Motive to Move

More companies are relocating their headquarters to better compete for millennial talent. But making such a move isn’t without its HR challenges.
By: | March 13, 2018 • 11 min read

It would be hard to find a company more closely associated with its small-town, longtime home than the direct-marketing firm YA, which, for much of its 46-year existence, was known as Young America. When the then-new firm moved in 1973 to the semi-rural Minnesota municipality of Young America (now Norwood Young America, population 3,549) some 40 miles west of Minneapolis, it not only took the name of the town but the U.S. Postal Service also assigned it a whopping 20 zip codes.

That’s why it was surely a shock to some when, in 2015, YA announced its name change and that it was relocating to the heart of downtown Minneapolis. But to the firm’s CEO, Chris Behrens, it was the only way that—in an age where most marketing is now digital—he could attract the software engineers and other top talent the firm needed to change its focus and thrive.

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“As the business progressed and the world turned toward technology, and social and mobile applications, the talent pool that drove the decision was much more digitally oriented,” Behrens says. “And to attract top talent—software engineers—you had to be downtown. That was the main driver.”

A who’s who of American corporations—General Electric, McDonald’s, Aetna and ADM, as well as a host of mid-sized firms—have relocated their headquarters in recent years to better compete for top millennial, tech-savvy talent. Often, these relocations involve moving from the suburbs to downtown cities, where many millennials prefer to reside and work.

However, as HR leaders who have played a role in orchestrating such a move can attest, establishing new headquarters isn’t as easy as putting on a few coats of paint and opening the doors to the new office. Relocation and HR professionals say employers must evaluate what millennial workers really want out of their new workplace, and consider how to balance that with the needs of longtime employees.

The City Calls

A perfect storm—the revitalization of downtowns across America with light rail, trendy entertainment districts and pro sports stadiums, the preference of skilled millennial tech workers to live in these urban areas and the need for even old-line companies to recruit those workers in a tight job market—has flipped the company-relocation playbook on its head. After a long era of corporate headquarters deserting decaying downtowns for wide-open suburban office parks with free parking and proximity to leafy subdivisions where baby boomers wanted to live, the tide has begun flowing in the opposite direction, and back to city centers.

“That’s where the millennial talent is, and it’s a growing trend,” says Courtney Cook, vice president of strategic development for the Los Angeles-based consultancy Korn Ferry, which has advised YA and other firms on relocations. “Every company, whether it’s a tech company or not, is going through a digital transformation.”

That means traditional companies—appliance makers, now connecting their products to the Internet of Things, or big retailers doing more of their business online—have an urgent need to hire software experts that had not been part of their old recruitment model. “There’s a definite need to go where the talent is—the city center where young people are gentrifying areas, where it’s fun and more culturally diverse,” says Cook.

Today, as YA’s Behrens looks out his office window onto the ultra-cool landmark mural of Minnesota native Bob Dylan, he can report the move has paid off for recruiting new workers. Before the relocation, YA had 90 employees at its headquarters, 20 of whom worked in technology; since the move, the firm has 130 headquarter employees, more than half of whom work in tech-based positions.

But for YA—and scores of other companies that have made or are considering similar moves amid the urban rebirth of a new millennium—that’s only half the story.

For one thing, the transition to digital and the increased recruiting pressure don’t eliminate the need for experienced and already trained high-value employees in other departments—many of whom have established homes or are raising kids near a suburban office location and aren’t eager to move. HR departments must figure out how to retain employees who’d been happy with the suburban or rural lifestyle but now suddenly have a long commute.

“If you’re trying to attract a different type of worker, you might lose some of your more mature employees,” says Matt Stevenson, a partner and leader of the Workforce Analytics and Strategy Group at the Mercer consultancy. He says his firm has worked with relocating corporations to develop analytics to determine which workers are more likely to resist moving and to create ways—compensation for higher transportation or housing costs, for example—to retain them.

In the case of YA, longtime employees from Norwood Young America—accustomed to free parking in that rural location—were given a $200-a-month allowance to cover the increased cost of commuting into Minneapolis, an 84-mile round trip from the former headquarters.

“We wanted everybody to stay,” Behren recalls, realizing that, even though the company couldn’t give workers back their commuting time, it could eliminate the financial considerations.

Heidi Skatrud, senior vice president of operations and management for Waterford, Wis.-based Runzheimer, a leading corporate mobility and relocation firm, says her company has seen a big swing in recent years away from moves driven by lowering costs and more toward the need to attract top talent in a competitive market.

Skatrud, like other relocation experts, suggests that HR executives do extensive research at the start of the moving process into the monetary issues, including possibly higher urban cost of living and home prices near the new headquarters, as well as changes in commuting patterns. That, she noted, might determine whether changes are needed in pay scales, could prompt the company to weigh how tax policies can differ in municipalities and could result in housing allowances for employees who need to move closer to the new office. “Some of that,” she notes, “is outside of normal relocation policies” from the era when moves were cost-driven.

Easing the Transition

One company that felt a need to move—and experienced many of the ups and downs of relocating—is Farmer Brothers Co., a leading coffee marketer that processes and sells roughly 90-million pounds of java a year. After a financially rocky period a few years back, the company looked into moving from its Southern California suburban headquarters in Torrance, with executives citing a desire to leave aging facilities on the West Coast and set up shop near the center of the country. The lure of recruiting a younger workforce that understood the millennial coffee culture, however, also loomed large in the decision-making process.

