Making corporate moves

In today’s economic environment, organizations face demands from customers and shareholders for more value and return on investment (ROI). In response, many of them are seeking to achieve cost savings and drive efficiencies—not only through strategic consolidation of support services but also through the physical relocation of corporate headquarters or other facilities that serve the business.These transitions may involve cultural and operational transformations such as:

• Changes to the organizational operating model, and/or changes to functional service delivery model

• Labor force reductions, affecting labor cost and workforce capability

• Consolidation/Geographic relocation of the physical workplace

While each of these transitions can be complex and challenging, corporate consolidations/relocations in particular require careful planning due to the significant impact on the entire workforce, productivity, and profitability that is likely to occur over the transition period. The imperative to effectively manage employees and external stakeholders impacted by a strategic relocation

is amplified in cases where the transition is complicated by concurrent operating model changes or labor force reductions.

This paper is intended to provide organizations considering a relocation insight into potential risks and challenges, and provide guidance on leading practices and considerations for a successful transition. It includes:

1. Key strategies to consider during a corporate relocation

2. The role of HR in workforce transitions during a corporate relocation

3. Industry spotlight: three reasons why consumer products companies are considering a corporate relocation

Note: The intent of this paper is to provide guidance to companies specifically regarding the relocation of salaried, non-union corporate office employees. There are additional considerations involved in the relocation of factory or unionized employees (e.g., union negotiations) that are not covered in these sections.

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1. Key strategies to consider during a corporate relocation

Decisions, decisionsSo you’ve made the decision to move your business, now what do you need to think about first?

The keys to moving forward with a relocation—considering the potentially disruptive impacts to the business and its employees—are to plan ahead and be decisive even in the face of numerous uncertainties. It is easy for leaders to get caught up in and stalled by conversations about individual circumstances and the desire to make exceptions to every rule. Making key decisions up front gives leadership a plan to coalesce around and will help to minimize isolated discussions about individuals and exceptions.

Set up a dedicated transition team that understands the needs of the businessIneffective transition teams are usually either (1) too far-removed from the transitioning business to have the expertise needed to make business decisions during the transition or (2) business experts who need to juggle

day-to-day responsibilities with transition duties and therefore do not have the bandwidth to focus on transition needs. It is important to set up a balanced team that is both dedicated to the transition and close to the business.

To achieve a balanced team, it is advisable to set up a transition management office with an appointed transition lead to manage the effort. The transition lead will be responsible for engaging the appropriate functional experts and business leaders to assist with the transition. It is the transition lead’s responsibility to escalate any risks or issues, including lack of adequate support, to the leadership team.

It is very common for HR Business Partners to be directly involved as well, given that there are many people issues to manage during this transition. HR Business Partners can also assist in the identification of additional transition team members and resources. These additional resources can provide support and guidance even if they are not part of the dedicated central team:

Additional resources Value-added to the transition

Local contacts Transitions are generally more effective when they are “high touch.” It is a good idea to engage local personnel (identified by HR) who sit in both the departure and arrival locations, if existing, to support with any on-site activities including information sessions, integration events, and feedback collection. If you are relocating your business to a new facility, be sure to identify resources who are willing and able to travel to the new location to support on-site activities.

Recruiting team Typically in relocations, only select key employees are provided with offers or incentives to move. Depending on the relocation acceptance rate, there may be a need to ramp up recruiting in the new location for business continuity. Engaging the recruiting team early on can help reduce its response time when these needs arise.

People managers A leading practice for transitions, or any organizational change for that matter, is to engage people managers early and often. The more ownership people managers have, the more employees are likely to feel supported by their direct leadership.

Policy experts and legal team With a change of this magnitude, it is critical to engage the right team of experts to provide guidance on policy decisions as well as review for legal risks. Not only will you need support from your compensation team (and any approval committees/boards) and benefits teams in pulling together the employee package information, but also all documents that are provided to employees related to benefits, compensation, and other required notices need to be reviewed by the appropriate experts.

Relocation vendor In some cases, employing an external relocation vendor can be a good investment if you don’t have the resources or expertise to do it yourself. Relocation vendors handle logistics such as site visits and employee relocations (home sales, finding rentals, etc.) and contribute to “selling” the benefits of relocation for employees who may be on the fence.

