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H. James Harrington Responds

Organizations change locations for many reasons, which can vary from financial, to environmental, to workforce skill levels or availability. Because there is no one reason for relocating an operation, the starting point for any initiative to persuade an organization to reconsider relocation is to understand the driving factors behind the relocation decision and to determine if there is any possibility for changing it.
To accomplish this, a group of employees, managers, local business people, local government officials and organized labor representatives should be formed. This group would meet with the organization's executive team to understand why the operation is being relocated. This team should be sure that it collects and quantifies any financial or performance data and also identifies less tangible reasons for the move. Today, moves are frequently made for non-financial reasons. For example, I helped an organization move out of South Korea to mainland China not for cost reasons, but because the products manufactured in China were much more reliable. Until you probe deeply to understand why the organization is relocating, there is no way you can develop a scenario that will change management's mind. Frequently, management communicates financial reasons when the real problem relates to cycle time, quality, employee commitment, high employee turnover rates, poor location, poor transportation, lack of necessary public education facilities or technical skills of the people in the present area. I am finding today that relocation is driven less by financial reasons than by other considerations.
Even when you understand why the executives have decided to relocate the organization, do not limit your strategy to meeting management-perceived advantages of the new location. Everything else being equal, other considerations may change the balance in your favor. The team should define improvements that will be made from the present performance in all the following areas if the operation is not relocated:

o Cycle time
o Costs
o Quality
o Financing

Based upon your question I am assuming that you believe the organization is relocating primarily for financial reasons. With this assumption, the following are some other ideas about things that could be considered to reduce the present operating costs.

1. A local tax break could be given to the organization for the next five years.
2. Often the cost of training a new workforce and the learning cycle related to the new workforce are not fully considered in the transfer plans. For management and professional people, these costs vary between $30,000 and $50,000 per person. The team should point out these high costs.
3. The poor-quality cost of the present operation should be compared to the poor-quality cost projected in the new location. Through the use of techniques such as Business Process Improvement tools like Express, present poor-quality cost can be cut by 50 percent, often reducing in-process cost by 10 percent and support cost by 25 percent.
4. Suggest that the organization use self-managed work teams that commit to a specific productivity improvement within the next 12 months. This is another way to reduce costs.
5. The employees can put at risk a portion of their pay equivalent to the difference between the two-tier hiring system. This risk money would be paid out as a bonus if the committed improvements were met on schedule.
6. Local community colleges could provide training at a minimum cost to upgrade present personnel for a specific period of time. This should not become a standard practice since the government should not compete with profit-making organizations that do training and consulting. The employees should commit to attend a minimum of 80 hours of skill level community college training each year on their own time if the organization covers the college tuition and books for all classes that are completed successfully.
7. The present order management system can be redesigned to increase product terms and decrease in-process inventories.
8. The local city government can help offset the cost of transferable skill training.
It is important the team conducts a risk analysis that defines the level of risk in meeting the projected performance at the proposed location compared to the risk of meeting the proposed improved performance at the present location.
Today, we live in a very harsh reality. Often by the time an organization announces its intent to relocate, there have been a number of contracts already signed that make it impossible for the organization to reverse its decision. Organizations are truly international buyers, international manufacturers, and international sellers. Communities that cannot compete in today's international markets have not earned the right to keep their industries. If your community is losing one organization, it is often difficult or even impossible to stop this particular relocation, but it is a big warning sign that preventive action should be quickly implemented to stop other organizations from relocating as well. The first thing the community needs to do is identify the organizations that are critical to its survival. Then these organizations' performance should be compared to similar organizations around the world. If any of these organizations are not in the upper 10 percent of the organizations in their field, the community should work with these organizations to improve their performance so there will be no reason for them to relocate in the future. For any community to remain viable and to provide employment for its people, it must establish an infrastructure that is competitive with other communities throughout the world.
Maybe its time for communities to set tax rates based on profitability of their corporations rather than property values. Think of the incentive for the community to contribute to organizational profitability.

John Runyan Responds