Farmer Brothers CEO Mike Keown says that company executives had been “thinking through, how do we embrace millennials or a younger workforce? How do we bring innovation more into the culture, and how do we build more diversity and inclusion and build more of a culture of accountability?”

Farmer Brothers’ move to outside of Dallas ultimately required laying off roughly 300 workers in California, which rankled some of the company’s longtime trustees. Keown and Suzanne Gargis, vice president for human resources at Farmer Brothers, insist that the firm worked extra hard to soften the blow for its workforce at Torrance.

“Once the decision was made, we brought the employees in, and we were open and candid,” Gargis says. “We shared as much information as we could. It was hard news for them to take, but when you treat them with respect and care, and trust them to do the right thing, they actually over-achieved what we expected them to do.” Despite the announcement of the move, Gargis notes, the bulk of workers stayed on for the next year until the relocation took place, while HR staffers offered resume-writing clinics and worked to sweeten relocation packages for those employees whom Farmer Brothers hoped to bring to Texas.

The Farmer Brothers move differed from other recent relocations when the firm—after a year in an interim site—picked a permanent headquarters not in a trendy downtown but rather in suburban Northlake, Texas, across from the Texas Motor Speedway. Company leaders said the ultra-modern design of the headquarters mattered more than the fact that it was not in a walkable downtown location near restaurants and art installations.

The company kept that in mind as it determined the construction and layout of the building, the materials that were used, lighting and furniture, explains Gargis.

Relocation experts and HR leaders point out that office design, and whether it fosters an open and collaborative work environment, is critically important when it comes to recruiting a millennial workforce. In the case of YA’s migration into Minneapolis, officials say what made the move successful was not just going downtown but also to the specific venue they secured.

The company hired a space planner and an artist and did an employee survey about the location, says Behrens. The winning approach was clear: Workers wanted a clean, open look, with floor-to-ceiling windows and very few enclosed offices. Company executives were thrilled when they learned that an investment firm was leaving Minneapolis’ iconic Lumber Exchange Building, a city landmark since 1885 and America’s oldest skyscraper outside of New York City. Workers gutted an entire floor to get the desired look.

Behrens says the ultra-modern design was essential for YA to become an attractive rival to other Fortune 500 firms in the neighborhood that were competing for top software engineers, such as Target, Best Buy and 3M.

Korn Ferry’s Cook says companies need to be mindful that older, legacy businesses need to do more than just plant the flag in a new downtown location to compete for the top millennial talent, but should consider a broader re-branding to become known as a cutting-edge place to work. Her consultancy recently worked closely with a banking company that was creating an airy, ultra-modern headquarters that looked more fitting for Google or Facebook than a financial institution. “It’s really important,” Cook says, “to communicate your brand in a way that’s aligned with a different, relevant target demographic. It’s not just changing your external messaging.”

Cultural Alignment

A company’s culture often factors into how it treats current employees, and how it recruits potential talent—and relocation serves as a way for employers to fully integrate culture into its operations.

Beam Suntory, renowned for its top whiskey brands such as Maker’s Mark and Jim Beam, announced in 2016 that it would move its entire staff from suburban Deerfield, Ill., into Chicago’s downtown Loop and the historic Merchandise Mart by the banks of the Chicago River. By the time the relocation was finished, only two of the roughly 550 employees—both administrative assistants—quit the company because of the move. Paula Erickson, senior vice president and global chief human resources officer, says the reason could be summed up in one word: transparency.

“We did not hold anything back,” says Erickson, noting company leaders announced the move as soon as it was decided “because we didn’t want there to be any rumors.”

The 18-month relocation, which occurred in two phases, gave employees plenty of time to adjust. There was a series of companywide “town-hall meetings,” at which executives tried to answer every question and were honest when they didn’t know the answer yet. Erickson says she and her top lieutenants regularly held open office hours for workers as well.

Many of the workers were inspired by the move’s driving notion of what Beam Suntory calls gemba, the Japanese word that Erickson defines as “being where the action is.” For a distilled-spirits firm, leaders wanted to re-energize the workforce by moving it to a neighborhood of trendy bars where people were more likely to consume their products—thus inspiring staff to come up with ideas for new offerings and new ways of marketing. “We can be in the heart of where the trends are happening and talk to the bartenders and talk to the customers” about what’s new in mixology, Erickson says.

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The hip factor was aided by the opportunity to move to a floor inside the massive and centrally located Merchandise Mart that was being vacated by Motorola, which had already remodeled it with state-of-the-art work stations and treadmills, while rewiring it for the latest technology.

The roughly 30-mile move inspired Erickson and her HR team to re-think other important aspects of the workplace culture and environment. Workers making the move were offered more flexibility to work from home or a remote location such as a Starbucks one day a week. Family-leave time was expanded for parents of newborns, and job-sharing opportunities were also increased. An allowance that encouraged employees to go out and purchase Beam Suntory brands was raised from $500 to $750. For the first year, employees also received a commuting allowance to adjust to the new location. And workshops were offered to encourage employees to volunteer in their new hometown of Chicago.

The last batch of Beam Suntory employees moved to the Merchandise Mart last June. Erickson says the company is already far along toward the ambitious goal that has motivated so many recent corporate moves—to gain not just a new zip code but a brand-new culture. “It almost feels like a new company,” she says.

Will Bunch is a freelance writer based in the Philadelphia region, who writes on human resources and other business topics. He can be reached at [email protected]