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Determine the employees you need to move to keep the business strongEven before you think about relocation incentives and engagement strategies, one of the first major decisions you will need to make as a team is determining who actually needs to move with the business. Your relocation and engagement activities will be shaped in large part by the type of talent you are trying to retain.

As a rule you need to prioritize key leadership that is needed to maintain business continuity during the transition and beyond. A stakeholder analysis will enable you to pinpoint which leaders you can expect to retain and who may need to be incentivized to move with the business. Once you’ve identified them, these leaders will also help you identify key talent-those with knowledge, skills, or expertise that are core to your business, with deep subject matter expertise and/or knowledge of strategic markets and product lines.

When determining the need to retain key talent, it is also important to look at industry trends and identify potential areas of investment in talent for long-term growth. Key talent in these high-demand areas should most certainly be considered for relocation incentives.

Your stakeholder analysis will also allow you to identify individuals within the business who are influential to others.

Key influencers are crucial drivers of engagement and can be especially useful in persuading key talent to relocate with the business. This analysis will guide many other talent considerations including allocation of budget for relocation and retention incentives, approach to contractors and non-exempt employees, and potential for economic incentives.

Commit to reasonable time framesAs with any major organizational change, you may feel torn between the impulse to “get it over with” quickly and the need to take the time do make the right decisions that will position the organization for sustained success long after the relocation. Keep in mind that in a corporate relocation, more so than other types of organizational change, impacts go well beyond the workplace, affecting families and local communities as well. Employees may essentially be asked to uproot their families or walk away from their current job-this is by no means an easy decision, even with lucrative financial incentives. As such it is important to give employees a reasonable amount of time to consider the relocation news, make a personal decision, and complete the transition.

Below are some guidelines for setting reasonable time frames around relocation activities and milestones:

Milestone type Timing considerations

Leadership engagement It is important to recognize that whether or not they decide to move, leaders in the organization will be dealing with the impact of relocation personally, while also trying to lead employees through the change.

Give impacted leaders adequate time to process the news and make their personal decision about relocation before seeking their help to lead transition efforts. A leader who has come to terms with his/her own personal situation will be a much more convincing change advocate.

Employee announcement Consider two competing factors when determining when to communicate to employees that a relocation decision has been made. On one hand there is a need to tell employees well in advance of the target move date so that they have sufficient time to make preparations (e.g., housing search, trailing spouse job search, school transfers). Note that before you can share any information, you must be prepared to provide details of the move, including individual impacts to employees. The longer you wait, the greater the risk of information leakage. On the other hand, though making the announcement sooner rather than later may stop information leakage internally, the news will become public as soon as it’s announced. The longer the lag time between the announcement and move, the greater the potential risk to the business as talent gets poached by competitors and productivity and morale are impacted by uncertainty and ongoing change.

The balance that is struck will depend on a variety of factors including culture, local competition, current job market, and attractiveness of the new location.

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Milestone type Timing considerations

Move decision Be sure to set a deadline for employees to decide whether they will relocate with the business or not, but consider employees’ needs before doing so. Employees need to be provided adequate time to make a rational and informed decision. They need time to fully process the news and to consider relocation options both for themselves and their families. You can help employees with their research by providing information sessions and site visits to the new location (see page 9, Engaging employees through the move date, for more details). Failure to provide adequate time and information will negatively impact morale and retention.

However, allowing employees an indefinite time to make decisions places all the uncertainty on the business. For instance, the recruiting team needs time to fill any future vacancies in the business based on the employee relocation decisions. People managers also require time to conduct knowledge capture and transfer from those employees who will not be moving with the business, to ensure business continuity.

If adequate support and resources are provided to help employees come to a rational and informed decision, the decision can be due within 1–2 months following the announcement.

Move date Finalizing the actual date of relocation requires thoughtful consideration of several factors. The ideal move date will occur at a time that will be the least disruptive to employees and to the business, and should consider the following:

• Family factors—a good time for families to move is during the summer in between school years. This will ease the transition for families with school-aged children.

• Recruiting factors—also coinciding with the school year cycle is the recruiting and hiring cycle for recent graduates, which is important if you plan to hire from local campuses to fill any talent gaps.

• Seasonal factors—if at all possible, it is also a good idea to avoid seasons/periods that are the busiest or most critical for the business (e.g., Halloween for a candy business, football championship season for a snack foods business, back-to-school for companies that produce school supplies).

