Uh, Jeff? About that HQ2 idea — we need to talk…

So, I understand you’ve decided Amazon needs to build a new headquarters complex, somewhere, which will eventually be the workspace for some 50,000 new staff. The idea certainly had a happy reception, with cities all over the country offering sites up — along with property tax breaks, infrastructure support and all kinds of incentives. After all, for most cities, the idea of adding tens of thousands of new, fairly high-pay jobs into the local economy has enormous attractiveness!

But is this HQ2 idea really a good idea for Amazon?

Source: Chicago Tribune

Putting so much of the company’s talent in one location exposes Amazon to many risks, direct and indirect, of varying degrees of likelihood, some that may cost money, some that impact the quality of operations.

Are you willing to pay your staff more than other major employers in the area? If you’re going to hire locally, you’re going to need to get people to move from where they’re already working, and to keep them, you’re going to need to make it worth their while to stay.

Whatever the location you choose, you’re limiting your pool of potential staff to people who already live there or who are willing to move there. Believe it or not, lots of really talented people don’t like living in or near big cities. They find the cost of living too high, the quality of life lowered by the cost of housing, traffic, congestion, and so on. Many others have a sense of home that does not lend itself to various regions. You’re not going to see them applying to fill your jobs.

You’re also taking on environmental risk by concentrating so much of your operations in a single location. You can make the HQ2 complex itself largely immune to natural disasters and other hazards, such as earthquakes, hurricanes, floods, wild fires, tornadoes, ice storms, blizzards, blackouts, and so on, but you can’t protect your staff and their families at their homes or keep all the roads and mass transit corridors open when conditions close them down.

And you’re taking on an even bigger potential risk by selling the idea on its dimensions and characteristics. People expect you to have 50,000 people on the Amazon payroll, full-time, in the foreseeable future, working in state-of-the-art facilities all neatly tied into the larger community without any notable negative impacts. And for that, you’re asking them (or more accurately, their elected government leaders) to pony up enormous amounts of money to provide infrastructure and to let Amazon off the hook for kicking cash into the common kitty by paying taxes like everyone else.

If the project goes well, grows quickly and gets implemented smoothly, then the risk will pass painlessly. But that may well not be how things turn out. After all, you’re only planning on space for maybe 3,000 staff in phase I, and no more than maybe 20,000 by the end of phase III — in 15 years or more. That’s not only slow, it’s only about 40% of what people are expecting.

It’s also not all that clear that all the jobs at the project will be the sort to pay in the $100,000 range, especially not in terms of 2018 dollars. Amazon may well need a lot more people to handle customer relations or trouble-shoot network problems that are not of the sort you need engineers to solve — just think of Facebook’s workforce needs in dealing with problematic users.

The risk you need to consider is that a build-out that is less than optimal may turn Amazon into a rent-seeking corporate loafer, one of the wealthiest corporations in the world shifting its costs to local government taxpayers, most of whom have household incomes only a fraction of what you said your staff would average.

These are risks, not certainties, and you’re the judge as to whether the problems can be eliminated, avoided, reduced or otherwise dealt with.

I served as a planner in the Army for a few years, and it was the accepted practice for us to always come up with two or three alternative ways to get a mission done. In the process of reviewing and comparing them with each other and with the problem set, we could really wrap our minds around what we were trying to achieve in the real-world as well as the relative strengths and vulnerabilities of each proposal. This then let us develop a final plan that had the best prospect to get the mission accomplished, effectively, at the lowest cost — as well as providing a resource to adjust course as events might dictate, what with hostile forces trying to defeat us and other dynamics of the situation developing in ways contrary to our expectations, and so on.

I’d just like to throw out a couple of alternatives to the HQ2 idea for your consideration, late though it may be in your planning process. Better to correct course before you actually move out, or to verify that you do in fact already have the best course of action laid in.

Alternative 1: HQ Extensions. Rather than committing to a single, palatial complex in one city to support, over time, an enormous workforce, commit to building a significant number of smaller (but still substantial) facilities at various locations around the country, such as each of the 20 cities on the current list of finalists.

