Amazon May Divide Second Headquarters Between Two Cities

Local employers brace for competition for workers as mega-retailer mulls its decision

By Theresa Agovino November 5, 2018
Amazon May Divide Second Headquarters Between Two Cities

Champagne corks will undoubtedly pop in the government offices of the city or suburb selected for Amazon's second headquarters—a distinction projected to bring 50,000 jobs and $5 billion in investment.

However, reports have surfaced that the company is planning to choose two communities, dividing the benefits in half. Amazon was expected to select a winner from 20 finalist locations by the end of the year, and predicting the decision became a favorite pastime for many business leaders. That parlor game took a sudden turn on Monday when The Wall Street Journal reported that the Seattle-based retailer was planning to split the second headquarters between two cities to ease the strain on local services and better find talent. The New York Times reported that Amazon is favoring Long Island City in Queens, N.Y., and Crystal City, Va.

Regardless of which location or areas are selected, don't expect to find celebrations in the corporate offices of companies that will be competing with Amazon for talent. Instead, C-suite executives will grapple with how they'll keep Amazon from luring away their top employees with promises of high salaries and other perks.  

Amazon pays its employees an average of 20 percent above the national median pay, according to PayScale, a Seattle-based provider of compensation software and data. Amazon says that the median annual salary at its second headquarters will be $100,000.

"If you are an existing company, you are facing stiff competition. I understand that anxiety," said Stephanie Douglass, vice president of people at Vungle, a San Francisco tech firm that is consistently tussling with industry giants like Facebook, Google and, sometimes, Amazon for talent.

"It isn't just the benefits," she explained. "The name is a big draw, too."

If Amazon chooses two cities, the impact changes, depending on which cities are selected.

"Twenty-five thousand jobs are still a big deal but not as big of a deal in Chicago as they are in Denver," said Alan Johnson, managing director of New York City-based compensation consulting firm Johnson Associates. He added that if Amazon selects a smaller city, it could bring even more jobs, because "The city will have the Amazon stamp of approval."

Boston offers the best talent pool for the company, according to PayScale, followed by Washington, D.C., and Northern Virginia, then New York City. Austin and Chicago tied for fifth place.

PayScale determined the rankings by examining the 25 top jobs and skills at Amazon's Seattle headquarters and calculating their prevalence among the contenders relative to the national average. It also considered the percentage of those workers who were unsatisfied with their current employers, a signal that they may be easy to poach.

Katie Bardaro, vice president of data analytics and chief economist at PayScale, said it wasn't especially surprising that Amazon was considering two second headquarters.

"They are looking for niche, in-demand skills that are in short supply," Bardaro said. "When you want those skills quickly, it is a tough thing to bite off."

She added that it might be easier for the selected areas to accommodate smaller headquarters, noting that Amazon's explosive growth in Seattle has come with downsides like increased traffic and higher home prices.

Washington, D.C., Northern Virginia and Montgomery County, Md., are three finalists that have a unique edge thanks to Jeff Bezos' connection to the area. Bezos, Amazon's founder, chairman and chief executive, bought The Washington Post in 2013. And in 2016, Bezos, the world's richest man, paid $23 million for a mansion in D.C.'s exclusive Kalorama neighborhood.

Speaking at an event last week, Bezos said that, even with all the data available about the finalist locations, ultimately "you make the decision with your heart."

The good news for companies that will find themselves battling with Amazon for talent is that it won't be opening its doors immediately, giving them time to develop a strategy.

"Don't do anything rash," Johnson advised.

Also working in local firms' favor is the retailer's reputation as a grueling place to work. The high-pressure atmosphere that has been described in the press may overshadow offers of rich compensation.

Still, don't bash Amazon. "It just makes you look desperate," Johnson said.

Instead, companies should reiterate their mission, vision and values.  "Double down on what makes you a good place to work," he said.

Johnson recommended that executives consider which employees they most want to retain and make sure they are satisfied. He said that many companies don't have significant differentials between compensation awarded to their stars and average employees.

"It is hard to pay some people more and some people less. It is human nature to want to even everything out," Johnson said. "How many people get zero raise? Not enough. How many get to 10 to 15 percent? Not enough."

Don't just throw money at people, though, experts warn. "Talk to them about what is important to them," said Michael McGowan, managing director and practice leader, leadership and talent for BPI Group US, a management and human resources consulting group based in Chicago. "Ask what you can do differently. Get their feedback."

If local employers can't match Amazon's salary, perhaps they can offer other benefits like increased vacation or a flexible work schedule, Douglass said. She added that employers may want to point out other advantages like the ability to work on different teams or work abroad. Let employees know what types of career paths are available.

Douglass said that some employees may leave to join Amazon, but not everyone likes working at a big company. Vungle has about 230 employees, and that smaller scale can be a draw, she said: "Here, people can hang out with the CEO."



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