• Financial factors—economic considerations, tax implications, and savings realization also play a part in finalizing the relocation date. Since these factors are transactional, they are relatively easier to manipulate and in most cases should not be prioritized at the expense of the earlier mentioned factors.

Relocation vendor In some cases, employing an external relocation vendor can be a good investment if you don’t have the resources or expertise to do it yourself. Relocation vendors handle logistics such as site visits and employee relocations (home sales, finding rentals, etc.) and contribute to “selling” the benefits of relocation for employees who may be on the fence.

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Agree to confidentiality and make it bindingFinally, as you engage others in making these critical decisions, it is important to strike a balance between involving all those who can support the transition and maintaining confidentiality prior to announcing the relocation decision to all employees. Determine if non-disclosure agreements (NDAs) are needed before engaging leadership and other change agents who can help with the process. It is important to keep a tight lid on any talk of relocation until you are able to inform impacted employees whether or not they have a job in the new location. Even if you are offering relocation to all employees, the incentives for individuals may vary widely, and it is not prudent to make an announcement until you can provide with certainty the terms of relocation for each individual. All transition team members should be required to sign NDAs to keep plans under wrap until announcement day.

Anticipating questions Announcing the decision to relocate the business is hard news for leaders to deliver. Employees are likely to experience a range of emotions from sadness to anger in addition to having a multitude of questions. Addressing the most frequently asked questions in a concise and consistent manner is critical to minimize uncertainty in the aftermath of the announcement.

The two big questions you need to prepare for and proactively address are: (1) “Why are we moving?” and (2)

“What does this mean for me?” Be prepared to tackle these before moving forward with an announcement.

The news of relocation is likely to cause employees to jump to many conclusions. Relocations are often associated with business units that are underperforming or no longer viewed as strategic to the company. This negative association may cause employees of the impacted business to lose pride in their business, which can reduce retention and morale.

However, companies may choose to relocate for a variety of reasons, many of which are extremely positive and strategic. These reasons include, but are not limited to, regional economic incentives, strategic market focus, operating model changes, and organizational synergies. Employees care about the why and want to know that there is a solid business reason for such a big, disruptive change.

The rationale will vary for every company and therefore cannot be prescribed. However, once you’ve articulated the

“why,” the following strategy will help you communicate the rationale clearly and effectively to help employees understand the reason for the relocation. A relocation announcement should include three fundamental activities:

• Plan the approach

– Analyze stakeholders to determine audience needs, including internal and external (e.g., press release/reactive statements, government relations, social media monitoring).

– Build your communications plan based on audience needs and determine the cascade order.

– Create a checklist to manage the details (e.g., technology requirements for webcast/video announcements, leadership presence at impacted location(s), time zone considerations).

• Align messaging to the business objectives

– Develop key messages by considering the benefits of the relocation to the business and to employees. The rationale should be both strategic (e.g., synergies gained) and specific (tied to tangible benefits e.g., cost savings, talent concentration). Messages should be crafted to be balanced, and not overly positive.

– If the relocation is simply a cost-saving measure, be straightforward about it and be prepared to demonstrate significant savings to offset the lack of a more strategic intent.

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– Develop a set of talking points for leadership for consistency and to build trust with employees. This is yet another opportunity to align leadership and get their buy-in as well. Provide leaders with a set of reactive FAQs with suggested responses to some of the more difficult, direct questions that employees may have.

• Address the rumor mill

– Even with “foolproof” NDAs in place, rumors regarding the relocation may leak out. When an employee brings up relocation rumors, leaders should not contradict them with a bald-faced lie. Prepare talking points that address the question head on without committing to anything that you don’t yet want employees to know.

– In the same vein, prepare talking points in case employees ask leaders, “If you knew about this, why didn’t you tell me sooner?” There are many reasons for not disclosing the news prematurely, including the need to be able to finalize details and provide notifications to all impacted employees.

“What does this mean for me?”The other critical question that needs to be answered at the time of announcement is how employees will be impacted. A convincing business rationale will only reach employees’ ears if you immediately answer the question of “what does this mean for me?” Without the assurance of a job in the new location or the certainty of a severance package to help tide them over during the transition, employees can quickly fall into feeling anxiety and mistrust. This can negatively impact morale, productivity, talent retention, and even company image.

