Episode 41 – Unpacking the Location Strategy Decision Process
Rick Weddle (Site Selectors Guild): Welcome to “Site Selection Matters,” where we take a close look at the art and science of site selection decision-making. I’m your host, Rick Weddle, president of the Site Selectors Guild. In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision-makers to provide you with deep insight into the best and next practices in our profession.
In this episode, we have as our guest Larry Moretti, principal with LFM Corporate Solutions. With over 30 years of professional experience, Larry focuses on global location strategies and site selection across all industry platforms, corporate real estate advisory services, economic development, and program management. Today, Larry will talk with us about the location strategy decision chain. More specifically, Larry will help us unpack and understand what goes into the decision process? Who was involved in the decision and how it works in practice? Join me as we welcome Larry Moretti to “Site Selection Matters.”
Rick: Larry, thanks for joining us today and helping us understand the location decision process from the inside out. Why don’t you start by giving our listeners your perspective on the strategy decision chain and what’s required for a successful decision path?
Larry Moretti (LFM Corporate Solutions): Well, thanks, Rick. I really appreciate the opportunity to chat with you today. It’s interesting having done projects like that, site selection projects for many years, I have seen a pattern I’m sure my colleagues do as well. I mean, the bottom line is the successful project for expanding, consolidating a relocating a company’s geographic footprint, they all share a common grounding. They’re guided by a logical defendable process to build a business case and to guide that decision. And this is often based on, or always I would say based on underlying business need and the project success factors.
So, you know, really important dimension there, in addition to all of the value developments of a citing selection, it’s having a clear project management communications and decision structure. And this structure constitutes what I would call a supply and demand decision chain of corporate site selection and economic development. And, you know, this decision involves a couple of categories, I would say three categories in total. One I would call the demand side, then there’s a supply side, kind of makes sense, and then the third is a group in between that that evaluates or otherwise influences the decision.
So the views and motivations of each of these groups towards alternatives solutions and factors of importance is going to vary, but the underlying process needs to be grounded in project objectives, but it also has to be flexible enough to anticipate actions and reactions to each of these parties. So, it’s really, really important for the roles of these key groups to be established and how they fit into the process upfront early in the process. So truly a classic exercise in project management, and we’ll go into some of the details.
Rick: Very, very interesting. Larry, moving or changing a corporate location, a facility if you will, is clearly a big decision impacting the whole company most likely. As such, I would expect that a lot of different people or stakeholders inside the company would want to have a say or do have a say in that process. Who do you consider to be the key parties in that decision chain from the company or the demand side?
Larry: Stepping back a moment, the demand, if you will, for changing or expanding a company’s footprint, first of all, these are often very big capital investment decisions. They affect jobs, they affect people’s lives, they affect the company’s future in many, many cases. And so, you have to look at a variety of organizational considerations, talent sourcing, future talent requirements, market demand and changing patterns of how a company’s wanting to penetrate the market, business process improvement factors, revenue enhancements. I mean, these are just a sampling of factors that come into the equation.
On the corporate side forms of the people who are upfront in that decision, these are the frontline peoples, and they need to make the right decision. And sometimes, you know, they have to live with that decision. So, the first group I would call corporate end-users and these are the people most directly impacted by the decision. It might be the head of a new plant operation, or in some cases, it may be a whole corporate headquarters team if the headquarters organization is moving, but they’re going to be impacted directly by the decision. Their families may be impacted by the decision, whether through a relocation or through travel, extensive travel to a new site and, you know, they’re going to be the ones who are accountable ultimately.
So, supporting that group is another group that I would call the broader internal project team. These might involve corporate real estate leadership in a company, the strategic planning group, HR, operational management, other groups that are charged with making sure that that decision is aligned with broader corporate goals. Then, you know, customers and suppliers fit into this as well. The auto industry is a classic case in point where a main auto plant’s decision is aligned to, or I should say the other way around, the supply chain has to be aligned to the core plant decision. So, you know, there are issues related to service delivery, performance objectives that need to be kept into consideration during these location selection decisions.
And then, you know, there are other groups as well, but I think those are some of the major ones. The bottom line is these are the people that may have to directly experience and live with an important location decision. This is frontline, the frontline of a location project.
Rick: Larry, if that’s the demand side…I think you articulated that extremely well. If that’s the demand side of the equation, let’s flip it over, who were the key players on the supply side?
Larry: Well, this is like, you know, classic marketing place and promotion. These are the economic development and related groups in a community whose charge is to attract and develop and retain businesses and jobs for their regions and convince the company that they are the best location for this particular project. So, you know, central to this are the development leadership in a region, in a state, in a country at times, or at the local community level. They’re charged with attracting jobs and capital investments, they’re the community’s principal ambassadors, and also, they manage intelligence and networks to help the consultants or the companies themselves get into the community and understand really what’s going on.
Supporting them or local businesses and employer representatives at chambers of commerce. I mean, when we go out into the field and do employer interviews, how do we get those interviews? How do we really dig into the labor market? Well, it’s because the economic development group and their local business community are the gatekeepers to helping us understand the community from a labor market perspective, from a business climate pursuit, to really understand, you know, how this community makes sense for a particular project.
