THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, October 8, 1995 TAG: 9510070230
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Long : 259 lines
In Hampton Roads, it has come to be a familiar lament.
``Why don't we have more corporate headquarters?''
``Why have so many large companies chosen only to place low-paying back-office jobs here?''
``Richmond has a bunch of Fortune 500 companies. Why don't we?''
Residents' and community leaders' questions go to the heart of Hampton Roads' desirability as a corporate home. While the region is blessed with several back-office operations - the production jobs of the service industry that include data processing, customer-service representatives and telemarketers - it also suffers from the perception of being unsuitable for corporate headquarters.
Hampton Roads seeks the clout of more upscale metropolitan areas - such as Charlotte and Atlanta - to raise the quality of life and enable the region to benefit from amenities like professional sports. However, few working-class regions like Hampton Roads evolve to the level of a headquarters city.
In this age of corporate downsizing and mergers, it's almost a pipe dream to land the executive offices of an industrial behemoth like Citicorp or Disney unless they are home grown. Hampton Roads' claim to the Fortune 500 numbers only one: Norfolk Southern Corp. Richmond boasts 13.
Very few of these major corporations move their executive offices. If they do, it's usually to change their image or to get closer to customers.
``Headquarters are really a funny thing,'' said Kurt Foreman, a consultant with the Atlanta-based site relocation firm Moran Stahl & Boyer. ``They don't move frequently. Back offices move to save money. The only group that saves money is the nonexempts, the clerical and support staffs.''
Most of the offices that relocate tend to be company divisions, such as San Antonio-based United Services Automobile Association's regional office, which moved to Norfolk in 1989.
Several other companies have established a huge presence in Hampton Roads but have chosen not to relocate their headquarters here:
Lillian Vernon Corp., the catalog retailer, employs 500 people at its Virginia Beach distribution center. At the company's peak during the holiday season, 1,300 people take phone orders, pack and mail merchandise. Despite the bulk of its operations being here, it calls the New York City suburb of New Rochelle home.
Bernard C. Harris Publishing Co., a publisher of yearbooks and directories, employs more than 1,000 people in its Norfolk office in Koger Center. Yet, it maintains a skeleton headquarters staff in New York.
QVC Network Inc., the cable-TV marketer, houses a 1,200-person telecommunications center in Chesapeake. It also owns a warehouse/distribution center in Suffolk. But it keeps its headquarters in West Chester, Pa.
What's so bad about all these companies setting up the majority of their work force in Hampton Roads, but not the executive washroom? Hampton Roads is getting jobs, just not the bragging rights.
That's not trivial, say those involved in the relocation business.
Corporate headquarters translate into intangible advantages. The presence of decision makers. Clout. Power. Money. Community leaders.
``When you have a corporate headquarters come to a community, there are high-level executives that work in those facilities,'' said John Whaley, chief economist at the Hampton Roads Planning District Commission. ``That can be very good in that community. We need people who can assume leadership roles, who can generate ideas, who can move this economy forward.''
Although these ``movers and shakers'' raise the community to immeasurable levels of sophistication, they also require high maintenance.
Business executives on the highest corporate tier command nationally competitive salaries. They want high-quality leisure and cultural pursuits: nationally recognized symphonies, art museums, restaurants and major league sports.
Some say all this emphasis on executive offices is misplaced.
``You get most of your jobs from the expansion of existing companies,'' said Jerry Lasker, executive director of the Indian Nations Council of Governments, a Tulsa, Okla., association of local governments that manages and solves regional problems.
``New firms coming in don't constitute most of the new jobs coming in. You have to encourage a business climate that encourages expansion of existing companies in your area,'' he said, reiterating an idea introduced by David Burch, a Massachusetts Institute of Technology economist, but made popular by small-business owners, politicians and others.
Economic development officials also make the mistake of targeting only specific companies, warns Dennis Donovan, a partner with Wadley-Donovan Group Ltd., a corporate relocation firm. He advises economic development officials against concentrating efforts on Fortune 500 companies.
``There are a lot of benefits, but they don't have the economic pizazz they used to have,'' he said. ``With so many changes in corporate America, you can't be sure it'll still be around. They may consolidate them. If you're an area that's very attractive to field offices, you have a much better chance of being the winner with a consolidation or acquisition.''
It's better to attract the bulk of an organization in combination with some decision-making power, such as a regional operation, in hopes of gaining more, Donovan said.
``It's an evolution,'' he said. ``Higher order back offices will move to the area more sophisticated and higher wages for all of us. When you're providing jobs, you need to provide from the lowest rung to the highest rung.''
That summarizes the strategy behind recruiting Lillian Vernon in 1987 and QVC in 1988, the pioneers of Hampton Roads' back-office landscape, said Greg Wingfield, former president of Forward Hampton Roads.
``The game plan was to get enough of those companies so there would be a critical mass to go to the next level: divisional headquarters, regional headquarters, national headquarters,'' said Wingfield, president of the Greater Richmond Partnership. ``You need a base to start from. We were trying to build that critical mass in the service side. We were using as fuel college kids, military spouses and retirees.''
So far, it looks like the grand scheme is unfolding as envisioned. Several other major companies have placed large back-office operations in the region over the past five years. They include Canon Computer Systems Inc.'s customer-service center in Chesapeake and American Funds Group, which has a mutual-fund distribution and service center in Norfolk.
