Company Site Selection: Key Decision-makers

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Company Site Selection: Key Decision-makers

According to our findings, the final decision related to an organization starting, relocating, or expanding to another location lies with the CEO and the Board of Directors while different individuals are responsible for making functional decisions at various phases during the site selection process. Organizations usually assemble a site selection team that consists of functional and site selection experts to support the decision-making process. It was also found that the CFO is a key member and commonly leads the site selection team.
  • According to a study (based in Finland), the manager responsible for corporate real estate in their respective organizations is the CEO (42%), CFO (23%), and real estate manager (11%) while 24% held other positions.
  • Another study on corporate real estate site selection states that while the final decision rests with the CEO and the Board of Directors, there are other individuals that are responsible for making functional decisions in specific phases of the site selection process.
  • It states that there are two stages in organizational site selection. First is the problem definition and spatial need assessment stage. This is the starting point where the goals and objectives of the decision are established and a self-assessment study is conducted. Once the problem is identified and the spatial requirements are set, the second stage consists of the site search, selection, and commitment process.
  • The study has documented the following key stages and decision-makers at each phase of the site selection process.

Stage 1: Problem Definition and Spatial Needs Assessment

  • Phase I- initiation of the location decision:
    • Key decision-makers: CEO/Board of Directors on request of division managers.
    • Role: assesses the capacity and the decision to expand or relocate to determine the need for the facility.
  • Phase II- corporate self-assessment:
    • Key decision-makers: CEO/Board of Directors, divisional heads, strategic planning, infrastructure managers.
    • Role: develops workplace strategies and policy, as well as corporate standards and growth strategy in order to determine the role of real estate in the business.
  • Phase III- space requirements & design standards:
    • Key decision-makers: division and corporate executives with real estate/facility planning personnel.
    • Role: determines operational requirements, prepares budgets and cost estimates in order to decide on the facility size and design.

Stage 2: Site Selection and Control

  • Phase I- selection of communities or geographic areas:
    • Key decision-makers: division and corporate executives with real estate/facility planning personnel.
    • Role: establishes the site selection criteria to select a suitable location.
  • Phase II- identify alternative sites:
    • Key decision-makers: real estate/facility planning personnel.
    • Role: identifies sites for examination and assesses the macro-environmental factors such as political, social characteristics to determine acceptable locations.
  • Phase III- evaluate alternative sites:
    • Key decision-makers: corporate and division executives with real estate/ facility planning and key operating personnel.
    • Role: conducts site visits and evaluations including financial and tax considerations to identify suitable sites.
  • Phase IV- site selection:
    • Key decision-makers: CEO/Board of Directors with real estate/facility planning and division personnel.
    • Role: negotiates between the division and corporate and obtains financial approval for the final site selection and acquisition.
  • Phase V- funding and construction:
    • Key decision-makers: CEO/Board of Directors with real estate/facility planning personnel.
    • Role: provides the approval for the capital budget, final construction plans and construction contracts.

OTHER FINDINGS

A summary of decision-makers (apart from the CEO) that commonly take the lead in site selection related decisions are as follows:

Chief Financial Officer (CFO)

  • An article from Area Development states that traditionally, CFOs played a supportive role in the site selection process and were rarely visible members of the negotiating team. However, due to the downsizing efforts and operational cost control in real estate, the role of the CFO has increased and they now commonly lead the site selection team.
  • The above finding is confirmed by another source which states that site selection had once been handled by the company's real estate team. The CFO had a limited role and was responsible for overseeing the financial side of the process. However, with the revolution in outsourcing corporate real estate functions, many of its staff positions have been eliminated. "Today, CFOs are finding themselves front and center in the process. "
  • With their financial insights, experience with marketing, operations, technology, and leading teams that handle portfolios, CFOs now serve as general-purpose executives who are able to consider the big picture in real estate decisions. Their role in the site selection process includes evaluating the site's impact on the company's finances, analyzing operational costs, assessing incentive offers and negotiating terms, etc. Overall, the perspective of CFOs is influenced by the impact on the company's bottom line.

Site Selection Team

  • The Site Selection Group states that the site selection team is a panel of experts that take the lead in the site selection process. The team "typically includes representatives from the executive team, business unit, real estate department, logistics department, tax department, human resources, and outside site selection consultants." The team will identify the economic investment, labor requirements, customer/supplier accessibility, infrastructure requirements, etc.
  • Economic incentive negotiations are usually undertaken by the tax specialist or site selection consultant member of the site selection team. Their role is to discuss the availability of tax credits, tax abatements, cash grants, training subsidies, utility rebates, and other related incentives with the local state leaders and to evaluate the financial benefit of the selected location/site.
  • It further states that the negotiation of the real estate deal is usually done by the real estate director or site selection consultant. The negotiations involve finalizing terms related to the price, space, rental, renewals, etc.


Sources
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