Here Today, Gone Tomorrow
March 1 1992 by David A. Heenan
In 1975, Albert A. Thornbrough, president of Massey-Ferguson Ltd., startled the business world when he announced that he might move the giant Canadian multinational from
While seriously considered, the proposition was shelved-only to reappear recently in somewhat different form. Last August the company, which changed its name five years ago to the Varity Corporation, won government and stockholder approval to move to the
Varity’s decision to trade in its home base of 144 years coincided with Citicorp’s pronouncement that it too might abandon its roots. In an interview with the Wall Street Journal, chairman John S. Reed raised the possibility of moving the headquarters of
Saber rattling or serious business? Chances are Citicorp is not likely to pull up anchor anytime soon. Nonetheless, more and more CEOs are reassessing their historic homesites.
THE MINIMALIST REVOLUTION
For the better part of this century, corporate
By the 1980s, several factors began to signal the demise of the monolithic, immobile head office. Foremost was the rise of global competition. With foreign products, well-made and well-priced, infiltrating
Enter the minimalist corporation. Its basic principle was that big was bad, especially at the head office. For a decade,
Efficiencies were also sought by forging strategic partnerships with other firms to share the costs of research and development, new product introduction, and other expensive staff functions. Corporations were willing to yield a degree of independence to reap the benefits of burden sharing. In addition, alternative notions of employment-job sharing, leasing, temporary help, telecommuting, and off-premises work-allowed companies to trim or transfer the costly expenses of their headquarters.
Finally, incredible improvements in information technology made the omnipotent command post obsolete. Commercial fax machines, cellular phones, overnight mail, teleconferencing, and corporate jets made communications so efficient that the monolithic headquarters became an industrial dinosaur. The evolution of the
Taken together, these forces gave rise to corporate
Minimalism, therefore, is universal. And it is here to stay-in good times and bad. Naturally, as firms streamline, their head offices become far more footloose. CEOs know that it is far easier to transfer 200 people than 2000. In a poll by Fortune 73 percent of chief executives of the “500″ said that they had relocated some operations between 1985 and 1990, and 81 percent expected to relocate facilities in the future. One in seven said that they planned to move home base itself. “Here today, gone tomorrow,” is no longer a hollow cliche.
BRIGHT LIGHTS, BIG EXODUS
The choice for more and more
The by-product: the bevy of corporate boomtowns that border
They have not gained their new stature without cost, however. Companies and their employees are experiencing many of the frustrations they thought they left behind. “It’s not a big city, but it’s beginning to feel like one,” is a frequent lament of those who have moved to suburbia. As populations bulge, local roads become congested, landfills overflow, and once-superior schools lose their luster. The demands on public services give rise to an infuriating string of tax hikes. Affordable housing, too, quickly dries up.
For many companies, the location of corporate headquarters remains a serious stumbling block to multinationalism. It is hard to be multinational from a centralized command post in Yazoo MS,
No one suggests fleeing the home country for a distant South Pacific island. Yet in today’s borderless economy, where a business is headquartered makes absolutely no difference. As Percy Barnevik, CEO of the $25 billion ABB Asea Brown Boveri, Ltd., puts it, “ABB is a company with no geographic center. We are a federation of national companies with a global coordination center [in
Other multinationals are pursuing dual headquarters. Unilever and the Royal Dutch/Shell Group both have joint command posts in
“Fortress IBM is an outmoded notion,” says the company’s top scientist, Dr. John A. Armstrong. The computer maker’s first breakthrough in semiconductors, he says, was made not in the
IBM’s relocation echoes similar moves by Hewlett-Packard Co. and Digital Equipment Corp. Last September, Hewlett-Packard, the granddaddy of
Less radical options include establishing regional training modules with worldwide enrollments-an approach used by Citibank and Philips, or developing regional advisory hoards, as AT&T, Westinghouse, Exxon, and Chase Manhattan Bank have done. Taken together, these actions begin to reveal the shape of the multinational enterprise of the future.
Today, powerful centrifugal forces are pulling corporate power from the traditional center to the periphery. In the process, they are triggering an odyssey of the global corporation. Typically, this odyssey begins with small branch offices, R&D labs, and management training centers. Next come area or regional offices. Finally, prestigious corporate headquarters join the move.
In an increasingly independent world, our greatest challenge, the late Buckminster Fuller once suggested, is not how well we get on independently but how we get on together. For future generations, peaceful coexistence may be greatly enhanced by a growing pool of mobile multinationals.
David A. Heenan is chairman and CEO of the Hawaii-based Theo. H. Davies & Co., the North American holding company for