As such it is recommended that you immediately follow the announcement with individual notification meetings with every impacted employee. Engage the HR Business Partner to help coordinate these meetings and prepare required materials (refer to section 2: The role of HR in workforce transitions during a corporate relocation).

The key to successRelocation efforts take significant time and energy and often detract from doing “business as usual,” so it is important to plan carefully and support it fully with leadership backing and dedicated, experienced resources. Since talent retention is so important to companies, leadership alignment and stakeholder engagement are both critical from the very early stages of planning. Engaging internal experts to weigh in on decisions can help prioritize the interests of both the business and your employees so that your customers and your brand are not negatively impacted during the transition. As you prepare for announcements and employee notification meetings, this guiding principle will continue to navigate you through decisions about key messages and employee package elements. Finally as you manage the transition, by putting people first you are also putting the business and your customers first, as your key talent will be critical to business continuity.

Keep in mind that while many other organizational changes can occur simultaneously, when you’re undergoing a relocation effort it is advisable to minimize other changes to the business that may further distract from the relocation and distress employees during a time of uncertainty and indecision. Instead, focus on strengthening performance in other business units or regions that are not directly impacted by the relocation, if any, to compensate for the inevitable hit that the relocating business will take during the transition. Most consumer products companies have the ability to do this because of the diversity of their product lines and brands. Doing so will help you weather the storm and be ready to realize the full benefits of the relocation once the transition is complete.

Finally, when all is said and done—roadblocks overcome, risks managed, employees relocated—make sure you acknowledge all of the hard work, and celebrate!

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In any corporate relocation, HR plays a critical role in the workforce transition. Talent retention during the transition period can be a major challenge as employees deal with change and uncertainty, and it often falls on the HR Business Partner’s shoulders to keep employees engaged and retained through and beyond this major event.

Because of this criticality, it is important that HR Business Partners are closely involved in the transition effort as part of the core transition management team. Often, HR Business Partners will be tasked with the responsibility of leading the team and executing on the transition strategy.

Prior to finalizing and executing any employee-related transition plans, it is important to gain alignment across the organization on the rationale, scope, impact, and timing of the relocation. Section 1, Key strategies to consider during a corporate relocation, elaborates on these decisions and the appropriate level of leadership who needs to be involved in making them. After the details of the transition have been agreed upon, the organization will rely on HR to execute on the plans and deliver successful results.

Preparing for Announcement DayLearning about the organization’s decision to relocate is hard news for any employee to receive. Irrespective of whether they are directly impacted or not, they will likely experience a range of emotions from sadness to anger. Proactively anticipating and addressing these sentiments by providing consistent, accurate information relevant to each employee goes a long way in generating calm and order on a day that is inherently chaotic and disturbing.

The two areas that need the most preparation for the Transition Announcement Day are (1) Creating individual employee packages and (2) Identifying and preparing the key communicators to deliver individual notifications.

Creating individual employee packagesIn a relocation, employee packages fall into two categories—for those employees who are offered a position in the relocated organization and for those who are not. If offered relocation, employees should be provided with the details of both their relocation package and the severance package they would be eligible for if they were to decline their offer, so that they can make an informed decision.

It is also important to consider the impact on any present interns, past interns who may have a pending offer, and any contractors critical to the business.

The details of the documents provided for each group of employees are listed in the following table.

2. The role of HR in workforce transitions during a corporate relocation

Employees who are offered a position in the relocated organization

Employees who are not offered a position in the relocated organization

Terms if offer to relocate is accepted • Severance benefits—employee may be entitled to severance based on position and tenure. Information on any pension plans, retirement accounts, etc., should be included

• Effective date—official date of separation

• Employee Assistance Programs—designed to help the employee and his/her family cope with the changes

• Placement services—offering the displaced employee access to job placement and resume writing services

• Severance policies—include any relevant company policies related to severance

• Retention incentive—employee may be offered a retention incentive to remain with the business through the transition

• Position/Title/Compensation—include description if role is changed or new

• Relocation benefits—financial assistance that is being offered for the employee’s move, if any

• Relocation incentive—in some instances key talent may be offered a bonus above relocation benefits

• Effective date—official date of transition to new position

• Final acceptance date—date by which a response to the revised terms and relocation offer is due

• Relocation policies—relevant company policies related to relocation

Terms if offer to relocate is declined

• Severance benefits

• Effective date

• Severance policies

If, and after employee has declined position in the relocated organization

• Retention incentive–if relocation offer is declined, employee may be offered a retention incentive to remain with the business through the transition. This information should not be shared prior to the employee making a decision

• Employee Assistance Programs

• Placement services

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Beyond these primary documents, supplementary information that can be added to employee packages include employee FAQs, area information for new location and spousal job placement support assistance (if any). If needed, packages for critical talent can be enhanced on an exception basis as well. Companies can employ incentives that are financial (e.g., housing incentives) or non-financial (e.g., job title promotions) to persuade critical talent to move with the business.

