Site Selection Framework for Moving Jobs to People

Brief: 

Marsh uses a comprehensive site selection decision framework for making investment decisions on where to locate work, particularly when the location is not determined by either customer or natural resource location.

The problem addressed by the campaign: 
  • Marsh conducted back-office operations throughout its 44 North American offices. This decentralized structure inflated claims processing costs by an estimated 40% over competitors. Consolidating back-office operations in low-cost areas became necessary to remain competitive.
  • Two locations needed to be identified for the administrative services centre that would supply an adequate number and right quality level of job candidates.
  • Marsh could not afford to be surprised by local conditions once a decision was made on the service centre.
Solution: 
  • Marsh conducted an extensive site review beginning with 269 metropolitan areas, while simultaneously reengineering its claims process.
  • Using External Labor Market (ELM) analysis®, site selection criteria were developed and data collected to evaluate 269 metropolitan areas in North America for their suitability.
  • Each location was catalogued based on similarities in labour market conditions such as overall labour costs, labour availability and demographic conditions. Labour markets characterized by lower costs and other favourable characteristics were short-listed for a more detailed review.
  • Other criteria such as natural disaster risks, real estate conditions, crime rates and purchasing power measures were then incorporated into the analysis.
  • The final candidates identified through the site selection process were characterized by low labour costs, favourable long-term conditions and ample available labour, and did not compromise factors such as natural disaster risks, community characteristics and available office space.
  • Narrowing down the list of the remaining locations required gathering additional information about competitive employers and recent layoffs, as well as forecasting the available labour pool, demographic conditions and expected wage increases during an economic expansion.
Impact: 
  • It resulted in optimal site location being selected. Having the locations facts and clear decision criteria made selecting the sites a quick and uncontentious process.
  • With large variations in local economic conditions among the locations, the wrong decision could have unnecessarily increased costs by 29% per employee, or US$ 4 million per year.
  • Substantial additional gains were achieved by reengineering the claims processes after consolidation.
  • Major investments in new locations delivered operational efficiencies, expanded capacity and lowered costs.
Why has it worked?: 
  • The analysis recommendations won credibility with all senior executives and ensured that the site selection process would not fall victim to internal politicking; a location ranked in the top tier by the ELM analysis was selected.
  • With the labour market knowledge gained from the ELM analysis, Marsh was able to reduce costs and, because of a thorough assessment of long-term labour market conditions, minimize the risks of future labour shortages and rising labour costs.
Conclusions and Recommendations: 
  • Have your decision criteria spelled out up-front.
  • While a qualified supply of labour factors is needed in almost all decisions, there is no “fixed set” of criteria.
  • Avoid basing decisions entirely on cost – be conservative about projected cost savings and stick to a short time horizon.
  • Do not simply look at the location factors, but decide which processes travel well and which need to be redesigned.
Foundational Issues: 
Public and private constraints on mobility
Level of Collaboration: 
Level 1: Collaboration within the organization
Region: 
North America
Economic and political context: 
  • Marsh operates in a highly competitive business environment with shrinking margins, but a premium on operational efficiency.
  • Because labour costs represent about 80% of total operating costs, the dominant concern was finding a favourable labour market.
  • The ideal location would have workers available immediately so that operations could be up and running quickly. Because the centre was expected to grow four-fold over the next five years, it also needed to have a growing labour supply.
  • These staffing demands required a location in an area with a qualified workforce, favourable long-term demographic characteristics and stable wage levels.
About the Author(s): 

Marsh is the world's leading insurance broker and risk adviser with over 25,000 employees. It provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies.