What kinds of head offices might be drawn to Winnipeg — and which ones won’t be so easy to snag.
December 2, 2011 3 Comments
Winnipeg came close to getting the big prize, but we couldn’t quite clinch it.
No, this isn’t about our disappointing loss to the B.C. Lions in last Sunday’s Grey Cup. It’s about the announcement in mid-November that the United Church of Canada wouldn’t be moving its head office to Winnipeg after all.
The lease on the United Church’s Toronto headquarters will expire in 2015. With that in mind, the Church was thinking that it might be able to “create a creative chaos” to revive their sinking fortunes.
The United Church lost more than 900,000 members between the 1981 and 2001 censuses, an average net loss of one member every 11 minutes. Its market share dropped from 15 percent of the population in 1981 to 9 percent in 2001, part of this closely linked to immigration, and part of this just as strongly tied to the growing percentage of Canadians with no formal religious affiliation, such as those who consider themselves spiritual but not religious, agnostic, or atheist.
Had the organization opted for the “creative chaos” of moving its headquarters 1,500 kilometres to Winnipeg, it would have brought about 150 jobs to the city.
Winnipeg was a serious contender for a relocated head office, along with rival bidders North Bay, Ont. and Waterloo, Ont., thanks to competitive real estate costs compared to pricey Toronto.
It wasn’t to be, though. The Church found that moving to a new city would be both too expensive and too disruptive. With many staff being anchored in Toronto by children, parents, longtime friendships and their spouses’ careers, there was a very real possibility that many employees would resign rather than move.
This brings us to the first two points that a community should have on its checklist when considering whether it is viable to “poach” a head office from another city:
- Do the post-move cost savings justify the cost of actually moving? Winnipeg was competitive here because of its low office space costs, and possibly to an extent by its relatively low housing costs. These costs weren’t low enough to offset the cost of the move itself. Sometimes the cost-savings do add up: Exxon and J. C. Penney moved their head offices from New York to Dallas, Tex. in the ’80s because of the high cost of operating in the Big Apple.
- Are employees able to move? This depends on the composition of your workforce. A young workforce with relatively few family obligations is more likely to move than a middle-aged workforce, for which a move would mean uprooting their children from their schools, moving far away from aging parents and longtime friends, and disrupting their spouses’ careers.
As William H. Whyte’s classic 1956 book The Organization Man (revised and updated many times since them) points out, organizations considering a move must also consider the quality of life that they’re either moving to or away from, and the professional network available in a new town:
- By moving, are you asking people to give up a way of life they enjoy? “Even salary boosts often fail to achieve repatriation,” Whyte observed of executives transfered to California. “Once tasted, the California way of life dulls such appetites… When Shell Chemical moved its head office to New York from San Francisco some of its management group resigned rather than go along, and several who did go along eventually decided to go back. Another company recently located a lab on the Coast, it admits, mainly to hang onto talent it might otherwise lose.” (2002 ed., pp. 275-276)
- By moving, are you cutting people off from professional networks and career options? “On the other hand, there are some kinds of environments many people can’t be tempted into trying at all,” Whyte wrote. “This has been particularly evident in the postwar moves of entire headquarters to the hinterlands. Making a small town a way station on the executive route is one thing; making it Mecca, another. An organization’s creative and professional people usually will move permanently to a small town only if it is in striking distance of a large city and the professional contacts it affords. Similarly, almost any executive is likely to balk — for a while at least — if the town is so small that the influx of the company threatens a resurgence of the paternalistic company town.” (2002 ed., p. 276)
Note that from a Torontonian’s eyes — much less a New Yorker’s, Angeleno’s or Londoner’s eyes — Winnipeg is a small town. By way of comparison, a Winnipegger living in the far-flung (by our standards) Waverley West subdivision is as close to the centre of the city as a Torontonian living near the Yonge/401 junction, a Los Angeles resident living in Los Feliz, or a Londoner living in Tottenham. That is to say, in an inner suburb if not in the heart of the city itself.
Other factors to consider:
- Would a move put a head office closer to the centre of the action? The Potash and Phosphate Institute of Canada moved its head office from Toronto to much smaller Saskatoon in the mid-’80s simply because Saskatchewan, not Ontario, was where the action was at in the industry.
- Would a move get a company away from political instability? Quebec saw a substantial loss of head offices over the years due to the threat of secession from Canada. Sun Life’s move to Toronto in the late ’70s caused an uproar in the province. Aviscar Inc., CP Rail, Zellers and Holt Renfrew followed in the ’80s and ’90s.
- Does a move put a company closer to a workforce with the skills it needs? Volkswagen of America announced plans in 2007 to move its headquarters from suburban Detroit to Herndon, Va., citing a better-educated workforce in Herndon as one of the key reasons for the move.
- Can you get to your customer’s offices — or to various parts of your corporate empire — nonstop? That was one of the reasons why Boeing moved its headquarters from Seattle to Chicago a decade ago: with company operating divisions (e.g., its Winnipeg operation) and its customers being scattered across the globe, it made more sense for Boeing to be based out of a global crossroads city like Chicago than in a less accessible city like Seattle.
Overall, Winnipeg will need to be selective about which head offices it goes after. A religious organization was a good try, though it would probably be better to aim for a company with a younger (read: easier to move) workforce. A major bank, on the other hand, is likely beyond our grasp for the simple reason that the Canadian financial industry — including the most talented people and the professional networks — are deeply rooted in Toronto.
A good starting point would be to look closely at the companies who hire people with skills already found in the Winnipeg workforce. For instance, there are small aerospace and health-related clusters that could be built upon.
Another important factor to look at: transportation links and proximity to where the action is. Winnipeg still has ties — threatened as they are — to agriculture, and good air access to Toronto, Vancouver, Calgary, Edmonton, Minneapolis/St. Paul, Chicago and Denver. Beyond that, the connections are somewhat weaker.
But most important of all, it’s important not to get so caught up in the dream of making the “big catch” that we overlook the more worthwhile pursuit of growing the city’s small start-ups. Corporations can be extremely difficult to lure from their current hometowns if their employees have put down roots and if they’re located in the city where it makes the most sense for them to be located.
A small Winnipeg-based start-up, however, is more likely to remain based in Winnipeg if it grows to become a large firm.
Thanks, United Church, for taking a look at our city nevertheless. Your reasons for staying in Toronto are sound ones, and at least you won’t have to worry about being offended by our politicians’ creative use of the English language.