The more information companies can provide employees to help them understand their personal impact, the more employees will trust that the company has their interests in mind. This trust will go a long way in keeping employees motivated during the transition period between the announcement date and move date.

Identifying and preparing the key communicators to deliver individual notifications

“Key communicators” are leaders in the organization who have been identified to conduct individual notification meetings with employees. They are critical enablers of a smooth transition experience and should ideally be both reputable within the organization as well as invested in the employee (e.g., a division or functional group director). Leading practices suggest that employees should not receive information that is of impact via an unfamiliar person in the organization. It is also advisable to pair each key communicator with an informed HR professional, who can objectively provide pertinent information to the employee during and after his/her meeting.

The selected key communicators may or may not have had any prior experience in delivering job-impacting communications to employees. Irrespective of their level of

exposure to transition execution, it is important to provide key communicator training for consistent messaging and approach across all employees. HR professionals involved in the conversations should also undertake the key communicator training.

Key components of the key communicator training should include the following:

• Rationale to be communicated to the employee, and the process that was adopted to identify the several employee groups who will be impacted. It is important for all key communicators to provide a common understanding and messaging across the organization. It will also help them confirm that all employees in their purview have received the appropriate communication.

• Schedule for the Announcement Day, including details of any employee meetings, locations, and times for individual conversations and scheduled key communicator/HR debriefs to capture firsthand reactions.

• Overview of materials that will be provided within the individual employee packages and details of resources that will be available for employees.

• Contingency plan for employees who may be absent during the day of notification. It is best to schedule a telephone call with employees who are on leave, so they are not made aware of the transition through a third party. Impersonal notifications (e.g., email) should be avoided as much as possible.

• Communication guidelines outlining what could and should not be communicated, key talking points, and information on how to cope with employee behaviors/reactions that they may experience during their meetings (anger/hostility, denial/bargaining, grief/sadness).

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Announcement DayA majority of organizations consider scheduling the announcement toward the end of the work week, so as to allow employees to digest the news and its impact over the weekend. Selecting a Thursday will also allow the organization to provide additional support and resources to employees who may need it the day after the announcement. HR professionals and employee assistance should be also be available on site for a couple of weeks following the announcement to answer any employee-specific questions.

Typically, the announcement day begins with a press release followed closely by an announcement to all employees. It is important for leaders to be visible and interact with employees, providing rationale and acknowledging the level of impact on individuals and the organization. During the all-employees meeting, information should be shared on the plans for the day, including schedules for individual conversations and available resources on site. Employees may be encouraged to take the day off to discuss the implications with their families.

Individual meetings should ideally be scheduled for 20–30 minutes, with 5–10 minutes between each to give each employee ample time to ask questions. Meetings should be arranged so as to communicate to those with the highest impact first. Arrangements could be made for lunch and refreshments during the day. Additionally, employees should be provided with access to transportation (e.g., cab vouchers, shuttles to public transport) in case they are too distraught to drive. Additional security should also be arranged for the announcement day, and a couple of weeks following it.

Leading practices suggest setting up a central command center that key communicators should contact after each meeting to confirm that there are no issues that require immediate attention. Gathering feedback from all key communicators and HR professionals at the end of the day will allow the organization to get a pulse on the mood, and alert the transition execution team of any potential issues.

Engaging employees through the move dateOnce you’ve announced the relocation and notified employees, you will enter into the tenuous transition period. It is important to recognize that impacted employees may be highly distracted during this time. Those who are not moving with the business will be actively searching for a new job. Those who are on the fence will be busy researching and weighing the options. Even those that have decided early on to move with the business will be distracted by the departure of their colleagues and the sense of loss. It is important to build an engagement plan that meets the needs of these different groups, as they can each impact the business in different ways during the transition. It is vital that leadership, while acknowledging the impact and potential changes, also focus on the vision and mission of the organization and foster a positive outlook. HR Business Partners should be closely involved during this stage to track individual employee decisions and engagement levels.

