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Why investing in company location still matters

Location is not the decisive factor it was in the past. However, companies in small and midsized cities are proving that strategic location investments remain a draw for top talent.
Ruth Heuss

As global leader of McKinsey Sustainability, serves companies in the automotive and machinery industries on future mobility, decarbonization strategies, and product development

Julian Kirchherr

Delivers skilling-at-scale transformations across industries in Europe and beyond

Nico Raabe

Leads the McKinsey Center for Government in Europe; supports large-scale transformations worldwide and advises companies and public institutions on strategy and organizational excellence

Kira Rupietta

Advises organizations to reorganize their HR for the future, with expertise in talent management, future of work, and employee experience

Companies in small and midsized cities have traditionally struggled to develop a talent strategy that not only attracts strong employees but retains them as well. Having such a strategy in place has become increasingly important, as competition for talent remains hot, and businesses are feeling the heat more than ever.

But there is an opportunity for things to change—one that particularly benefits companies in less urban locales. Workplace requirements have completely shifted in recent years, accelerated by the COVID-19 pandemic. It is more common to see employees come together on site for interaction and collaboration with their colleagues, while heads-down work and deliverables are handled remotely. The pandemic also drove some employees to move to smaller, more affordable locations.

In fact, there are companies in small and midsized cities that have leveraged these changing workforce expectations to create a highly compelling and effective value proposition for their workplace. We’ve seen six factors prove beneficial in making these companies’ office locations more attractive to new talent:

  1. Transportation solutions. Companies are getting involved in ensuring mass transportation connections and enhancing sustainable, forward-looking mobility concepts to bring in the best talent.

    Example: One technology company is investing in transportation links and supporting regional projects to promote sustainable mobility for employees and residents in surrounding areas.

  2. Workplace design. Organizations are intentionally designing innovative work environments with dedicated space for interaction and collaboration, supporting the office’s newfound purpose.

    Example: An automotive company is setting new standards for fresh, innovative working environments by constructing one of the most modern research and development centers in Europe.

  3. Cultural experiences. Companies are investing in local cultural offerings, including collaborating with museums and other institutions to create attractive recreational experiences for employees and local residents.

    Example: A manufacturer has invested for decades in a small town as a cultural metropolis, with museums, art collections, and cultural events that enhance local quality of life.

  4. Sporting and leisure. Organizations are providing a wide range of sporting and leisure activities to support and encourage employee work-life balance.

    Example: An apparel company has created a unique experience for top talent—especially families—offering a sports campus with leisure opportunities, including a pool for employee and family use.

  5. Sustainability. Companies are creating and promoting sustainable office sites, supported by innovative technology and environmentally-friendly building materials and methods.

    Example: Another automotive company is creating new sustainability standards with its construction of a model metropolis, where employees, researchers, and residents can directly experience sustainable innovations.

  6. Community ecosystem. Organizations are expanding their ecosystems in close proximity to universities and start-ups, enabling networking and knowledge transfer—while creating a pipeline of fresh talent.

    Example: Another automotive company is opening an AI lab while establishing a network with nearby universities and start-ups to foster innovation capabilities.

It’s important to note that a desirable office location is just one of many considerations in a successful talent strategy. Companies, regardless of location, should also adjust and adapt their strategy based on key elements related to company image, corporate culture, salary and career options, and job characteristics to attract and retain the best talent.

While company location may not be the decisive factor it was in the past, companies in small and midsized cities are proving that smart location investments—in conjunction with other strategic elements—remain a draw in today’s fiercely competitive talent marketplace.

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