The days of companies planting the flag and building a major headquarters and all of their operations in any one city seem to be over. When GE Transportation moved its headquarters to Chicago, it wasn’t unique. It joined a long list of companies relocating from all over the country to a smaller office in middle America. GE said at that time:
“We have transformed GE Transportation from a North American rail company to a truly global transportation business,” unit President and CEO Lorenzo Simonelli said in a statement. “Chicago allows us to more efficiently reach and serve customers around the world in the rail, mining and marine industries.”
Another unit, GE Healthcare, is moving its headquarters from a suburb of London to Chicago and GE is moving its main headquarters from Fairfield, CT to Boston. Where a company builds products can be anywhere in the world, so locating executives requires little more than a small office, Internet connectivity, close proximity to other businesses and a nearby airport.
Headquarters began shrinking a decade ago, but the trend has accelerated in the past three years, says Vinay Couto, a consultant in the Chicago office of Strategy&. The phenomenon is driven by the outsourcing of shared services such as IT, accounting and human resources, as well as by a mindset borrowed from private equity—and embraced by activist investors and increasingly management itself—to cut overhead and make every part of a business count toward profitability. If a company moves to a “more expensive location, you just move the team that runs the business, but not the team that administers . . . because what you want is to not increase the overall cost,” Couto says.
Erie’s loss of GE Transportation’s executive headquarters and an additional 1500 jobs are issues Erie can do little about. Their moves are caused by global business developments affecting communities all over the country. How Erie adapts to those changes will make all the difference to our economic future and it requires a lot of focused effort and a willingness to step away from government solutions.