Let’s take a look at the different groups of employees based on their situation, and engagement strategies for each based on their specific needs:

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Keeping track of these different groups and strategies requires a bit of structure. Employee decisions should be tracked throughout this transition, as they will also inform knowledge transfer and hiring needs. It is extremely important not to lose sight of the needs of your critical workforce at this time. If budget or resources are limited (as they usually tend to be), make sure you focus them on your

top talent with high retention risks. Set the expectation that leaders should be engaging top talent and helping to support any decision-making needs, and hold them accountable.

Employee decision Potential needs Engagement strategies

Undecided • Learn more about the opportunity and the new location

• Explore available job options as point of comparison

• Site visits—visit to the new location to meet potential new colleagues and explore the region

• “Tap on the shoulder” conversations—personal outreach from respected/influential leadership to encourage relocation

• Expert office hours—on-site resources available to answer detailed HR questions

Relocating • Learn more about the opportunity and the new location

• Concern for departing colleagues

• Site visits—visit to the new location to meet new colleagues and explore the region

• Ambassador program—buddy pairings with colleagues in new location who can help with onboarding and be a familiar face.1 Welcome events and other celebratory activities with ambassadors will help motivate and excite employees for the future in the new location.

• Internal networking opportunities—building ties to the company outside of current location. This will help curb the sense of loss that employees feel as their colleagues depart.

Not Relocating • Look for a new job

• Transition out of current role

• Flex hours—offering flexible time that employees can use toward job search, interviews, etc. This promotes goodwill toward the company.

• Knowledge transfer plan—put structure around the expectation for departing employees to capture and transfer knowledge before they transition out of their role.

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While corporate relocation decisions are not specific to any one industry, the consumer products industry is currently facing challenges that are forcing more and more CEOs to undertake this move. Faced with pressure from consumers to lower prices and shareholders to increase ROI, research indicates that 3 out of 4 CEOs and other top executives in the consumer products industry are clearly aware of the need to make significant changes to their business model to sustain historic margin levels and deliver more savings to fund growth and expansion plans.2 Many consumer products companies are being pushed toward corporate relocation in order to drive efficiencies and deliver on consumers’ expectations. For executives in the consumer products industry, it is becoming increasingly important to be prepared to execute a corporate relocation as key market trends may necessitate this consideration. In the event of a transition, it is critical for the company to proactively prepare for the event to minimize disruption to key constituents—in particular employees, customers, and suppliers.

Though it can be a risky transition to make, companies seek to gain several benefits from a corporate relocation; benefits include reduced headcount and real estate costs, access to new or different markets, and/or greater synergies in key functional areas such as supply chain. While many factors are contributing to the need for consumer products companies to consider such a large-scale change, below are three of the most notable trends that are impacting the industry today.

Changing brand portfoliosThere was a time when consumer brands used to be synonymous with one product or at least one product category. These days that is less true as major consumer product companies race to bolster their brand portfolios with diversified product categories. Many companies like Post Holdings have been in the news recently announcing major acquisitions. Post has been on an aquisition spree of sorts and most recently signed a $2.45 billion deal for Michael Foods.3 This purchase added eggs and dairy goods to Post’s existing cereal business.

When companies come together through M&A transactions one of the first ways to gain synergies is to consider is the rationalization of corporate locations. As the industry continues to see a flurry of M&A activity, more and more consumer products companies will be faced with the challenge of corporate relocations. If your business is engaged in M&A activity, recognize that preparing for relocations is an important step to maintaining business continuity as you rationalize locations.

Aggressive promotionsWhile promotion offers have always been a reliable tool used in the marketing and selling of consumer products, consumer companies are under greater pressure now than ever before to offer aggressive promotions to sell their products. The trend is industry-wide as “slack consumer spending and a broad shift toward fresher grocery items” put pressure on consumer products companies to maintain sales and meet growth targets.4 Most importantly the industry has experienced slow growth in the US; in fact, unit sales of consumer products have been largely flat for the past three years according to Nielsen.5 As a result, consumer products companies are becoming more dependent on steep discounts to bolster sales.

