Navigating the Site Selection Process: Top 10 Steps and Best Practices
December 20, 2023
The rapidly changing business environment requires organizations to continually reevaluate their global location strategy. Whether they are experiencing growth and expansion; consolidation following mergers and acquisitions; or the need for greater cost efficiency, organizations need to take a data-driven approach to make the right site selection decisions to achieve their business objectives.
In the past, site analysis and selection were driven mainly by financial considerations such as the cost of real estate, government incentives, and tax rates. While these are still important, in the past several years the labor market has become the primary criteria for location selection due to chronic skills shortages and high wage inflation in many regions. Failure to take talent supply, cost and competition into account when making site selection decisions often leads to disastrous consequences including long lead times to fill roles, overpaying for talent, and high attrition.
Let’s explore the top 10 steps involved in the site selection process, along with best practices to guide your decision making and select an optimal location.
Step 1: Define Your Objectives
Before embarking on the site selection journey, it’s crucial to define your objectives clearly. What are your business goals and specific requirements for the new location? For example, if you’re seeking a new location to support a market expansion strategy, proximity to key customers and top Commercial talent will be key. If you’re maturing your global Shared Services strategy to achieve cost efficiencies, cost and availability of talent will be more important. If you’re building out a global Center of Expertise for strategic capabilities such as R&D, it will be critical to identify locations with the key skills and product expertise you need, and research institutions you can partner with to achieve a competitive advantage.
Best Practice: Engage key leadership stakeholders to align on business objectives for site selection. Define what success looks like both in the short and long-term and establish location non-negotiables and non-starters to avoid boiling the ocean.
Step 2: Create a Site Selection Team
Assemble a dedicated site selection team with representation from Human Resources, Real Estate, Operations, and the business.
Best Practice: Include HR within the site selection team; do not wait till later in the process to consult them. If the labor market is the most important decision criteria, HR should potentially lead the team.
Step 3: Establish Evaluation Criteria
Develop a set of site evaluation criteria that align with your objectives. Criteria may include labor market considerations (availability, cost, competition, flexibility, unemployment rate); proximity to suppliers and/or customers; macro-economic factors; political and environmental risk; transportation infrastructure; tax incentives; real estate cost and availability; and the regulatory environment.
Best Practice: Prioritize and weigh your criteria based on their importance to your organization’s goals. Create modeling tools that will allow leaders to run various scenarios on the data.
Step 4: Evaluate Data Requirements and Sources
Determine which specific data points are needed and whether that data is already available to your organization or will need to be procured. The various stakeholders on the site selection team will typically have their own established databases and sources. Evaluate which sources are most reliable for your needs. Work with external vendors to procure needed data.
Best Practice: Establish the acceptable level of data needed to make a sound decision. For example, if specific skills are required in the location, ensure that your labor market data is specific to those skills.
Step 5: Utilize Data to Identify Potential Locations
Compile an initial list of potential locations that meet your criteria and source data according to your established criteria and weightages. Use labor market intelligence platforms such as TalentNeuron; local Economic Development Agencies; government agencies; and local partners (e.g., recruiters and search firms) to gather data. Take an iterative approach to pressure-test hypotheses with leaders and narrow down options.
Best Practice: Don’t forget to include competition and talent demand when evaluating the labor market. Many cities with large talent supply and low cost are also highly competitive and difficult to recruit in.
Step 6: Conduct Site Visits and Due Diligence
Visit the shortlisted locations and surrounding areas to assess them firsthand and deepen your understanding, particularly of factors that are not easily quantified such as quality of life, cultural significance, soft skills of the workforce, and competitor attractiveness. Conduct thorough due diligence to uncover any hidden challenges or opportunities.
Best Practice: Engage with local communities, universities, staffing firms, and real estate agencies to gain insights into the region and prospects for short- and long-term growth and development.
Step 7: Perform Deeper Financial Analysis
Perform a detailed financial analysis to compare the costs and benefits of each location. This should encompass real estate costs, labor costs, operational expenses, taxes, and potential incentives.
Best Practice: Create forecasts of cost increases based on inflationary conditions and projected growth to provide a short- and longer-term view.
Step 8: Negotiate Incentives and Agreements
Engage in negotiations with local authorities, property owners, and potential partners. Leverage your understanding of local regulations and incentives to secure favorable terms.
Best Practice: Collaborate with legal experts to ensure agreements protect your interests.
Step 9: Finalize Site Selection
Based on the evaluations, financial analysis, risk assessment, and negotiations, make a final location decision. Ensure it aligns with your objectives and long-term strategy.
Best Practice: Consider the scalability of the chosen location to accommodate future growth.
Step 10: Execution and Integration
Once the site is selected, execute your expansion or relocation plan. Establish clear timelines and milestones for the transition. Effectively integrate the new location into your operations, workforce, and supply chain.
Best Practice: Develop a comprehensive project management plan and engage employees in the transition process.
Bonus Step: Continuous Evaluation
Even after the site selection process is complete, continue to monitor and evaluate the chosen location’s performance. Regularly reassess its alignment with your evolving business goals and make adjustments as needed.
Best Practice: Establish key performance indicators (KPIs) to track the success of the new location as well as site analysis checklist.
A Transformative Decision
The site selection process is a complex and multifaceted endeavor that demands careful planning, due diligence, and strategic decision-making. By following these top 10 steps and adhering to best practices, organizations can position themselves for success in a new location and establish a clear competitive advantage. A well-executed site selection process not only mitigates risks but also maximizes the opportunities for growth, cost savings, and operational efficiency in the short and long-term. Ultimately, selecting the right location can be a transformative decision that propels your organization toward its future goals.
TalentNeuron’s Tailored Guidance
At TalentNeuron, our mission is to help organizations successfully compete by translating global talent data into business and talent strategy. We help you propel your future workforce strategy, manage disruptions and market-shifting moments, and discover untapped opportunities with powerful global data intelligence.
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