WBC explains the impact of corporate headquarter relocations

By: Jeff Malehorn

In the recent article “The Incredible Shrinking HQ,” Crain’s argues that “corporations moving their headquarters to Chicago arrive with only a handful of employees and a modest economic impact.” This idea could not be further from the truth.

The piece fails to tell the complete story of the real economic impact that a corporate relocation has for residents, neighborhoods, and the economic fortunes of our entire city. Every corporate relocation that Chicago has attracted in recent months—from ADM, ConAgra and GE Healthcare to the many non-headquarter operations and small- and medium-sized businesses—brings jobs for our residents and tax revenue for the city that can be reinvested right back into improving our neighborhoods.

But their real value cannot be measured by jobs and tax receipts alone. Every business large and small that moves their headquarters to Chicago makes a powerful statement about our improving business climate, which in turn creates a multiplier effect for the city, attracting even more businesses in their wake.

To fully understand the power and potential of this multiplier effect, consider the following numbers. According to the Bureau of Economic Analysis, the economic multiplier associated with headquarters is approximately 3.5. That means that for every one job created directly by a headquarters relocation, another 2.5 new jobs are established across the metropolitan area. So not only do headquarters bring employees, but their impact on the area economy runs deep.

Recent research conducted by University of California, Berkeley economics professor Enrico Moretti suggests that the direct and indirect job impact associated with corporate headquarters (particularly those in the technology sectors) is high and benefits both “skilled” and “unskilled” workers in the regional economy. From the law or marketing firm that provides service to the headquarters, to the neighborhood caterer that provides it with meals—the benefits are significant.

In addition, headquarter locations provide the city with a reputation advantage and assist in the proliferation of clusters—in fact, there is no better validation for a CEO considering a location move than that of his or her peers. For this reason, a city’s corporate community is integral to attracting new companies. This is one of the key reasons World Business Chicago was created 16 years ago. The collaboration between the public and private sectors is ingrained in Chicago’s history, and WBC’s board remains imperative in talking to companies thinking about locating in the region. As corporate leaders continue to locate here, the city’s reputation as a good place for business strengthens.

As outlined in the Crain’s story, the number of companies moving their headquarters to Chicago continues to grow. That is a testament to our city’s many institutional strengths, from the talent of our workforce to our many transportation options, to the incredible quality of life that they can offer to their workers, which is uniquely Chicago. And the fact that companies have become more mobile and agile in the modern economy has worked to our city’s advantage.

The changing nature of corporate headquarters also makes the huge presence of non-headquarter offices of companies such as Google, Salesforce and SC Johnson significant.

While WBC welcomes and actively recruits corporate headquarters, we take a targeted approach to reach industries with the most growth potential including technology, advanced manufacturing, transportation and logistics, and food. This targeted approach builds on Chicago’s diverse economy and helps us to create jobs at all levels throughout all sectors.

Contrary to the article in Crain’s, we believe that every new company that chooses to make Chicago its new corporate home brings economic opportunities to our residents. It also brings an essential economic value to our city that is truly immeasurable.

This editorial was originally published in Crain’s Chicago Business on February 05, 2016.