There are other major groups as well, you know, recruiters, educators, the academic community, training resources, of course, and then, you know, for particularly for larger manufacturing projects, but also, you know, technical projects, the infrastructure, the role of utilities, telecommunications, transportation companies, there’s property and construction advisors. How long is it going to take to bring the project into play and implement a new location? So, these are all parties.
I mean, others would include tax advisors, regulatory groups, etc, etc. Now, the key is all of these groups need to be totally aligned and the economic developer’s role is to make sure everybody is in lockstep to present the best face forward to the community when a client actually…a prospect actually visits the business community. They need to be orchestrated; they have to have clear messaging. And I’ve seen many times where this has not worked.
Rick: Very, very interesting process. I mean, my head’s about to explode just listening to you go through the full gamut of all the people involved. You said early on that from the corporate perspective, getting a common grounding or a common agreement on the alignment of the process, and then you came back here and said, from the supply side, it’s important that all the local people get aligned too. Alignment seems to be a keyword in this whole process.
Larry: Oh, absolutely. Absolutely. And that is part of the role of third parties such as consultants and, you know, the broader leadership of a company. A consultant’s role is to help evaluate the benefits and risks in an objective way, but a part of that is getting all of the parties to the decision involved at the right point in time. And this is really interesting because this whole process, Rick, evolves over the course of a project. And it might help to put a little clarity into that evolve because, you know, upfront, before any economic development group or even third parties like consultants might be involved, there’s a whole strategic element here in terms of, you know, project feasibility, the rationalization for doing something.
I mean, this is going to be an internal very confidential, within a company confidential to a core planning team. You know, they’re trying to clarify the vision of the project, a roadmap for further actions and who are the key stakeholders. Evolving from that is part of the next phase, a search for a location, whether it be a new location, an expansion, a relocation, a consolidation, you know, whatever the specific project is, you know, there’s an action plan, and this is where consultants are often brought into the equation.
Consultants like to be brought into the equation earlier as well, but at times this is the entry point. And then consultants go through a site selection process, and at some point in that process, the economic developers are brought into the fold as well. At first, perhaps just as a conduit for providing data, being responsive, or quickly provide data, and then as the project gets into more levels of detail, you know, the economic development groups then become frontline as well and help develop the relationships.
Rick: Larry, listening to you talk through this, you know, from your perspective of the company’s perspective, they’re looking for…they’re really solving a problem, a facility requirement. From the community’s point of view, they’re looking for a deal or they’re looking for a lead if you will, and if you turn it around and look on that side, it’s almost like a lead generation. On the supply side, how does that economic development organization that is trying to align all this effort, how do they best engage with you as a site selector in this process if they’re just looking to try to find a way to get involved in a project?
Larry: Well, you know, I think in three ways, and one is, you know, kind of, I would say groundwork. Maybe it’s a bit of PR if you will, Rick, and it has nothing to do with the specific project. I think it really is remaining visible, remaining engaged with consultants, you know, kind of, organizations like the Site Selectors Guild, and just kind of having a forum to network, get to know each other, all that sort of stuff. And, you know, that’s really, really helpful to just gauge general knowledge.
Then when a project actually activates, you know, again, an economic development group may not even be aware of the product for the first two or three, maybe even four months of an effort that the consultants who will be working directly with a company on a very confidential basis. There’ll be a screening process to help shortlist locations and maybe when, you know, an initial shortlist of viable alternatives is identified, that’s when consultants would typically reach out to these communities, these economic developers.
And at that point, you know, the key role is responsiveness. We may have, you know, the need to get information in a very short turnaround time. I just had a client request…this was around the 22nd of December, and we needed to get our results back this week. Man, I felt terrible having to get people work over the holidays, but you know, something that we were charged with doing, and the client, you know, needed to make a decision very, very quickly. So, response to this, having data at the fingertips and being able to just share information on recent employer dynamics, you know, who are the major players, what’s happening in the labor market, current information on sites.
So that’s the first stage, but then as you go through the process of that, the community is shortlisted, and we say, hey, you know, we want to take a closer look, we want to do field investigations. And increasingly they’ve been virtual field investigations, but we’ll get back to off the ground shortly we hope, then really the dynamic changes because the dynamic then becomes one of providing information to, I would say…you know, it’s an exercise in salesmanship in a way. You’re marketing your community, you want to present your best foot forward.
First contact, particularly, you know, if we’re traveling with a client, is everything. You make your impressions in, you know, sometimes the first 30 minutes. I mean, and that’s very, very true. How do you orchestrate the delivery of the message of your community to a client when the client visits? What are the highlights of a community that are going to be most important to our client? Who are the parties, is everybody aligned?
