A government department in Australia this week announced to their staff they would be relocating their head office and 300 people from the CBD to an outer suburb some 25 kilometres away. The rationale was that in this outer suburb, the government had built and occupied a large office building some years ago, which now stands unused. Consequently, in a quest to save over $1m in property rental costs, the financial decision to relocate was made and ratified by the experienced Board.
It is easy to see how someone with a calculator could make this decision in isolation. It is difficult however to understand how the Board could. This writer has managed 5 head office relocation projects in 3 different countries. All offered the opportunity to save a lot of money by moving from existing locales. One in North Sydney was one of the largest commercial lease deals in Australia that year, involving the consolidation of 10 premises into 12,000 square metres (120,000 ft 2) of space. To move from North Sydney offered millions in savings.
But after interviews and research with the staff in that project, one thing became obvious. A major relocation would alienate a large proportion of them, many adamant they would leave as soon as other job options became available. Over the years staff had bought and rented homes to be near their workplace. Due to transport options, the location was convenient to all staff regardless of their geographical location. And so while the tangible savings from an alternate property deal in an outer location was in the bag, it became very obvious that the expected loss of good staff and the associated cost and damage to the business far outweighed these savings.
There is nothing wrong with decentralised head offices, the rents are cheaper, parking free, and you can always get a good pie with gravy from the local cafe. But when choosing to work for that decentralised company, everyone knew where they would be working. To move a large number of people from one established location to an entirely different region, guarantees staff turnover.
In the case of the government department, over 75% of their staff lives on opposite sides of the city to this new location. They have not been asked for any input. They didn’t sign on for a 2 hour transit each day. They like working in the city. If say 20% of the 300 leave (approx. 60 staff), (and you can be assured it will be the very best people who can get other jobs), the people cost will smash any property savings made. This strategy of forcing the business to fit around a property strategy is the opposite of what should happen and is clearly stacking one bad decision on top of another. We understand that the Board may have been given no choice by the relevant government, but isn’t it the role of an experienced Board to resist such folly? If there were any analysis on the real cost and impact of staff turnover, it would highlight the destructive decision that has been inflicted on this operation.
Some workplaces measure their staff turnover statistics as a core performance indicator. The best then go two steps further. They place a tangible value to the cost of losing a person, and analyses major decisions, sometimes seemingly non-related, on their direct effect on people’s desire to stay. By doing this, key leaders in the areas of Finance, Property, and IT, will often have to resist their natural urges to crack the best deals in their own discipline, by making the best decision for the overall business outcome. People over property is the solution in a relocation dilemma.