Making the Move: Taking Your Business Out of California

Note: this was originally published in Working Girl: Exploring the Lighter Side of Human Capital Management, under the title “HR: Ready to Relocate?”

In 2005, a company that had been located 38 years in the small town of El Cajon, California, made a decision to move out of state.

It was a decision that rattled the local business community, for the company was the famous Buck Knives, known worldwide as one of the finest manufacturers of knives. Besides employing over 250 employees, Buck Knives was the type of company a small town like El Cajon could use to lure other business into town.

At the time, no one guessed the Buck Knives departure would be the start of trickle that turned into a flood of businesses leaving California. In fact, the year Buck Knives packed its bags, the Public Policy Institute of California issued a calming and reassuring report stating that business relocations cost California less than a tenth of 1 percent of all the state’s jobs.

But each year since 2005, the number of businesses leaving California grew exponentionally. Today, a recent report by Joseph Vranich, an Irvine-based business relocation expert, indicates the exodus is 5 times greater than it was just two years ago.*

In other words, California is in trouble. Magazines such as Chief Executive continually rank California as the worst state to do business. Other states such as Texas, Utah, Arizona and others smell blood in the water and are actively recruiting California employers with tax breaks and other incentives.

So what does this mean for a California HR professional? Well, it means, at the very least, you need to be aware there is a very real possibility your company might be considering a major move. And at the most, assuming you’re in the loop (and let’s hope you are; certainly it’d be a huge mistake to NOT tell the human resource department), you need to start the huge process of transferring a company’s biggest asset—its people—to another state.

But how in the world would you even start a process this big? I won’t pretend to have all the answers here. Each company will present its own unique challenges, of course, but it helps to look at what another company did, in this case Buck Knives, and perhaps get an idea of what could be involved.

Buck Knives had at the time of the move over 250 employees. Surprisingly, however, only 58 employees actually relocated to Idaho (Buck Knives’ new home). The remaining employees were laid off. When Buck Knives set up again in Idaho, it filled over 200 jobs from local applicants.

Naturally, one has to wonder about this. Only 58 employees relocated, and the rest laid off? What exactly happened here?

Well, during the time of the Buck Knives transition, I belonged to a local Toastmaster’s group that met weekly at Buck Knives, in a conference room Buck Knives allowed us to use. Because employees were there working a second shift, I got to know a few of them, and naturally the impending move was a big topic.

From what I gathered, Buck Knives was offering buy-outs and early retirement to the senior, long-term employees who didn’t fancy the idea of moving at this stage of their careers. Other employees, who worked part-time and sometimes had a second job that anchored them locally, simply could not afford to move. Some employees, married to a spouse who perhaps had a higher-paying job locally, refused to go; while others, regardless of the financial considerations, just didn’t want to leave the San Diego area.

It was clear from hearing employees talk that the HR department was busy determining just what proportion of their labor force was able and willing to make the move. This must have been a fairly big job, and I had the impression this had been a yearlong process at least.

Naturally, pay and salaries never came up in conversation, since it’s bad form to ask what someone earns (even for HR professionals, the most nosy of people usually), but I wondered if there was a cost of living adjustment being made to the salaries of employees who were relocating. Generally speaking, leaving the San Diego area—one of the more expensive areas to live—to go to another part of the country means taking a cut in pay. If Buck Knives was adjusting salaries to reflect the lower cost of living in Idaho, then perhaps some employees refused to relocate just because of that alone. When I worked at Home Depot, I remember several San Diego store employees who were shocked to learn that accepting a transfer to a store in, say, Mississippi, would cost them a 30% pay cut.

At any rate, only 58 Buck Knives employees relocated, a little over twenty percent. Once in Idaho, the company then had to hire over 200 employees, quite a job for any HR department.

But besides all the new hires, however, there was another major consideration. Idaho, as part of its program to convince Buck Knives to locate there (some would say as part of its program to steal California business), offered to give Buck Knives $690,000 to train new workers. Now, I have to believe the Idaho people aren’t stupid: that $690,000 no doubt was intended to train Idaho workers. After all, the whole idea of bringing in new business is to help create jobs for the locals. I have to assume that Buck Knives considered this when it accepted the money, and that this played at least some part in the layoffs here in El Cajon.

The Buck Knives HR department, besides the yearlong culling process, may have been given a bottom-line number of employees allowed to relocate. This would have necessitate some difficult decisions, in effect saying to some employees: “we’re relocating, but “we” isn’t “you.” It’s kinda like the story of the parents who move, without telling the kids where.

All in all, following the Buck Knives transition illustrated the challenge HR faced. There was a yearlong culling process, the layoffs before the actual move, and the big recruiting and hiring process that took place once the company arrived at its new home, not to mention all the training that needed to be done. It’s clear all this posed a real challenge and was no doubt a tremendous amount of work. Surely the process did not go smooth–there must have been mistakes and rough spots along the way–but in California any HR professional should be thinking this is something they too might face.

If I were to face a relocation task, I suppose I’d break things down this way then:

1) Find out if there is a limit of employees who will be allowed to relocate
2) Determine which employees simply cannot or will not relocate
3) Of the employees willing to relocate, determine which of those will be allowed to go
4) Conduct the layoff at the old location
5) Pack my bags
6) Recruit and hire at the new location
7) Put in place any training plans needed for the new-hires

Having never undertaken such a project, I’m sure my list is woeful and incomplete. But I’d love to hear from any HR professionals who’ve actually handled a company relocation project. What were your biggest challenges? What went right? What went wrong? What advice would you give?

*Besides my conversations with Buck Knives employees, I relied on Anne Krueger’s article, “Buck Knives enjoying a better business life in Idaho than El Cajon,” dated March 26, 2006, for the San Diego Union-Tribune; and also Tami Luhby’s article, “California companies fleeing the Golden State,” dated July 12, 2011, for CNNMoney at http://money.cnn.com.

Possibly Related Posts:

• Part 7: Preferred Employers Insurance Company – A Case Study in a Corporation Gone Wrong
• Part 6: Preferred Employers Insurance Company – A Case Study of a Corporation Gone Wrong
• Part 5: PEIC – A Case Study of a Corporation Gone Wrong
• Part 4: Preferred Employers Insurance Company – A Case Study of a Corporation Gone Wrong
• Part 3: Preferred Employers Insurance Company – A Case Study of a Corporation Gone Wrong