I spend time working with companies that work in a global environment with front offices in one country and back offices in another. They face day-to-day issues in achieving their tasks, such as: overcoming cultural nuances, time zones, communicating using existing technology and leading dispersed teams when travel budgets have been frozen.

These problems often stem from applying a co-located method of managing and leading a team to the virtual global world. There are small and large differences and they need to be factored in to achieve agreed outcomes. The reality is that often team members are communicating by email and in some instances, have no idea what the other team members key skills are, or in some instances what they even look like.

When you ask at a corporate level, why the organization operates globally you often hear the answer cost, as it is cheaper to offshore work to another country where the labor rates are lower than another country. Global working is still in its infancy as a management science, and organizations are still learning about what works and what does not. In the pursuit of lower costs, the long terms implications are often not considered and the question I ask, is whether this approach is sustainable?

If the real pursuit is cost, then yes a lower cost per employee, per hour discussion is relevant, and the gap between one country and another can be significant, but what about the long-term impacts? What happens when a “low-cost country” starts developing and the labor force experiences wage inflation? If the cost savings are no longer viable, then will the maintain presence in that location?

Often companies will invest in training and developing their workforce, but the end result is that trained individuals, will leave and seek other opportunities, so the parent company suffers from significant churn rates, that means more time spent hiring people and training them. This is certainly not sustainable, and works so long as there is a constant stream of eager applicants for jobs, but what happens if this runs out? What are the options? Focus on existing staff, or move to another country and start all over again.

As more and more companies offshore work, they are basically doing what others in their industry are currently doing. All in the pursuit of reducing and controlling costs but what are the strategic implications of doing this? If all organizations strategic intent is too offshore to reduce costs and increase profitability then this is not long-term sustainable and we are back to square one.

I encourage companies to consider the viability of their offshore models and think about the impacts from not just a short-term perspective, but a long-term sustainable solution that provides profit, growth and an environment that allows employees, regardless of where they are located to contribute and work seamlessly as a team.

In Harvard Business Review (March 2013), there is an article entitled MakingSustainability Profitable (Haaneaes, K. Michael, D and Rangan, S.) http://hbr.org/2013/03/making-sustainability-profitable/ar/1.

In the article, they look at organizations that have sustainability at the heart of their organization and show that this results in “above-average growth rates and profit margins.  In these examples, from across the globe, they are not looking at sustainability as an add-on, something to consider as it is in vogue, but make sustainability a core value of their organization, from which all other organizational activities follow.

They suggest three main approaches:

1. A long view: Investing in sustainability at the operational level to realize lower operating costs and resulting in attractive profits and margins.

2. Bootstrap approach to conversation: Implemented small process changes that generated substantial cost savings.

3. Spread sustainable efforts to the operations of their customers and suppliers, creating new business profit models.

So we see sustainability all around us. As a business you want to consider the concept of sustainability within your organization.  Where do you start? This is a key question to consider and not an easy one to address.  Well, let’s go back to the very beginning.  Why are we in business / or rather why do we exist.  I always answer that regardless of whether you are a business keen on making profit or a non-profit organization, that the reason why we operate is to maximize stakeholder returns. The concept of return means different things to different people, and could consist of making profit, gaining market share, benefiting a community etc.  If we look at a manufacturing business, we take a set of inputs (raw materials) transform them (through manufacturing) and if there is a value add in this transformation, then people will buy the resulting products.

The concept of value is well-studied in management literature and some seminal work was undertaken by Michael Porter, who identified the Value Chain concept. 

Considering a business, the model analyses the individual components within it, so that value-generating components can be identified to learn where profit can be gained. If we break down the constituent elements that create the product or service, we identify the processes, techniques and value add techniques that results in the transformation.  If this analyses has been properly undertaken, we can then look at how sustainability can be applied to drive the value addition.  For example, a key value-add contributor, for a manufacturing firm, will be the manufacturing process itself.  We look at the process from a sustainable lens.  How can the processes be optimised to meet sustainable targets?  Can they improved or manufacturing steps improved?  These fundamental questions, from a sustainable stance enables the value-add to be improved. 

We have finite resources, if they are used effectively, from a sustainable lens, then we can attain better returns from our resources, processes and create value add that maximizes stakeholder returns.