Business Terms and Relocation

Risks, Benefits and Costs of Relocation By Prudential Joseph R. Carucci Real Estate Business location continues to be a primary factor in sustaining a companys war-ridden position whether it is a corporate headquarters seeking to get nestled to emerging markets, or a back office wanting to dilute operating cost. Companies often find that their current locations no longer impart the competitive advantage they once held. Consequently, they attempt to weigh the guesss and benefits of a study(ip) move along with the costs to determine the viability of relocation.Risks Related to Relocation By far the most significant risk tie in to a major relocation for any operation is the possible for business disruption. The outcome could force in the loss of valuable employees (knowledge assets) and distractions from normal business activity during training and implementation that impact service delivery and customer retention. While the risk of disruption is real, careful planning and i mplementation can minimize its impact. A special relocation policy can be developed to maximise employee retention.Effective communications can minimize employee distraction and customer concerns. Short-term lag redundancy along with the phasing of relocation can minimize overall impact. different factors that influence the success of a relocation decision include non making an effective location selection decision Not adequately defining the costs of a relocation Not making a reasonably accurate attrition calculation Not engaging in a major relocation because of the fear of failure. Benefits of Relocation A relocation decision needs to achieve a payback in deuce to three years or little.Since the cost of labor comprises approximately 75% of the total operating cost, picking a location that results in a 10-15% reduction in labor cost is key. Because the majority of staff in a back office are on pay scales that ponder the local market, a significant cost reduction is potent ially achievable. contriteness in a back office relocation is usually senior high (80-90%) depending on the destination. Benefits derived from relocating a company headquarters operation are less concerned with reducing cost and more on strategic localisation of the company.Key objectives focus on gaining access to emerging markets, enhancing the ability to recruit and stay top talent, or making a radical change in corporate refining all of which send a positive signalise to each company stakeholder and support the long-term viability of the company. Employee retention from a exemplary headquarters relocation is 60-70% and is influenced by the level of interest in the destination, approachability of other local job opportunities and family situation. The average cost of relocation per employee is round $50,000, but can vary widely depending on salary, home will power status and relocation policy provisions.Relocation Cost and Risk/Benefit epitome Process Risks and benefi ts will vary for each type of business operation. In a given scenario, a particular condition may be viewed as either a risk or benefit depending on the specific needs of the company. For example, if a company wants to radically change culture and reduce the cost of highly tenured employees, a large percentage of attrition is positive. If there is a significant concern over the potential loss of intellectual capital due to a relocation, the company should nonplus its relocation policy reviewed and incorporate provisions that maximize retention.The analysis butt on should be comprehensive, and take into consideration short-term risks as well as long-term benefits. Business location consulting firms specialize in preparing relocation analyses and in evaluating relocation alternatives. Factor examined include retention/attrition of affected employees one-time costs of relocation and build-out as well as the long-term costs and savings for real estate and labor. The following five-po int process will help a company analyze its relocation cost and risk/benefit 1. 2. 3. 4. 5. mend location and employment level alternatives.Determine potential employee retention and attrition for alternatives bet the one-time costs of relocation, attrition, new staff recruiting/training, etc. Estimate the incremental current cost/savings over a specified period related to the cost of real estate and labor, facility improvements and lease penalties. Identify some(prenominal) the risks and benefits to the company for each location scenario. Whether its a short or long-distance relocation, this analysis process will help your company reform understand the risks, benefits and costs of relocation.