The Smooth (Headquarters) Operators
22 Nov, 2013
By Rachel Duran
Relocation means uprooting your employees and creating opportunities.
When Hertz Corp. acquired car rental competitor Dollar Thrifty Automotive Group Inc. in 2012, the combined entity immediately had to manage a clash of cultures: Dollar Thrifty was located in Tulsa, Okla., and Hertz was located in Park Ridge, N.J. It was clear the New Jersey employees were not interested in moving to Tulsa, and the Tulsa employees were not interested in moving to New Jersey.
“Culturally, we knew we needed to bring together the home office people and create a solid common culture,” says Richard Broome, executive vice president, corporate affairs and communications, Hertz Corp. “We began looking at how to best bridge this perhaps insurmountable gap. The best way was to find a neutral location for our worldwide headquarters. As we went through it, it seemed Florida could be a mutually acceptable location to attract both New Jersey and Oklahoma-based employees.”
A different approach to relocation was undertaken by California-based American Specialty Health, which due to growing business interests, required a location in the middle of the country, which among other goals, would enable business recovery and resumption in the event of a disaster. The company, one of the nation’s largest premier specialty health services organizations, has been located in San Diego for 25 years. It also has an operation in Dallas.
Leadership recently decided to move half of its corporate services to Carmel, Ind., a suburb of Indianapolis, and keep the remaining half in San Diego. Carmel makes sense for the company in the long term in regard to a central location to serve its customers throughout the nation, among other reasons.
“Now, if you measure quality of life in terms of great weather and beaches, San Diego has a great quality of life — among the best in the United States,” says George DeVries, chairman and CEO, American Specialty Health. “But if you measure quality of life in the cost of housing, energy, and commute time to work, quality of life is a bit hard for many in San Diego.
“So for us, if we were going to do this we wanted to make sure we located in a community where the cost of living for employees makes it affordable to live, plus lowers the costs for the company,” DeVries continues. “And it needed to contribute to the business resumption strategy; as well as our growth into a national company.”
DeVries also notes Carmel’s city council, community and five-time mayor, Jim Brainard, have collaborated for years to create a robust quality of life, investing in the future through thoughtful planning. Brainard points to the built environment in Carmel, a region which lacks seashores, mountains and rivers. “In Carmel, we have chosen to be different, and when it makes sense, to be innovative and get outside of the box,” Brainard says.
Amenities include a master-planned downtown, which is located outside of the original village area, and which anchors a $175 million arts complex, consisting of a $125 million concert hall, an underground parking facility and two small theatres, Brainard says. Carmel also has a new community center, an arts and design district, 800 acres of park space, and 126 miles of walking and biking trails.
These initiatives have paid off for Carmel. In addition to the attraction of American Specialty Health, earlier this year, GEICO announced the addition of 1,200 jobs to its operations. Carmel is home to 43 corporate headquarters facilities. Its population has increased from 25,000 people in 1990 to 85,000 people today.
Don’t Let the Rumor Mill Get Started
Before the acquisition of Dollar Thrifty was complete, Hertz began working with site consulting specialists, McCallum Sweeney Consulting LLC. Officials from Hertz were about to embark on a process where confidentiality is crucial. What’s more, the relocation of an entire corporate headquarters operation is very rare, intensifying the need to prevent leaks and rumors from circulating among employees and current host communities until the official announcement is made.
“This whole relocation effort could really have blown up if confidentiality was breached too soon,” Broome notes. “The communication issues around relocating are complex and important, as well as the negotiations and the handling of the entire transaction. It is more involved than buying land to put in a car rental facility or to build a location at an airport.”
Hertz decided on a location in Estero, Fla., located between Fort Myers and Naples. Senior management team members are in the process of moving into temporary space in Naples while the permanent facility is being built in Estero. The 250,000-square-foot facility will be located off of U.S. Route 41, and will include office functions, a car rental service and a car sales facility. “We wanted to have a local presence next to the headquarters to keep our fingers on the pulse of the industry,” Broome says. “It is a great location to attract customers to rent or buy cars from us.”
Hertz will relocate hundreds of employees to the new headquarters as well as hire locally in Lee County, Fla. The company advised employees in both New Jersey and Oklahoma that they could keep their jobs if they moved to Florida with the company. It should be noted that Hertz is keeping 100 to 150 employees from ecommerce, IT and finance positions in New Jersey and New York City. Company officials believe it is the best location for these employees to work.
For American Specialty Health, operations will continue in San Diego and Dallas; however, new growth will take place in Dallas, and in particular, in Carmel. The company will locate to an 80,000-square-foot facility at the Hamilton Crossing Centre in Carmel, and by the second quarter of 2014 the company expects to employ 150 people. By next fall the company expects to have 200 to 250 staff members at the location.
“This whole relocation effort could really have blown up if confidentiality was breached too soon. The communication issues around relocating are complex and important, as well as the negotiations and the handling of the entire transaction. It is more involved than buying land to put in a car rental facility or to build a location at an airport.” – Richard Broome, executive vice president, corporate affairs and communications, Hertz Corp.
Corporate relocation decisions are made sweeter with incentives to support these significant moves. In regard to its relocation, Hertz will receive incentives from the state of Florida and the local community to help in defraying costs of the move. “We don’t get a dime of state or local incentives until we finish the headquarters building in 2015,” Broome says.
For American Specialty Health, the company will receive a quarter of a million dollar training grant from the state, and it qualifies for $11 million in EDGE tax credits, also a state program. These incentives are also performance based.
Why did Estero and Lee County win the Hertz project? Positive interactions. “They kept our interests strictly confidential; they didn’t know who we were for quite a while. They were very responsive at every turn. They honored confidentiality, and the few who knew, kept the news confidential.”
The relocation process is challenging in the fact that you are uprooting people, Broome notes. “You are providing opportunity but you have to help them make that transition. We offered familiarization tours and connections to realtors, as well as introducing them to the local education system. We also assisted the employees’ partners in finding suitable employment in Florida.”
American Specialty Health also provided familiarization tours for its employees to visit Carmel for those interested in transferring. “If they decide they want to do it, we send them back out again to at least rent a place for the time being to get their feet on ground,” DeVries says. “We will provide some reimbursement around relocation costs.”
DeVries notes this was a soft approach, and the company’s leadership feels good about where they are today. “People in San Diego are reassured and understand we have an ongoing commitment in San Diego; and people in Dallas and Carmel know we also have strong commitments at those locations,” he says.
Adds Broome: “We like to think we did some things right, but we had a lot of help locally and with our business partners. We are not finished — we are not prepared to spike the ball just yet. We still have a way to go before we cross the goal line.”
Broome summarizes the relocation process by highlighting that it takes careful planning throughout the project, which includes managing employee issues, and managing “where you live today so there are no hard feelings when you announce you are leaving.”
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Illustration by renjith krishnan at Free Digital Photos.net