UK: THE SIGNALS FROM HQ.

UK: THE SIGNALS FROM HQ. - Head office is there to house the top people but it can also say a lot about the company. So how will shrinking managements and improved communication systems affect future HQ size and location?

by Malcolm Brown.
Last Updated: 31 Aug 2010

Head office is there to house the top people but it can also say a lot about the company. So how will shrinking managements and improved communication systems affect future HQ size and location?

Six months after the European Bank for Reconstruction and Development (EBRD) moved into its new London headquarters in December 1992 its president, Monsieur Jacques Attali, moved out - not just out of the building but out of his job. The building, as Attali should have realised, was a monumental misjudgment. The bank was there to lend or invest money in the poorest East European economies and the countries of the former Soviet Union, but it was doing so from premises so opulent that they might have been planned by the Medicis themselves. The lesson is that although headquarters buildings are there to house the organisation's top people, they do much more. They send out messages about the company or institution. Sometimes the messages reinforce the organisation's image. Sometimes, as with the EBRD, they contradict it.

Recent examples of new corporate headquarters which most people probably think enhance the company's image are the Prudential Corporation's HQ building in Holborn and BP's corporate centre in Finsbury Circus. By sheer coincidence both companies have returned, after an interval, to their historic roots - the Pru to the restored and refurbished Alfred Waterhouse building, originally built for the Pru in 1897, and BP to the building which Sir Edward Lutyens designed for it (or to be precise for its predecessor, the Anglo Persian Oil Company) in the 1920s.

The Pru's return to Holborn from a temporary HQ off the Tottenham Court Road wasn't about sentiment. It was a hard-nosed business decision. The group has expanded enormously in recent years, giving a great deal of autonomy to its divisions, each of which has developed its own individual HQ. When in the late 1980s it was decided that the Waterhouse building would have to be completely remodelled internally if it was to retain its investment value, the Pru's directors had a choice. They could either go for a completely new building or they could take the now much smaller corporate team back into a wing of the Holborn building when it was finished.

'They didn't have to move back,' says Ian Gordon, who was the Pru's development manager for the Holborn project, 'but a combination of history and being in the right place made them decide it was appropriate to do so.' The decision was market-led. The board believed that though the 'Man from the Pru' image was out-of-date the public still felt that the Pru stood for qualities like soundness and continuity. It was an organisation which would be around in 30 or 40 years, ready, if need be, to deliver on promises it was making today. The imposing Victorian Gothic Waterhouse building conveyed that image in a way that a modern building never could.

BP's Finsbury Circus HQ sends out precisely the same signals, yet it was sheer coincidence that the refurbished Lutyens building, which had been BP's home from 1925 to 1967, happened to be on the market in 1990 just when the slimmed down company, by then based in the nearby Britannic Tower, was looking for a new and smaller corporate HQ. Ironically, considering the sense of stability that the dignified and solid building exudes, the deal was done at a period of maximum instability for BP, which culminated in the board deposing the then chairman Bob Horton whose style of management they could no longer tolerate.

Occasionally, of course, the signals that a new corporate HQ gives out are ambiguous. The bosses of the hapless British Gas, for instance, may well be nervously wondering what the public will make of its new headquarters. Chief executive Cedric Brown, the size of whose post-privatisation pay packet outraged many people, is moving with his fellow executive directors and a small group of support staff from the company's present HQ, a dowdy Thames-side building near Vauxhall Bridge, to a new suite of offices practically next door to the Savoy Hotel. The rest of the 2,000 HQ staff are being shipped out to offices near Reading. A cynical public (or at least a sceptical press) might be forgiven for seeing this as further evidence of fat cats looking after themselves, and organisational psychologists might question the wisdom of top management isolating itself from its employees at a time when company morale is low. Yet if you blow away the fug of bad publicity surrounding the company the move looks quite different.

The new corporate headquarters is certainly right next to the Savoy, but the reality is that the Adelphi building into which the directors are moving is comparatively modest by central London standards and the logistical reasons for their doing so are powerful - or rather the reason for everyone else moving out of London, leaving only the rump of executive directors, is powerful. British Gas's new corporate HQ is not an exercise in self-aggrandisement by Brown but a by-product of a much bigger move aimed at solving the chaotic communications system the company faces in London. The people who work in the dozen or so British Gas office buildings dotted around the capital need to be in daily face-to-face contact, which means they have been constantly criss-crossing London just to keep in touch with one another. Putting everyone on the same site at Reading will solve the problem in one go, says Colin Barlow, British Gas's director of human relations. 'That is the important decision. We'll be able to dispose of a portfolio of very costly and inefficient buildings in the London area. On that basis I think the Adelphi issue is really incidental.' That, of course, raises the question whether a central London HQ, even a small one, is necessary these days. One group which has decided to decamp - in its case from Berkeley Square to the western fringes of London at Greenford, where it already has premises - is the pharmaceuticals company Glaxo Wellcome. Glaxo's take-over of rival company Wellcome last year triggered a review of the group's properties in and around London, says Jeremy Strachan, executive director for legal and corporate affairs, and it decided it would be best to move closer to the sharp end of the business. 'Clearly you've got sophisticated communications and telecommunications systems which means it's no longer necessary to have a central London location,' says Strachan. 'Greenford is pretty well located for Heathrow - remember less than 8% of our business is in the UK - and it's well placed for the M40 and the M25.' While Glaxo will keep a small pied-a-terre in Mayfair where executives can drop in if they need to meet with customers or advisers who can't make it out to Greenford, some other corporations think even a small London town house is unnecessary. When BOC moved its 200-man corporate HQ from Hammersmith to Windlesham in Surrey a decade ago it decided to cut its metropolitan ties completely. 'We don't have a little office in London,' says human resources director Dick Page. 'When we discussed it we thought it was a bit of a nonsense really because we are customers of the banks and big legal firms in London and if they want to do business with us they have to come out and see us.' So what will the future hold? The shrinking of managements seems to suggest that, at the very least, new corporate HQs will be a good deal smaller. Architect Frank Duffy, head of the DEGW practice, believes that communications are becoming so sophisticated, lessening the need for people to be together, that the corporate HQs of the 21st century may actually be quite tiny. The glass stumps of the '70s and '80s may become anachronisms. Many of the prosperous companies of that period put up buildings that expressed their confidence and ebullience, then many of them hit crisis, says Duffy. 'Paradoxically, the ones that reflected their needs best are the ones that have got the most problems. The excess of virtue can lead to vice.'

Happy to be in St. Helens.

Not every major company regards it as mandatory to have itsHQ in London or the home counties. Glass firm Pilkington keeps a town house in London's St James's for meetings with international customers or with its lawyers and financial advisers, but intends to remain in its historic home, St Helens. The company has from time to time explored the question of whether its HQ should be somewhere else, says director Sir Robin Nicholson, but has always come up with a negative answer.'I think we feel it keeps our feet on the ground because we're near where some of the manufacturing is. It prevents us going off into flights of fancy. We're where the money is made.'

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