And I mentioned this term before, but part of it is chemistry. It’s almost like, you know, I wouldn’t call it matchmaking because it’s not matchmaking. I mean, they’re very logical objective rationales that are going on here, but I suppose there are in matchmaking as well. But it’s really about, you know, even if all of the facts are aligned, it has to fit. It has to fit intangibly, and that’s what I call chemistry.
Rick: Good point. Okay. So, I get there’s a big complex decision process and it really necessarily involves a lot of information from a lot of sources. And you’ve indicated that there’s this big evaluation phase where the evaluators or advisors help the company sort through the pluses and minuses. How do you really approach that in that process? How does that evaluation work in terms of building to the decision?
Larry: Well, you know, there are all sorts of analytical techniques. When we do project evaluations, typically, we establish criteria, what I would call a location methodology or roadmap of decision-making throughout the project. And there are critical success factors that translate into criteria that are measurable, that they’re weighted in terms of the different factors in terms of what would be most important to drive the decision, and that becomes a structure for evaluation.
From screening to get to shortlisting, and then even down at the sub-market level when we’re looking at the real estate options and sub-markets from a talent point of view, in terms of are we still aligned to the project decision? So, you look at risks, you look at benefits, you look at the trade-off and ultimately there’s no perfect location, it’s often a matter of trade-offs to broader corporate requirements. So, looking at the operating environment versus the cost environment, which is maybe what I would call delivery, how quickly can the project…and effectively can the project be delivered within that timeframe?
Rick: It seems like no two projects will be exactly the same. Is that right?
Larry: That’s exactly right. I mean, no two projects are the same, but I would say almost every project, either [inaudible 00:17:31], they all follow the same structure more or less in how do get to the decision.
Rick: Following that structure, Larry, you’ve outlined a number of different stages in this process, and you suggested the decision chain evolves or shifts along the way from the strategic down to the tactical, from strategy to search to selection, then implementation, what insights can you share from this process that would help our EDO partners understand it better and just be a little more successful as a resource?
Larry: I’d probably just go back to some of the things I mentioned earlier. I mean, creating brand awareness upfront in terms of what your community is all about. And that’s not project-specific, but that’s just in general, you know, marketing promotion, just making the world of corporate users aware of your community or region, and what are the strengths and opportunities available there? That’s real important.
When we get down to the project level, again, you know, being responsive, you know, allowing the consultant to reach out to, knowing who to reach out to. I can’t tell you how many websites to this day, you know, you go to an economic development website and there’s no contact information. They say, put your name in and we’ll get back in touch with you. I mean, that doesn’t work. You want to be able to have people that you can reach out to almost immediately. Consultants want to have their networks of economic developers that they can rely on and form a collaborative partnership through the project process.
And then, the third element is on the ground. Once a consultant or a client goes on the ground, we talked about, you know, the first contacts and the importance of making good impressions. And, you know, you have to create a confidence in a client that you’re going to be with them not only during the selection process but when the decision is implemented. And that leads to maybe the fourth element, which is really continuity of the client economic developer relationship. Once a client is in a community and it’s part of the business retention effort, but making sure that there’s a long-term partnership between the company and the economic development group, you know, long after a consultant is out of the picture.
Rick: The business retention actually starts while you’re getting the business in the first place that you start working on it. Hey, Larry, let’s switch gears if we can. And since it’s the beginning of the year, if you will, take a minute and tell our listeners what you see ahead for site location in 2021.
Larry: I don’t like to prognosticate about things like this. But what I will say, you know, gosh, I mean, obviously 2020 was very tumultuous in many ways, and let’s hope that 2021 settles down to a level of normality. What I hear, you know, that maybe later in Q3, maybe Q4, is when maybe we’ll have confidence to get back to a level of socializing and normal that we were prior to 2020.
I will say that my fellow consultants as well because we talk about these things a lot, our business, paradoxically, has remained quite solid. There has been quite a bit of consumers’ goods manufacturing investment. Supply chains are going through, you know, rethinking. Office servicing has continued strong and, again, our firm and as I speak with my colleagues, you know, most of them have a pretty solid backlog for 2021. So, you know, we’re optimistic. I think that’s the bottom line, we’re optimistic.
Rick: Well, that’s great. And let’s hope that we can also find a time a little bit…maybe double back a little bit later in the year and find out, did we actually get back to normal? You know, Larry, you’ve given us a lot to think about in our talk today. What a great conversation we’ve had, but that’s about all the time we have. So, let me stop and say thanks to Larry Moretti for talking with us today on this episode of “Site Selection Matters.” Thank you, Larry.
Larry: Thank you very much, Rick. Have a great day.
Rick: Thanks for listening to this episode of “Site Selection Matters,” and a special thanks today to Larry Moretti for helping us get inside and better understand the location strategy decision chain. What an informative discussion that leaves us a lot to think about. Again, I am Rick Weddle, President of the Site Selectors Guild. This podcast episode presents my views and the views of my guests, and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership. We hope you’ll subscribe to the “Site Selection Matters” podcast on Apple Podcasts, Stitcher, Spotify or wherever you get your podcasts. We look forward to bringing you some great discussions in the year ahead, until next time, good day.