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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
 

 

Test Location

Impact Suburban SF Long-Distance
Employee Action    
   Relocation    
   Commutation    
   Attrition    
One-Time Costs    
   Human Resources    
      Relocation    
      Separation    
      Replacement    
   Real Estate    
      Existing space disposition    
      Furniture/fixtures/equipment disposition    
      Office move    
      Redundant operations    
      Miscellaneous    
      Contingency    
Recurring Costs    
   Payroll    
      Replacements lower in salary grade    
      Geographic differential (new and replacements)    
      Salary sensitive benefits    
   Occupancy    
      Base rent    
      Operating costs    
      Taxes    
   Taxes    
   Travel    
Payback    
   One-time costs    
   Annual savings    
   Years to recoup one-time costs    
Business disruption risk    
   Potential    
   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


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. WDGC did, however, recommend re-examining the situation some 18 months before a new lease expires. Littler-Mendelson followed WDGC’s advice.

     
© WDG Consulting

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