Decentralized corporate operations

All companies strive to become more efficient and have been working in optimizing their tax models so that they can pay less taxes and benefit from the different legal and tax regulations across countries. In difficult times, they immediately impose cost-cutting / cost-saving measures to limit a decrease in revenue.

During these actions, it is very possible that the company start restructuring its operations, leading to site closures and concentration of activities. More recently, there has been an increased appetite to think about outsourcing or transferring operations towards shared-services centers.

I find this practice important and necessary, in the perspective that companies have to continue to reinvent themselves and adapt to a more competitive environment. However, I think there are other alternatives that should be considered more often.

Local markets to become global players

Our extremely connected world allows us to have a center, for example, in India performing low cost services to the entire world; however, we often deal with quality issues and even with some cultural barriers. Moreover, when we transfer services to locations where the company is not operating or has a limited operation we limit the ability to develop talents in that location.

I would recommend that companies leverage their major markets even if there is a gap in personal costs. In my experience, many business cases fail to calculate the potential people development has in the overall success of a local operation.

In a nutshell, corporate operations should be executed as close as possible to where the revenue is generated and were the core business workforce is located, allowing some off-set of taxes but ensuring a sustainable organizational development.

The world is connected, so corporate operations can be still connected in a collaborative network that allows good governance of processes and decisions but highly insightful local market and operations knowledge. The number of centralized corporate offices, governing a multinational operation from a single base, should decrease in the near future giving more power to countries where growth and revenue is happening.

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