Amazon and the Expansion Question

The big retailer and others face a growing issue—move HQs to cities packed with talent, or bring talent to cheaper outposts.

As it does with nearly every move, retail giant Amazon certainly created buzz when this month it announced plans to house a second corporate headquarters. After all, it’s rare when a company can bring 50,000 high-paying jobs and billions of dollars in direct and indirect investment to one city.

Or will it be a city or suburb? In its search for a new location, Amazon will have to make an increasingly hard decision faced by every business leader looking to expand: Do you go where the talent pool is small but costs are cheap, or where talent is plentiful but costs are steep?

While always an issue, the HQ call is tougher as the gap between skilled workers and costs in major cities versus elsewhere grows. Experts say there’s no one right answer, but that the wisest business leaders will take an approach that prioritizes the attraction and retention of employees. At a time when millennials comprise the largest share of the US workforce, that means choosing a location that offers an attractive work-life experience.

“If you choose a location off the beaten track, you can pay lower rates for talent but you’ll have to relocate them in,” says Mitzi Shafar, a global leader in the Talent Acquisition Advisory practice at Korn Ferry Futurestep. “In that case, you have to have a differentiator. The differentiator, especially for millennials, is quality of life.”

For a generation that widely values convenience and flexibility, perks such as on-site gyms, dry cleaning, salons, childcare, and substantial paid time-off can be big draws for employees. Companies such Hyland, a 2,200-person software developer based in Westlake, Ohio, and Acuity, a 1,200-person insurance company based in Sheboygan, Wis., are good examples, offering lifestyle-friendly benefits that consistently land them on lists of the best places to work, despite their remote locales.

Of course, the other big question at stake when building or expanding involves looking at whether the move will benefit the company’s customers. In 2007, Volkswagen Group of America decided to move its North American headquarters from Detroit to the lesser-known town of Herndon, Va., which offered the company millions in tax incentives. The move took VW out of Motor City, but it brought the company closer to its strongest customers, many of whom were located in the Mid-Atlantic region.

“[The C-suite] realized that the closer [the company is]to [its] customer, the easier it is from a sales and marketing [perspective],” says Shafar. “They looked at their customers first; I think the way they prioritized was stellar.”