and reputation.

4. Operating model constituents—Business process changes are linked to deployment decisions (e.g. building a shared services organization, changing the ratio of in-house versus outsourced operations, or shifting from a decentralized to centralized model). These stakeholders will be drivers of change toward new geographic and sourcing alignments.

The end-user groups and the project team charged with evaluating options are at the center of the decision. They may directly experience, and have to live with, the new environment. As important, they may be held accountable for making the decision successful. Additionally, the project team needs the right facts to build a business case that satisfies the needs of the end-user groups, to sell the decision internally (perhaps to executive leadership) and to gain the necessary authorization to proceed with the investment.

Supply: Place and Promotion—We are the best location! Next are some representative parties on the supply-side. These groups represent candidate locations for the project and those who want to attract the investment to the community:

1. Economic developers—These groups are charged with attracting jobs and capital investment to the area. They are the community’s principal ambassadors as well as the managers of local intelligence and networks to guide the decision and deliver commitments.

2. Local business and employer representatives—An essential source of knowledge for prospective site-seekers, these groups can make or break a community’s chances to win a project. They can open up local networks and, sometimes, broader business opportunities for site-seekers.

3. Recruiters and educators—These are important representatives and entry points to the work force and new sources of talent.

4. Infrastructure providers—The roles of utility, telecommunications, and transportation services vary with the type of project, sometimes key (e.g. for manufacturing or data center projects), and other times less visible (e.g. for office projects).

5. Property and construction advisors—These groups transact the site and deliver the bricks and mortar: lease commitments, land acquisition, environmental due diligence, permitting, project design, and construction.

6. Other implementation partners—These include business structuring, regulatory, and tax advisors, and other sources of start-up and operating support.

These groups should strive to give the end-user confidence, backed up with facts. They need to focus on client needs and how the community can be part of the solution and deliver the project. One of the most important things this group can collectively do is to present an orchestrated, unified client-facing team with clear messaging.

The Evaluators: What are the benefits and risks, real and imagined? This is a rather diverse group of parties who determine or influence the decision, objectively or subjectively. Evaluators include:

1. Executive Leadership—This group includes the C-suite, business unit leadership, or board of directors who will authorize spending for the project and be driven by bottom-line considerations.

2. Corporate influencers and gatekeepers—These may be crucial links to access executive leadership and gain their endorsement.

3. Consultants—Their role is to provide objective framing, consistency, experience, and unbiased decision support to the project team and /or executive leadership. The consultant also provides a crucial firewall to protect confidentiality relative to external groups.

4. Political leadership—Although local, state and/or national leaders usually want to add jobs and capital investment for the citizenry, they will likely evaluate the project relative to community benefit. They hold the purse strings to approve incentives and other means of supporting project start-up and long-term operation.

5. Permitting authorities—Zoning, regulatory, environmental and other public officials will weigh in at some level for nearly all projects.

6. Financial analysts—The role of Wall Street is occasionally very visible, e.g. in considering the bottom-line benefits of a post-merger footprint rationalization or the subtle messaging that headquarters relocation communicates about the company’s vision.

7. Family members impacted by relocation—Personal move situations can quickly become emotional, and can sidetrack a project if key employees or their families are distressed.

8. Current employees—Workers impacted by the decision represent both a sensitive, and potentially costly and disruptive issue.

9. Other local constituents—Neighbors, local competitors, community groups, and the media may seek to influence (positively or negatively) political support for the project.

10. It is crucial to understand these groups, as much rests on their leverage and acceptance. It is the role of the project team—sometimes with the objective support of consultants—to deliver the facts to the internal and external parties authorized to approve the project. It is the role of the project team and the economic developers to separate fact from fiction, communicate balanced messaging to those concerned about the project’s impact, and to manage mitigation as appropriate.

The Decision Chain Evolves during the Site Selection Process. The underlying process serves as the control point for managing the decision chain and the changing roles of parties during the project stages, as follows:

Strategy: During this stage, the key questions concern project feasibility and rationalization. The decision chain will most likely be internal to the company and confidential to a core planning team. At this stage, it is critical to clarify the vision of the project, develop a business case and roadmap for further actions, and to clearly establish the stakeholders who will be part of the decision and when they should be involved. Overall clarity of leadership is essential.

Search: As the process evolves into a feasible plan for action, other parties may be brought into the decision chain including consultants, other internal experts, and economic development organizations. The stakeholders now need to have a clear understanding of the command and communications structure. Information overload can be an issue during this phase. Sorting through voluminous amounts of—and often inconsistent—data is frustrating; having a tight decision process to manage information, messaging, and the expansion of the decision chain is essential. Many project teams go off-track by letting the information at hand take charge of the decision, or by becoming too focused on specific factors, such as incentives or particular sites.

Selection: This is a logical point to selectively expand the decision chain. Sound location selection practice includes thorough investigation to identify fatal flaws and evaluate the fit of a location with respect to labor market, operating climate, site/infrastructure, cost, and other factors deemed important to the project. Sources of evidence are essential. This is also the right time for the project team to position the project with community leaders relative to incentives and other support.

Limits are usually placed on information sharing to protect project and client confidentiality. This is perhaps the most critical time to manage the decision chain so it does not unintentionally expand to additional parties, such as the media, competitors and others who could potentially compromise the delicate nature of the decision-making process.

Implementation: Once the decision becomes clear, other parties enter the process. These might include relocating employees and business parties who will potentially be impacted by the decision. Some may have been woven in earlier and, at least, their interests should have been considered in evaluating the alternatives. Third-party project delivery providers are also essential at this stage, including the design/build team, equipment and transportation providers, attorneys for finalizing property transactions, residential relocation companies, outsourcers, and local resources for recruiting and training. Other internal corporate parties may become more involved as well, relative to changes in business operations, new processes, and enhanced market access. This is also the time, perhaps starting with a formal announcement, to communicate the project benefits and form long-term relationships with the community at large.

Perhaps the most crucial message is to account for the eventual role and potential impact of each and all of these groups and how and when they fit into the decision. EARLY in the process. This brings this discussion full circle back to the first stage of having a program decision roadmap that logically considers the what ifs of the decision tree and the variability of the players in the decision. This is essential to effectively planning project implementation and to a successful long-term location decision.

About the Author: Lawrence Moretti has over 25 years experience consulting with corporate end-users, economic development groups, and other parties to global business geography deployment decisions.