Tim WilsonMany corporations present cultural strengths that run deeper than the location of their head office. Columbus Networks, for example, has its headquarters in Bridgetown, Barbados, yet its management consists of multinational team working out of Miami, Florida and Canada. And outsourcing giant Cognizant – which began in 1994 as the Chennai, India-based technology unit of Dun & Bradstreet, and whose CEO Francisco D’Souza is of Indian origin and was born in Kenya – overseas its Latin America operations from its headquarters in New Jersey.
“Over the past few years, our increasingly globalized, online economy has changed the game, and the very definition of what is local or ‘yours’ is no longer as universal as it once was,” says Carmi Levy, a technology and business analyst in London, Ontario. “In today’s business climate, it makes more sense to downplay the local, national or cultural connection. Instead, the average company now tends to create a more universally-targeted brand-based message – one that plays just as effectively in Peoria as it does in Panama City.”
The view among many executives is that over-reliance on a central base can slow things down. For example, William Amelio, CEO of electronics manufacturer Lenovo, has structured his company such that top personnel are positioned around the world. Lenovo may be headquartered in Hong Kong, with three quarters of its workforce is in China, but its international management team lives and works out of Singapore, Seattle, WA, and Raleigh, NC. This is also true of Bangalore-headquartered Infosys, which has begun to shift more operations out of India to its 18 international offices, including those in Brazil, Costa Rica, Puerto Rico, Mexico and Argentina, where the company employs over 1,700 people.
Strategic choices
There are strategic reasons for decentralizing a company. That said, moving headquarters exclusively on the basis of finding a business-friendly location can leave observers with the impression that a company is not really being run out of head office at all. This risks confusing an organization’s brand identity, and can also expose a company to criticism that it is willing to undervalue some stakeholders in the service of a more favorable tax regimen. However, the truth is that the formal location of a head office appears to make little difference to an organizations internal culture, nor does it negatively affect brand.
“There is always the risk that an offshore-based corporation or a remotely located headquarters will rub some stakeholders the wrong way,” says Levy. “But with today’s companies growing ever larger in scale, there is no way to please everyone. If it makes sense to locate headquarters somewhere else, the majority of people will accept this if the company is otherwise managed in an acceptable, efficient and profitable way.”
Levy argues that most stakeholders – employees, customers, clients, members of the supply chain – care more about how well a company is run than where its offices may or may not be located. Still, when there are location-based cultural advantages, most organizations are quick to leverage them. One way to do this is to split headquarter locations, or to include some head office functions within nearshore delivery centers.
“Dividing headquarter functions among multiple offices allows companies to more precisely leverage talent no matter where it might be located,” says Levy. “It can aid agility by facilitating faster responses to local business conditions.”
But Levy warns that it can also lead to a kind of ‘analysis paralysis’where leaders in different geographies can’t align on priority decisions and activities. There is also the risk that it might slow the overall company down by adding an additional layer of activity to normally routine workflows.
“Companies that go this route must be methodical about implementing tools and processes to drive cross-site collaboration,” he says. “Without this kind of framework in place, a company that divides such functions among more than one site risks creating multiple silos of knowledge and activity – which will ultimately undermine organizational effectiveness.”
It’s the Service that Counts
There is little evidence that clients will avoid organizations that have more complex corporate structures. In fact, the cultural discrimination that can come from ignorance is usually dispelled once a service provider proves its capabilities – no matter its origin or structure. Today, for example, no one questions the capabilities of the Indian provider Tata Consultancy Services (TCS), which has its headquarters in Mumbai and delivery centers in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Peru.
“The rush toward bulked-up, global conglomerates has dampened the value of strict adherence to a national or cultural identity,” says Levy.“It ensures greater levels of acceptance no matter the geography, and minimizes the potential for pushback based on non-mainstream cultural mores.”
San Jose, CA-headquartered Cisco Systems saw this back in 1995. At that time the networking company began operations in Bangalore, India. In the ensuing years it has transferred more and more capabilities to India. Now, the Bangalore campus is home to Cisco’s Research and Development, IT, Services and customer support teams, with some C-level executives calling Bangalore home. Other big services firms, most notably IBM, have senior executives from around the world working out of a range of offices. No longer do customers demand that a company carry a national brand; instead, as was shown by Gallup over a decade ago, when looking at businesses across sectors, the focus is on the quality of the services and the knowledge of the employees.
“Once upon a time it might have been a significant issue for corporations or business entities to have a defined national or cultural identity,” says Levy.“In the pre-Internet era, supporting local businesses was seen as a powerful and resonant consumer behavior, and companies often built their entire marketing messages around locally-focused themes.”
But that is now less and less the case, allowing companies more flexibility in terms of their corporate structure. Even heavily branded corporations are splitting functions. Fiat, for example, which was resident in Italy for 115 years, is now paying its taxes in Britain, trading on the NYSE, and legally headquartered in the Netherlands – a favorite spot for those companies on the hunt for simple and undemanding legal requirements.
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