| For many companies, the idea
of relocating or establishing a new location within
any market can be difficult, but overcoming these challenges
overseas can be daunting. Ensuring that the process
is done correctly – that the key stakeholders
have been involved, all
criteria are identified and analysed, and your company
has received the maximum value for its investment –
can make the difference between success and failure
at the enterprise level.
When a company seeks to relocate, it typically makes
the mistake of focusing on finding the appropriate property.
This is often true if the site selection process is
being driven at corporate level. However, selection
of the property can often be the third or fourth step
when
considering a relocation or establishing a new location.
Furthermore, while property is a large percentage of
every organisation’s costs base, there are many
other key “success” factors that need to
be considered prior to selecting the site. Many of these
factors will differ in definition and importance according
to the needs
of the business.
By applying a strategic planning methodology to location
selection, a company’s site can be more closely
aligned with the company business plan.
There are four key phases in a typical location analysis
process:
- Project initiation and objective
setting
- National/regional/city selection
- Analysis of short-listed locations
and community tours
- Implementation, negotiation
and construction
PHASE 1: PROJECT INITIATION AND OBJECTIVE SETTING
This is the most critical step as it determines the
key business drivers for the location selection process.
It is important that key stakeholders are involved at
this stage. We recommend the creation of a Steering
Committee, which typically includes location executives
and other stakeholders and decision-makers, such as
human resource teams, information and technology teams,
finance teams, and key business unit heads.
The project objectives and macro criteria relevant to
the location strategy are often determined through guided
brainstorming sessions that can have a secondary benefit
of building common objectives from different stakeholders
in the business. This exercise will also ensure that
creating a new location or relocating an existing operation
is the correct business decision to implement.
Once the objectives of the overall project have been
identified, time frames and project plans are defined.
Information regarding existing property within the company
would be gathered at this time to identify potential
constraints (for example, long-term lease obligations)
and/or opportunities (for example, collocation synergies)
within the current portfolio, and ultimately an exit
plan, if required.
Communication is an essential process in projects such
as these and can often be a potential pitfall if not
managed and guided appropriately. The methodology applied
to communication is very project specific; however,
an external consulting resource is often helpful in
managing this process. To ensure early communication
and staff buy-in, a staff communication policy can be
formulated
during this phase, especially if the project requires
international relocations.
PHASE 2: NATIONAL/REGIONAL/CITY
SELECTION
During this phase, the process of identifying the micro
criteria commences. This is typically defined through
a series of interviews and questionnaires to formulate
a profile of the appropriate micro drivers and their
respective weighting. The weighting will be defined
in accordance with the company’s business plan.
Initially, a geographic scope would be defined (for
example, a firm may decide to establish a European location).
Once the geographic scope is defined, the micro criteria
would be used to narrow the scope of the search. These
can include image, labour cost and
accessibility, language skills, move costs, tax breaks
and other incentives, proximity to transportation, phasing
of a move, among others. Cities or regions are then
identified and evaluated according to the weighted importance
of the micro factors. Labour availability and cost is
a standard micro criterion that is weighted heavily
in a location strategy, and often one that is considered
too late in the process. Consideration must be given
to issues such as travel times to work, available travel
networks and public infrastructure. Each of these factors
also has an impact on the retention and severance rates
of existing employees and hence the cost of potential
redundancies. These factors would also be built into
the model to evaluate respective locations.
Once the markets are modelled, a refined short list
of suitable locations is established.
PHASE 3: ANALYSIS OF
SHORT-LISTED LOCATIONS AND COMMUNITY TOURS
Following the quantitative research of the previous
two stages, this phase commences with a detailed analysis
of the specific locations. Community tours and site
visits would be included in this stage. This allows
the Steering Committee or key decision-makers to understand
the specifics of the labour market, real estate, connectivity
and other key items associated with the success of the
project.
During this phase, a detailed analysis of the relocation
of existing labour would be undertaken (if applicable)
and the preliminary recruitment campaign would be initiated.
Companies seeking to hire a large number of candidates
or candidates with specific qualifications would meet
with recruitment firms to determine if qualified candidates
existed within the specific market place. Other relevant
employers may be interviewed at this stage to determine
overall satisfaction with a specific location.
Once on-site tours have taken place, specific buildings
would be considered and an analysis would be conducted
for each building. This would include a full cost analysis,
viability, and a pros and cons report. The buildings
would be ranked in the final selection
process.
During this process, companies and their consultants
would meet with local governments or economic development
agencies to determine the level of aid, grants, incentives
or tax schemes that may be available within a region.
These incentives can have a dramatic
impact on the overall cost of a location. However, the
process of gaining Regional Selective Assistance and
Grant Aid within the EU, and securing Statutory and
Discretionary incentives in the US, has several pitfalls,
including claw backs and other commitments that can
disguise the medium and long-term risk of accepting
some incentives. A consultancy-based approach is recommended
to secure the highest value of incentives with the lowest
proportion of risk to the enterprise.
The conclusion at this stage is to identify a single
preferred location.
PHASE 4: IMPLEMENTATION
At the initiation of this phase, a summary of the findings
including an audit trail of approved and rejected options
would be created. Typically, the Steering Committee
would reconvene following the site visits to agree on
the ranking of appropriate buildings within the selected
location.
Once a number of buildings have been identified, a negotiation
strategy would be established and discussions with the
landlords/developers would commence. Space planning
and design work would be undertaken at this stage to
determine optimal
layouts and occupancy patterns. Final budgets are often
authorised during this stage as final costs are realised.
Once the final legal transaction has been completed,
build-out and construction would commence and telecommunications
infrastructure would be established. At the same time,
staff communication regarding potential relocations
would be initiated.
In addition, training grants and economic incentives
would be secured at this stage.
The last stage is for the company to finalise its transition
plan and occupy its new premises.
For further information on site selection needs, please
contact:
Sue Asprey
Director, CBRE
1a Wimpole Street, London, W1G 0RE
Tel:
+44 (0) 207 182 2797
E-mail:
sue.asprey@cbre.com
Darcy Frank Kotun
Senior Managing Director, CBRE Consulting
101 California Street, 44th Floor, San Francisco, CA
94111
Tel:
+1 415 722 0249
E-mail:
darcy.kotun@cbre.com
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