I spend a lot of 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.