Dear Mirror, Do We Really Need Headquarters at all?
Corporate headquarters are known for not merely places of work. Rather, they also signify the aspirations, values, and corporate culture of an organisation that are embodied in a physical space. According to a giant real estate agent, an average office space allocation for an employee has now shrunk to more than 75 percent over the last 40 years as companies try to shore up cost and increase productivity, and in addition to that, many also resorted to readily available co-working space service providers. The latest figure of 75 - 80 sq.ft per employee is however a space provision estimated long before Covid-19 arrived at our shores.
In a study by Bjorn Ambos and Volker Mahnke in 2010 on How Do MNC Headquarters Add Value, they have concluded - after looking at various studies on the matter - that headquarters still have important roles to play in modern multinational corporations as they are the locus of hierarchical business decision making and control. Interestingly enough, the finding of the study was drawn against the backdrop of global financial crisis which had led many industry observers and firms alike to re-evaluate the value added by corporate parents. Alfred Chandler in his work The Functions of the Headquarters Unit in the Multi-business Firm (1991) opined that headquarters fulfill two primary functions: an integrative charter and an entrepreneurial charter. The former organises the corporations’ activities and creates synergies by pooling resources and consolidating value-added activities, while the latter describes the headquarters’ mandate to scout and explore new business opportunities and to strategise in an ever-changing business environment. In their book, The New Role of Regional Management, (2010) Ambos and Schlegelmich listed seven perceived value added by headquarters namely to improve information flow, challenge subsidiary to improve, provide useful guidance, substantial cost saving, knowledgeable about the local environment, fast and efficient decision making, and provide relief from administrative work. The roles of headquarters are once again challenged as the ongoing business processes during this time of pandemic seemed to suggest that the digital approaches are no less effective in accommodating the afore-stated perceived values.
Major cities are now eerily silent of business activities. With office tenants are now labouriously downsizing, the headquarters of many organisations are now seemed reluctantly becoming antiquated. The only plausible question begs explanation is, what purpose really is large corporate headquarters and how do they adjust to current environment going forward, should they choose to remain or even to relocate geographically?
Amazon, Facebook, Google, and Apple are recruiting more people and obviously the impact of the pandemic has brought them fortunes, paradoxically. New York Times (August 18th 2020) reported Amazon is keeping their earlier plan on track when they decided to hire 3,500 white-collar employees and going forward with their second headquarters. But there are not many as fortunate as these giants.
Dare to ask the mirror on the wall?