Nov 14, 2014

The Newest CFO Prerogative: Site Selection

By Don Catalano



Once, the site selection process ran through a company's real estate team. Along the way, the finances ended up on the CFO's desk while the Chief Marketing Officer looked at the impacts of a location on branding, the COO looked at its relationship to the company's logistics and the CEO took the 30,000 foot view. Today, CFOs are finding themselves front and center in the process.

The Outsourcing Revolution

Back when companies had their own internal corporate real estate departments, the staff in those departments handled vetting and visiting sites. The last decade's revolution in outsourcing corporate real estate functions gutted or completely eliminated many of those departments. While skilled corporate services tenant representatives helped to fulfill many of those roles, those outside experts still need oversight from company staff.


Executive Powers

CFO's are no longer relegated to the accounting department. As they emerge as company leaders, they have the ability to go beyond just looking at the financial aspects of the site selection process. As CFOs get closer to the marketing, operations and technology sides of their companies, they also serve as general purpose executives that can take a big picture view over real estate decisions. Since they have also historically lead the teams that handle portfolios, they are also the closest executive to the process.

Dollars and Cents

While there are many business reasons to allow CFOs to emerge as leaders in site selection, the financial aspects still remain extremely important. CFOs are best positioned to look at a site's impact on the company's bottom line, while they are also best able to show a community how their presence will impact a community's finances.

Sites start out as cost centers. Adding a new site means a new lease, new set of operating expenses and all of the additional costs that go into a location -- staff, equipment, additional management time and the like. CFOs can quickly comparatively analyze different offers for which has the lowest out of pocket cost. They can also see what each site will require from the other areas of the business that have to support it.

Sites that are eligible for incentives add an additional level of complexity. Incentive offers frequently come with strings attached and it has frequently been the CFO's responsibility to figure out which incentives are worth considering and which end up generating more incremental cost than savings.

Furthermore, as communities offer site selection bonuses, they frequently want commitments from companies that receive the incentives as to what they will do for the community. The CFO's intimate knowledge makes them both better able to discuss what can be done as well as giving them the information they need to educate a community on the overall strength and solvency of their company. Finally, since the CFO usually has to manage compliance with the requirements of the incentive agreement, it only makes sense to allow him to negotiate those requirements up front.

There is a great deal of truth in the belief that the CFO ends up being responsible for site selection because she is the last woman standing. However, in addition to being the last woman standing, she is also the best one to spearhead the process that leads to the most attractive option for her company.

Other great CRE Site Selection articles:

CRE Utilization Optimization and the C-Suite

Simplifying Site Selection with Technology

Site Selection is the Key


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Don Catalano

Don Catalano