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Amazon's decision to build a second headquarters points to several benefits—from new, diverse talent pools to distribution optimization. See why smaller companies might want to follow its lead.
On September 7, 2017, Amazon announced that it would build a $5 billion second headquarters in North America, kicking off a competition between cities and states to offer tax cuts and incentives that could bring 50,000 new jobs that would average more than $100,000 per year over the next 10 to15 years, while adding billions of dollars to a local economy.
This would be a full "second headquarters" for the company that would be the equivalent of its current headquarters in Seattle.
The advantages of an all-out competition between cities with more than 1 million residents for the online behemoth's HQ2 are readily apparent. Amazon would likely obtain tax cuts, fees cuts, commitments to infrastructure build-outs, and possibly even a cheaper cost of living than the Seattle area offers.
However, Amazon may be looking at benefits far beyond tax cuts and infrastructure build-outs. Here are some of them:
Access to new talent pools
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Amazon recently acquired Whole Foods. It has never been in the grocery business before—and it is likely that Amazon will position itself to enter other previously untapped industry sectors. Amazon will need fresh talent to do this. At some point, locating high-level management and other key players near new talent pools begins to make sense.
Spreading management responsibility
Amazon already is the largest e-commerce company in the world. It has to ensure that its top management doesn't have a scope of control that is too broad for one team to handle. Arguably, the company is fast approaching this point.
Logistics and distribution optimization
By officing high-level management and key personnel in another location, Amazon is in a better position to engineer and run its already impressive distribution and logistics operations.
Disaster recovery isn't an issue for data centers alone. It is also a concern for management teams. If a tsunami flattens Seattle, the alternate HQ team somewhere else can take charge—and vice versa.
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Should this HQ2 strategy be considered by other smaller tech companies? Here are some points to consider:
Management team redundancy
Too many companies limit their remote office personnel to sales and service technicians. What if you did design a place for a second HQ, or even a "mini HQ"—say with your CFO and an operations officer—in this HQ2? It could enable you to make strategic decisions if disaster struck your main headquarters. This would keep your company running.
Access to more top talent
A major commitment by your organization beyond just sales or service office could enable you to hire badly needed talent that you can't find in your home market.
Proximity to your customers
No one knows where Amazon will locate HQ2, but a location closer to the east coast and the European continent wouldn't hurt when it comes to customer proximity. Smaller companies, as well, should consider the value of placing key executives in areas that are close to customers and business partners.
You can offset some of the costs of your operations if you locate a major facility (and personnel) in area that will be more than happy to add your jobs to its economy. Amazon, with its e-commerce presence, has been criticized in the past for its negative impact on brick-and-mortar jobs. The dual HQ approach is a way to allay some of that criticism.
In the future, there will be many companies that choose not to follow Amazon's example—but some will. This more flexible approach to major headquarters in multiple cities can expose tech industry companies to diverse talent pools and enable them to retain key executives and performers who don't want to relocate.