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LITTLER-MENDELSON
A large law firm based in San Francisco, Littler-Mendelson was
contemplating a move of back office functions to reduce
operating costs. About 150 positions (21,000 SF) were involved.
Top management retained WDG Consulting to assess the impacts of
moving selected operations either elsewhere in the Bay Area or
to a remote location. The following analytical process, typical
in a relocation feasibility study, was adhered to by WDG
Consulting:
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Interviews with top management to elicit opinions on
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Geographically mobile business units
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Operational
challenges if support operations are located a
significant distance from headquarters |
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Most critical
positions wherein move induced attrition should be
minimal |
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Retention/relocation policies for study purpose |
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Current/future operating experiences in San Francisco
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Most
important criteria for a new location
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Request for baseline information on affected business units
(e.g., staffing, salary, office space, telecommunications,
air travel, etc.) |
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Selection of a test suburban location in the Bay Area, based
in part on commute distance for critical employees |
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Map depicting the geographic clustering of current employee
residences |
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Selection of a test long-distance location for study
purposes (selected by WDGC based on past experience) |
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Review of the company’s current lease provisions in San
Francisco |
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Quantification of relocation’s impact to the test locations
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Test Location |
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Impact |
Suburban SF |
Long-Distance |
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Employee Action |
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Relocation |
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Commutation |
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Attrition |
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One-Time Costs |
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Human Resources |
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Relocation |
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Separation |
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Replacement |
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Real Estate |
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Existing space disposition |
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Furniture/fixtures/equipment disposition |
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Office move |
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Redundant operations |
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Miscellaneous |
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Contingency |
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Recurring Costs |
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Payroll |
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Replacements lower in salary grade |
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Geographic differential (new and replacements)
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Salary sensitive benefits |
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Occupancy |
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Base rent |
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Operating costs |
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Taxes |
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Taxes |
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Travel |
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Payback |
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One-time costs |
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Annual savings |
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Years to recoup one-time costs |
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Business disruption risk |
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Potential |
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Mitigation |
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Recommendation
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Synopsis of
risk/rewards |
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Go or No go
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If go
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Bay area |
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Long
distance |
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While relocation did make economic sense, WDG Consulting
counseled against a move. Rather, given the depressed state of
San Francisco’s real estate and labor markets, WDG Consulting
recommended taking new space on a five year lease elsewhere in
downtown San Francisco. We also advised the company to be more
diligent in hiring new workers at the lower end of established
salary bands.
The WDG Consulting strategy would result in an 8%-10% savings in
geographically variable costs. Moreover, several million dollars
in scarce capital could be deployed for other business uses. And
there would be minimal loss of key employees and business
disruption. WDG Consulting did, however, recommend re-examining
the situation some 18 months before a new lease expires.
Littler-Mendelson followed WDG Consulting’s recommendations.
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