Cities adapt as employers relocate
Facing the loss of jobs and civic prestige, Boston turns to institutions that won't leave.
Boston - With the purchase of Gillette Co. by Cincinnati-based Procter & Gamble, Boston is losing its third signature company in less than two years.
Still, many residents barely flinched last week at the departure of one more headquarters in an era of consolidation and globalization.
The corporate flight means lost jobs and prestige, to be sure. As with the departure of financial giants FleetBoston and John Hancock, this latest buyout comes as an economic and civic blow. Corporate headquarters, after all, provide cities with high-paying jobs - both directly and by demanding a range of professional services - and their CEOs tend to be closely intertwined with the cultural fabric of a place.
But there are signs that cities from here to Seattle and San Francisco are learning to adapt more easily to such losses. As homegrown icons are swallowed up or move away, cities are relying increasingly on smaller employers and entrepreneurs to sustain the local economy and civic engagement.
"The reality of the situation is there are fewer and fewer of these large corporations," says Thomas Lyons, a professor of urban and public affairs at the University of Louisville in Kentucky. "It doesn't make sense to continue to squeeze blood out of those turnips. [Cities] need to focus on more and smaller firms in order to cobble together what they got before."
No one would call a company's departure good news. The "Places Rated Almanac," a guide to metro areas in America, includes a measure of headquarters in given cities.
It goes beyond jobs. "You can still be Los Angeles, or Boston, or San Francisco and ... not all the jobs are going to leave," says Joel Kurtzman, founder of the Kurtzman Group, a consulting firm that measures the competitiveness of cities. But the power base shifts, he says. "All the decisions that are really important are made somewhere else."
Mergers, driven in part by globalization, have spurred the loss of headquarters in cities across the nation. Although companies still identify closely with the cities where they are based, they tend to disperse jobs and charitable activities widely. "There is a trend among corporations to be more international in their giving, and to better align their giving with the sort of geographic weighting of their business," says Mark Kramer, managing director of Foundation Strategy Group, a consulting firm on corporate social investment, in Cambridge, Mass.
Boston was still adjusting to its new bank signs - FleetBoston Financial Corp. was bought by Bank of America Corp. in Charlotte, N.C., last year - when the newest buyout was announced. The $57 billion acquisition of Gillette could result in 6,000 layoffs, but it is still unclear how many jobs will leave the Boston area. It is also uncertain how Gillette's corporate giving will be affected.
Many companies, experts say, honor the legacy of their varied roots. John Hancock Financial Services Corp., which was sold to a Canadian firm in 2003, has pledged to continue sponsoring the Boston Marathon. But such philanthropy can wane over time.
A midnight fireworks display at Boston's First Night, its New Year's celebration, was almost canceled this year, in part because of a lack in corporate sponsorship. In the end, a retired CEO announced he would pay for the display.
Moreover, givers from afar often grow less connected to the true needs of the community. "There is a loss of intimacy," says Paul Grogan, president of The Boston Foundation. Whether giving to various causes or providing conference space for community groups, "they don't know the people or have ready access to the decisionmakers ... to hatch important civic initiatives."
Given these realities, leaders in Boston and beyond have begun to look to more permanent institutions - like healthcare providers and universities - as the central economic and civic engines of a community. "They understand that the health of the community and quality of life will have a huge bearing on their own health," Mr. Grogan says.
He says that university presidents, from Harvard to Tufts University, are spending more energy on civic matters - even if many cannot give as much money as a corporation. The Boston Chamber of Commerce named James Mongan as its new chair last year. Dr. Mongan is the president of Partners HealthCare System Inc., and is the first executive from the life sciences to hold the position.
Such organizations can buffer cities when corporations relocate. And when cities don't have them, officials turn to other ideas. In Louisville, when a tobacco company and a health insurance company left town, leaders began to focus on young workers in the knowledge economy. "The most devastating thing is not the loss of corporate structure, but the loss of human capital," Professor Lyons says. So rather than dangling targeted incentives to attract employers, Louisville is "dangling an educated workforce who is ready and can get the job done immediately."
Still, some losses are permanent. Gillette has been a Boston fixture for more than a century. Generations of blue-collar workers found jobs in its South Boston plant. Any visitor arriving by bus or train to South Station terminal passes a sign that reads "Gillette World Shaving Headquarters. The top floors of the Prudential Tower in Back Bay, the city's second-tallest skyscraper, are filled with its workers.
"I don't know if ultimately layoffs will have a huge economic impact on Boston," says John Barrett, director of research at the Beacon Hill Institute at Suffolk University. "But it diminishes our image of our self."