Some recent arrivals include TWA, which is setting up a reservations center, in Norfolk, and Avis, the nation's second-largest car-rental company, in Virginia Beach.
The Peninsula announced a coup d'etat last week. It landed a Gateway 2000 computer-assembly plant and distribution center that will employ 1,000 by 1999.
On the heels of Gateway 2000 in Hampton, Oceana Sensor Technologies Inc., a sensor manufacturer serving the automotive and defense markets, recently broke ground on its headquarters facility in Virginia Beach's Corporate Landing. It will join its parent company, Depew, N.Y.-based PCB Piezotronics, which also will open an office in the same industrial park.
Hampton Roads' deep and cheap labor pool continues to be a big draw. The region boasts a per capita income that is 89 percent of the national average, low wage costs, a plentiful and skilled labor pool, and a low tax structure. That also helps companies expand.
Business expansion alone isn't enough to propel a city into the metropolitan big leagues, economic development officials say. The key to evolving into a metropolis involves building that back-office base into a diverse pool of jobs.
Many cite Charlotte as a city that made the transition from a textile and manufacturing truck stop to the second-largest financial center in the country behind New York.
Charlotte still maintains several back-office operations, said Tony Crumbley, vice president of the city's Chamber of Commerce. But it continues to recruit regional divisions like Hearst Publishing, Transamerica Insurance and Moody's Investors.
``Any city can transition into a headquarters,'' Crumbley said. ``The perception of us transitioning into a headquarters has more to do with the growth of First Union and Nationsbank.''
Crumbley cited three factors to Charlotte's success that don't happen to all cities: gaining a USAir hub, the deregulation of the banking industry that allowed its two prominent banks to expand nationally and winning the Charlotte Hornets, an NBA team.
Not all towns rise from the back-office backwater. Cities like Tampa, Fla., Tulsa, Okla., and Omaha, Neb., grew so bloated with low-paying service jobs that companies have difficulty retaining employees, who switch jobs often because the labor market is so competitive.
Planning and community vision are essential ingredients to transition into a Charlotte or any other type of headquarters town, Foreman said. A little luck helps and momentum goes a long way.
Consultants that work with cities and companies on these issues insist on starting with the basics. Work on a foundation and build on your strengths. Strategic plans for future growth take about 20 years, Donovan said.
He and other relocation experts encourage regions like Hampton Roads to work on attracting smaller companies that might move their whole office.
``It happens by virtue of demand,'' Donovan said. ``The composition changes. You don't make it happen because you can't create demand. You make it happen by attracting what the market says and you try to accelerate that growth.'' ILLUSTRATION: Color photos
HAMPTON ROADS
CHARLOTTE
ATLANTA
RICHMOND
Graphic
BACK-SHOP OPERATIONS IN HAMPTON ROADS
CIGNA Group Insurance
Parent company: CIGNA Corp.
Headquarters: Philadelphia
Area location: Virginia Beach
When chose Hampton Roads: 1990
For what: customer-service center, direct-marketing division
Local employment: 125
Nonlocal employment: about 1500 for Cigna Group Insurance; about
45,000 for CIGNA Corp.
Most common local job: specialist/licensed insurance agent
Household International Inc.
Headquarters: Prospect Heights, Ill
Area location: Chesapeake
When chose Hampton Roads: 1989
For what: regional headquarters, Household Credit Services
Local employment: 1402, including Household Finance employees
Nonlocal employment: 12,559
Most common local jobs: loan collector, service representative,
telemarketer
Issues and Answers Network Inc.
Headquarters: Virginia Beach
When chose Hampton Roads: 1988
For what: market research business
Local employment: about 350
Nonlocal employment: about 420
Most common local job: telephone interviewer
Competitive Media Reporting/VNU
Headquarters: New York
Area location: Virginia Beach
When chose Hampton Roads: 1990
For what: data-collection facility (measures, categorizes
newspaper and magazine ads)
Local employment: about 200
Nonlocal employment: about 2000
Most common local job: research associate
Lillian Vernon Corp.
Headquarters: Mount Vernon, N.Y.
Area location: Virginia Beach
When chose Hampton Roads: 1987
For what: distribution/customer-service center
Local employment: 1000 year round; 3025 during peak season
Nonlocal employment: 185
Most common local jobs: order processor, material handler,
service representative
United Services Automobile Association
Headquarters: San Antonio
Area location: Norfolk
When chose Hampton Roads: 1989
For what: Mid-Atlantic region headquarters
Local employment: 768
Nonlocal employment: 14,402
Most common local jobs: service representative, claims
representative
American Funds
Headquarters: Los Angeles
Area location: Virginia Beach, Norfolk
When chose Hampton Roads: 1992
For what: distribution center in Virginia Beach; customer-service
center in Norfolk
Most common local jobs: customer-service representatives
TWA
Headquarters: St. Louis
Scheduled area location: Norfolk
When chose Hampton Roads: 1995
Scheduled to open: March 1996
For what: call reservations center, customer service
Local employment: expected to be about 500
Avis
Headquarters: Garden City, N.Y.
Scheduled area location: Virginia Beach
When chose Hampton Roads: 1995
For what: car-rental company
Local employment: expected to be 500
by CNB