Tuesday, September 14, 2010

Case Study:
Why it’s Hard to Track Companies
That Quietly Leave California

This Is the First Published Report About
Thomas Guides, a California Icon, Leaving
The State Last Year for Illinois & India

Ridiculous but true – California has a surplus of politicians who are contemptuous towards business and refuse to admit that the state’s policies are causing companies to move to other states and foreign countries. Some policy makers grudgingly admit that companies leave the state, but assert that the numbers are "exaggerated." However, for every out-of-state move found in newspaper stories, press releases, and SEC disclosures, dozens "go quietly in the night” because doing so makes the relocation less nerve-wracking to company officials who already feel beleaguered.

This posting will help illustrate how company departures are under-reported by focusing on one legendary California company that vanished – Thomas Brothers Maps – without a single media report appearing about the event nearly a year after it occurred. Hence, consider this the first public notice that Thomas Brothers Maps is no longer a part of California's landscape.

Hush-hush moves can be carried out so skillfully that even a company like Thomas Brothers, with a 94-year history in the state, can "disappear" without public notice. This California institution closed its Irvine headquarters around November 2009. Apparently it’s owner, Rand McNally, moved jobs to Skokie, Illinois, while map production was further solidified in Bangalore, India, where it had been located for some time.

Just how much of a legacy institution was Thomas Brothers Maps? Well, the company was founded in Oakland in 1915, moved to Los Angeles sometime in the 1940s and relocated to the building at 17731 Cowan in Irvine in 1980, according to the History of Thomas Bros. Maps and the Making of the Thomas Guide.

Rand McNally acquired Thomas Bros. Maps in the late 1990s for about $30 million and at the time said it planned to retain its 180 employees and the Irvine HQ. See the Contra Costa Times Nov. 14, 1998, story “Thomas Guide Makers Sold to Rand McNally" (through NewsBank; subscription required).

Three Questions:
  1. How do we know Thomas Guides has really left California?
  2. Was the out-of-state and out-of-country relocation justified?
  3. Wasn’t a public announcement of the move justified?
Question One: How do we know Thomas Guides has really left California?

Rand McNally’s website suggests a continuing California presence because it still publishes the Irvine address and phone number in a list of U.S. facilities on its website – see Locations. (Irvine shows on the following screen shot taken on Sept. 14, 2010, at 11:15 am, PDT.)

Also, the entrance to the parking lot for the Irvine HQ building continues to promote the name of the company as illustrated by this Sept. 13, 2010, photo:

But evidence to the contrary is powerful:

1.    A former employee, in providing the initial tip that the company left California, said that Thomas Brothers' Irvine employment was around 200 before the outsourcing to India started in 2003. He said the company was well liked and he thought Rand McNally didn't publicize the move since they didn’t want to drive away California customers. He said, "They wanted Thomas Brothers to die quietly after all the rounds of layoffs and outsourcings. By the time Irvine closed, it was down to about 20 employees."
2.    Rand McNally’s Career Opportunities page here fails to show Irvine as a location option in the drop-down menu.
3.    The Irvine location has had the same phone number since at least 1999, which is 949-863-1984 and remains posted online, but it’s now a non-working number.
4.    The Thomas Guide’s building at 17731 Cowan in Irvine is for sale or lease. A commercial real estate broker didn’t say much on the phone, but confirmed “they’re gone.” See the listing for the 57,890 sq. ft. structure – described as a “Manufacturing/Warehouse Building” and “Creative Office Space” – which is “Priced for Immediate Occupancy” here (pdf).
5.    Photos of the facility taken on Sept. 13, 2010, at about 1 pm, show the following:

The parking lot is empty including this area closest to an employee entrance:

The next two photos were taken through the window into what may have been the reception area, which is now bare with a bit of litter here and there.

Photo also taken through a window – a fountain in an indoor courtyard is dry and no furniture is in the area.

A dumpster sits inside a large area, which may have been the warehouse. The portion that is visible from outside (the photographer was careful not to step into the building) looks empty.

Emblazoned on a truck parked in the lot is “Tight Quarters, Inc.” Among other work, Tight Quarters of Santa Ana specializes in demolition and site clean ups as explained on their website here.

Question Two: Was the out-of-state and out-of-country relocation justified?

I have no inside information, but I suspect that the answer is “yes.” My primary work with companies is to help them become more successful in whatever location they choose. So, based on experience, I considered the following:

Costs: It’s more difficult to succeed in California, with its harsh tax and regulatory environment, than virtually anywhere else. The best example I give is that McAfee Inc. candidly admitted in March that it intentionally avoids hiring in California. McAfee has transferred entire departments elsewhere and saves about 30 to 40% every time it hires outside of the state. See Forbes: “Not Hiring in California.”

Competition: Consumer preferences have changed in that maps on GPS devices, iPhones, Droids, and online sites are now favored by many over paper maps. I suspect the competition is so powerful that It's dampened profit margins on paper map sales. Moreover, competition will intensify with the emergence of deeper and more specific interactive map products like SpatialMatch (in this case, for home buyers and residential realtors, but there will be similar applications for other markets over time). A map maker that wants to survive probably finds it imperative to move from a high-cost to a lower-cost area.

Competence:  Rand McNally is now owned by Patriarch Partners, LLC, which is run by Lynn Tilton, the only female CEO of one of the largest private equity firms in the world. Although I don’t know her, she seems like a turn-around expert who knows what she’s doing. In the last ten years she has rescued troubled companies and has saved American jobs that would have otherwise been lost through liquidations. After seeing her interviews on business shows, she appears to make business decisions while taking into account as many factors as possible. More about Ms. Tilton can be found in her biography here and her commentaries and TV appearances are here.

For all of the above reasonsand it pains me to say thisI've concluded that it's highly likely a number of valid business considerations justified moving Thomas Brothers Maps out of high-cost California.

Question Three: Wasn’t a public announcement of the move justified?

Official disclosure has yet to occur regarding the departure of this legendary California institution. There is no Rand McNally press release about the closure among the 2009 and 2010 press releases found here.

I've long advocated that companies disclose actions to protect their credibility among stakeholders – and communities and states are stakeholders. Henry Kissinger once said, "Anything that will be revealed eventually should be revealed immediately." When a company fails to volunteer its side of the story, people will assume the company is hiding something. Where’s the gain in that? I’ve given entire speeches on the subject of fair public disclosure and reputation management, so I’ll spare the reader any more here.

Unfortunately, recent requests for information to Rand McNally and Patriarch Partners about the relocation have gone unanswered.

What Did We Lose?

California has lost more than a company, capital investment, taxes, jobs and the economic spin-off benefits that come from those jobs. We've lost a company with a heritage of chronicling the changing nature of California's street and freeway "footprint" – changes that reflected the state's social, demographic and economic transformations. Thomas Brothers Maps is now less a part of the state's fabric.

I say to legislators and city council members who are hostile to businesses, and who claim business departures are being “exaggerated,” that Thomas Brothers Maps is only one example of companies quietly leaving California. There are many more.

(P.S.: To be fair, Rand McNally continues to sell 32 California-related products for cities and counties under the Thomas Guide brand that retain their high quality. The maps are for the following areas: Alameda, Bay Area, Contra Costa, Los Angeles, Marin, Monterey Bay, Napa, North San Diego, Orange, Riverside, Sacramento, Sacramento, San Bernardino, San Diego, San Francisco, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Solano and Ventura – and also for Arizona, Nevada and the Pacific Northwest – according to the Rand McNally Travel Store here.)