Each HQE could be designed for one or more LEED-certified buildings, providing space for 1,000 to 4,000 people to work, which would not need to be built all at once, would not need to be limited to Amazon tenants, and could be as monumental or modest as you think appropriate for that place and the purpose intended for it. Put up a masterpiece of modern architecture in Washington, DC, for an impressive presence in the nation’s capital; honor Frank Lloyd Wright with an homage to the prairie outside Chicago

Amazon would also have the flexibility to develop one or more sites at the same time or to adjust the overall program at any time to evolving needs and circumstances.

Alternative 2: Operations Hubs. There are many, many universities and cities that are homes to people with skills, talents and experience that could be of great value to Amazon. In order to develop and cultivate relations with this broad base, the company would site large numbers of moderately-sized hub operations throughout the nation, each structured for a number of staff appropriate to the center it is affiliated with.

For example, a large hub might be built outside Boston, a smaller ones in Worcester and Amherst, each with ties to the great universities in their area — and the terrific professors and students learning there, eager to get real-world experience, and looking for great positions with great firms after graduation.

Amazon could build its own facilities for some hubs, while leasing space in existing facilities elsewhere, where it makes sense not to make more of a commitment, such as while exploring the potential for a particular partner or where the project may be too small to warrant more of an investment.

Comparisons. The HQ2 idea and the two alternatives above each have various strengths and limitations, and create or avoid various risks. In order to reach a final decision, planners compare each plan against a set of considerations in order to help decision makers compare one alternative against another, let the planners know what they like or don’t like, and provide a basis for making changes in any or every alternative in order to get to a final plan they are willing to commit to.

I would suggest a few considerations as key to a multi-billion dollar program like this: significance, utility, flexibility, compatibility and cost.

Significance: How much attention does the project get for Amazon in the public mind? How long does the attention last? What is the risk that attention could turn negative?

Utility: How well does the project support Amazon’s needs? What are its strengths? Limitations? Vulnerabilities? How does it support connectivity, in terms of information systems, staff and potential staff, contractors, suppliers and customers?

Flexibility: How easily can the project be adapted to evolving needs?

Compatibility: Does the project accord with the way Amazon structures its workforce and operations? This includes vertical and horizontal organization among various organizations, as well as with career paths and supervisory needs.

Cost: What costs does the project force n Amazon? Structures? Infrastructure? Taxes? What impact does the project have on the cost of living for staff? Impacts on the local community? Does some quality or aspect of the project create a notable value, or impost an extraordinary cost?

As an outsider, I have no idea how Amazon might evaluate each of the three alternatives. I don’t know how you structure work, how your people are assigned to specific projects or tasks, how you evaluate potential staff, how staff might value living and working in one place versus another, whether or not they value some aspects of home and family life (floor space, yards, nearness to parks and shopping, museums, night life, schools, professional sports, seasons and landscape, and so on). This is the kind of work a diverse group of people needs to do together, people who are connected to Amazon, its people, its customers and its culture.

But I can tell you this: by putting out headlines that Amazon will have put $5 billion in its HQ2 complex, with a workforce of 50,000 and an annual payroll of $5 billion per year, and encouraging state and local governments to put massive sums of money on the table if you choose them, the project had better hit its target population and payroll, and a lot sooner that 15, 20 or more years in the future.

People are not reading the fine print of the RFP, with its modest projection of less than $2 billion of investment through Phase III, which implies a workforce of less than 20,000 — of which some may actually turn out to be contractors, not employees, and whose salaries may well not actually average $100,000 per year. It’s still a mighty project, but you’re accepting even mightier commitments from state and local government, who taxpayers generally have household incomes less than half of what you say you’ll pay your staff.

Amazon is an enormous company, one of the most highly valued in the world, providing enormous value to enormous numbers of customers, clients and affiliates, not to mention an enormous number of people on your payroll who make it all work.

If you stick with HQ2 and it fails to hit the projections laid out in the headlines, it could get a lot of people wondering whether Amazon is actually all that special, or whether it’s just another enormously wealthy corporation leaning on the public to pay its bills and pad its bottom line, even whether Amazon is trustworthy and can be taken at its word on other aspects of its operations.

Risks are not certainties, of course, but if you decide to stick with the current plan, I hope you have your staff work out ways to deal with problems like these if they materialize.

Otherwise, it’s not too late to rethink the whole thing and settle on something more likely to create lasting value for Amazon, its workforce, its customers, its affiliates and its clients.

Best of luck!

Learned in the Army to provide information that is thorough, accurate, meaningful and useful — and what happens when you don’t.

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