As prices are driven down to account for promotional discounts, consumer products companies must find other ways to squeeze out marginal profits. Many CEOs scrutinize operational costs to find savings by eliminating redundancies. This often means consolidating locations and/or sharing resources across business units. When companies are already running lean, it often requires an operational restructuring to be able to maintain business operations with reduced staff. For example, Nestlé USA recently underwent an operating model change and corporate relocation that allowed the business to find synergies and go-to-market as one company. Nestlé USA CEO said in a press release “The decision also allows us to better manage our costs and to improve our efficiencies by operating as One Nestlé with our retailers.” If yourbusiness is looking to achieve greater synergies across its various units, a corporate relocation may be imminent. Being prepared for this move is an important way to help achieve cost benefits and reinvest into growing the overall business.

Industry spotlight—Three reasons why consumer products companies are considering corporate relocation

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Focus on emerging marketsAnother reason that consumer products companies are choosing to reduce their real estate footprint in the US is so that they can reinvest capital into new markets. This is due to both the stagnation of domestic sales as well as the potential for expansion in growing international markets. Many consumer products companies are looking for expansion in emerging markets to make up for the lackluster growth in domestic sales. For example, German consumer products company Henkel is looking to expand to emerging markets after seeing a 3.1% decline in organic sales in North America.6

As consumer products companies turn their attention to emerging markets, oftentimes they must find ways to “utilize the existing workforce to support continued long-term growth as a result of shrinking budgets and reduced hiring.”7 This again drives the need for restructuring and cost rationalization which are major catalysts for relocation projects. Furthermore, as consumer products companies continue to expand into new markets, the physical relocation of key talent will become an important consideration in the ability to grow the brand and business. A well-executed relocation of both talent and operations can be the key to success in a new market.

The bottom lineIn summary, companies within the consumer products industry are experiencing three key trends that are catalysts for corporate relocation:

• Changing brand portfolios: Increased M&A activity in the industry spurs location rationalization

• Aggressive promotions: Cost reduction initiatives are top of mind as promotional pricing drives down margin

• Focus on emerging markets: Companies are reducing footprint in the slow US market to reinvest in new markets that are growing overseas

These trends in the consumer products industry are prominent ones, and as such industry executives need to be prepared for the distinct possibility of a corporate relocation in the near future. Not being prepared to manage the operational and people transition activities that are critical in a corporate relocation will be extremely disruptive to the business.

However, as challenging as a corporate relocation may be, consumer products companies can also benefit by making changes to establish a stronger platform for long-term growth in a mature industry. Companies that make bold moves in changing times have historically come out on top. In that sense, a corporate relocation can be viewed as an extremely positive and strategic move for the company. There are other benefits to be had as well, including regional economic incentives and improved operational synergies. Whatever the reason may be, it is critically important to plan systematically and to understand the critical activities and potential risks in any corporate relocation. If your organization is faced with a corporate relocation, this paper can guide you through the process and help you minimize business disruption.

For further information about this topic, please contact:

Kevin KnowlesPrincipal Human Capital Deloitte Consulting LLP keknowles@deloitte.com

Joyce ChangManager Human Capital Deloitte Consulting LLP joychang@deloitte.com

Danielle FeinblumSenior Manager Human Capital Deloitte Consulting LLP dfeinblum@deloitte.com

Swapna SathyanManager Human Capital Deloitte Consulting LLP ssathyan@deloitte.com

Chris NormanSenior Manager Human Capital Deloitte Consulting LLP chnorman@deloitte.com

Alyssa LoverroConsultant Human Capital Deloitte Consulting LLP

1 http://www.forrester.com/Effective+Business+Change+Management+Requires+More+Than+A+WaitAndSee+Attitude/ quickscan/-/E-RES58525

2 Clark, Gregg. Industry Weekly. “Cutting Costs the Wrong Way Can Damage Your Brand”

3 Stynes, Tess. Wall Street Journal Online. “Post Holdings Swings to Loss”

4 Stynes, Tess. Wall Street Journal Online. “Post Holdings Swings to Loss”

5 Ng, Serena. Wall Street Journal Online. “Americans Lose Their Taste for Cereal, Soda and Soap”

6 Reeg, Caitlan. Wall Street Journal Online. “Henkel’s 14% Rise in Profit Buoys Shares"

7 Deloitte C&IP Learning, “Grow C&IP Through Organization Strategies

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