A recent article in the Harvard Business Review noted that in an industrial economy, company location decisions were often based on minimizing the cost of access to and transport of raw materials, transporting finished goods to their markets, and labor. In contrast, the driving factor in location decisions for today’s high-tech, knowledge-based companies is primarily based on access to highly educated and skilled people.
Companies considering relocation to Texas have to consider the strategic risks of relocation and mitigate those risks. Companies considering a complete relocation of a large facility with many employees should have a record of being an outstanding place to work so key employees remain committed to making the move successful. Moving a manufacturing plant – a traditional blue-collar workforce – has more complexity to it than moving the C-suite or back office functions because manufacturing plants need workers inside. Those people actually have to move or replacements need to be found in the new location.
Companies need to carefully determine how many employees are willing to make the move, and then determine if the targeted area in Texas has the right talent to fill any gaps. One of the biggest deciding factors for a relocation is an improved quality of life for a company’s employees and potential employees. A lower cost of living, especially for housing, along with highly rated schools are a draw for families. For employees who travel a lot, Texas’ central location and major airports will make it easier for them to do their jobs.
A company might consider moving to Texas if its competitors have moved to the state, as this indicates there likely is a significant talent pool available for that type of business. Austin, for example, is a miniature Silicon Valley technological hub. The area is experiencing a massive influx of companies from California, like Tesla, Oracle and Hewlett Packard, along with the talent that has gone with those relocations.
Even if a company doesn’t move to Texas, it may find itself in an unexpected talent competition with companies that have moved. Because the Texas economy is growing faster than most other states, one person may take a job there, and their spouse or partner will move and work remotely for their current employer. The spouse or partner will be exposed to many more opportunities in the booming Texas economy, so if they find their career opportunities are limited at their current job, they may have a greater opportunity at another company in Texas.
Leadership and management teams can carefully research possible Texas locations without raising concerns about a possible move with their existing workforce. A local chamber of commerce, Bureau of Labor Statistics, or executive recruiting firms or staffing companies in the target market can help a company assess availability of local talent, such as data on majors of local graduating classes or local labor pools with specific skill sets. As the decision to relocate becomes clearer, companies have to consider issues such as:
- Who are the key people they need to retain during the transition because of their essential knowledge base?
- How long do those key people need to be retained?
- What retention incentive or severance plan is needed related to these key roles?
- What positions could be moved with very little disruption to the department?
Companies also have to consider their human capital budget for a possible relocation:
- What relocation expenses will the company pay for people who move?
- Will the company fill open positions at the new location itself, or will it hire a local external staffing company or executive search firm?
- What are the employment tax implications of moving to Texas?
- What are the benefits implications; for example, will health insurance cost more or less in Texas?
The nature of manufacturing is changing and becoming heavily automated, which in turn will affect decisions companies make as to where they locate future plants. Instead of needing several shifts of line workers, they will need smart people who understand systems, data and software to manage inputs and outputs. Companies will need space for warehouses, and fewer people, but those employees will need to know how to manage robots and automated systems.
Texas has one of the most competitive and diverse labor forces in the U.S. According to the New American Economy, a bipartisan research and advocacy organization, Texas has almost 5 million immigrant residents, accounting for 17% of the total state population. This immigrant population holds jobs in many sectors. While over 70% of this immigrant population has less than a college degree, 27% of the immigrant population have a bachelors or graduate degree, compared to 32% of U.S.-born residents with higher education degrees.
In moving to Texas, a company has to ensure it maintains its company culture, which is often the secret sauce for a successful company. Often when companies decide to move, they will place someone from the existing location in charge to better ensure that as new people are hired in the new location they match the company culture.
