Anecdotal experience tends to lead many people in the technology industry to suggest that growth (or newly ‘sexy’ or ‘hot’) companies rapidly head into difficulties at about the same time as they move from the seedy garages and crumbling buildings they started in to shiny new office buildings. The evidence has not been the subject of any formal study and so remains anecdotal, but instances are sufficiently frequent to render it difficult to reject the thesis.
Suggested underlying reasons include, growing corporate bureaucracy and vanity with an attendant lack of close focus on the business and rising internal politics, distraction associated with the move, or the dispersal of employees (not all of whom may get desks in the shiny new office) and the segregation of management from the operative end of the business, harming communications and eliminating the coffee-pot effect/water-cooler channel. Another suggestion sometimes made is that “when your office is a dump, you’re inclined to go out and look for business; when your office is pleasant and comfortable, why not sit back and enjoy it?” Yet another suggests that as business managers and ordinary employees start to outnumber the owner-employees of a start-up business, their lower opportunities to gain wealth from the company’s success make these later employees them less willing to sacrifice personal comfort.
Noted examples of “new HQ syndrome” are:
- Yahoo – which built a new office in Santa Clara on land it bought in 2006 for $112 million, to promptly see its business start to decline as Google became dominant in search;
- New York’s AOL Time Warner Center, completed in 2000, which was pruned to the
AOLTime Warner Center as AOL declined, and with the slow demise of Time magazine was in late 2018 renamed the Deutsche Bank Center; - The IAC Centre completed in 2007, just in time for InterActiveCorp (previously Home Shopping Network of HSN) to shed a large proportion of its larger components, e.g., Ticketmaster, Home Shopping Network and Expedia – as well as its largest shareholder, Liberty Media;
- Inktomi’s 380,000 sq. foot complex in Foster City, California, by 2002 the company could not pay its lease, by 2003 was being restructured and today is largely forgotten;
- Excite@Home which moved into its new offices in 1999 and promptly collapsed.
Other, older instances of the syndrome were set forth in C. Northcote Parkinson, Parkinson’s Law: The Pursuit of Progress, London, (John Murray, London 1958, Houghton Mifflin, New York, 1962). See Business Week, Curse of; Edifice Complex