Leaders of international companies are reconsidering the balance between how much work should be done in an office and how much can work remotely. This is because more and more employees have proven that they can work remotely. Hybrid work can offer new opportunities for competitive advantage but it can also have its drawbacks depending on the firm's goals. You need to consider two things before you can decide if your company should adopt a hybrid organizational model. These are the core tasks and the importance of employees working in international markets. After you have outlined the factors, think about how they fit into four models.
Many international organizations discovered that they were able to continue their operations despite a full-fledged evacuation. Digitalization of routine tasks and activities like information processing, communication and customer service, increased. Employees were open to online interaction replacing face-to-face interactions. These international companies' leaders are now rethinking their organizational models.
Remote working at scale presents both challenges and opportunities. These benefits can be a boon for organizations who are able to navigate them. This will require a change in the way organizations are structured. We combined our experiences in leading and researching these companies and created a new data collection to help us understand how this could look. Twenty-eight senior executives from different U.S. multinationals were interviewed. These names are well-known around the globe. Multinationals were a mixture of established global giants and young high-growth companies. We included both natively digital businesses and those that are rapidly transforming their digital business. We looked at how leaders think about organizational models. This included what opportunities and challenges they see and which models they are considering. The needs of both the company and employees were considered in the leaders assessment.
This research shows how leaders think about the future of their organization structures. Based on two new design principles, it also offers four models that international organizations can consider.
Two Principles of International Organizations
Two new design principles were identified to assist you in identifying the best organizational model to support remote work at scale.
Take into account the context of your core activities.
This will allow you to determine the right balance between office and remote work. Leaders assess the task context to determine how many transactions or relational information are required between colleagues in order to accomplish the task efficiently and effectively.
Relational exchanges are tasks that involve innovation, knowledge creation, or activities in which the organization is still developing processes. These activities are dependent on the moment-to-moment creativity of individuals engaging in spontaneous and vivid interactions. The best place to perform relationship tasks is in an office setting. A vice president at a rapidly-growing tech company stressed that the organization must have sufficient relational exchanges in order to innovate and share information, particularly around the integration of new employees into the culture.
Tasks involving transactional exchanges, on the other hand, are routineized and procedure-oriented and thus suitable for digital interactions. These tasks can be accomplished efficiently by employees working in teams and communicating with each other virtually. Our leaders discussed software development, call center, inside sales, and other support functions. One vice president stated that his company can reduce its office footprint by using remote work for such tasks. This is a significant cost savings.
Many activities involve both transactional and relational exchanges. It is important to assess the relative importance of each. Also, it is important to consider the interconnections between tasks that require transactional exchanges. The physical office can also be a valuable space for socialization and embedding an organization's culture. Leaders of tech companies with strong organizational cultures stressed that remote work policies should include the expectation for an office presence. It is important that employees live within reasonable driving distance. A hybrid model can be used depending on what balance is needed. It could be office-centric (work in the office > remote work) or virtual centric (remote working > office).
Assess the competitive value of having employees on international markets.
Our leaders spoke out about the global talent war and how remote working allows them unprecedented flexibility in accessing employees. This could include finding rare or specialized skillsets, as well as generic skillsets at lower prices. This could also include the acquisition of companies (for technology or market share), where key talent can still be retained. It may also be in an organization's best interest to establish a new hub that is home to a group of recognized talent who are focused on a specific sector.
It is obvious that having employees in more countries can increase costs and add complexity. A leader we spoke with was especially aware of the increased administrative burden for employees based in multiple countries because of differences in taxation and employment laws. This is a cost that organizations often overlook as they try to find talent from multiple locations.
Depending on the product or service offered, the required level of presence in international markets may vary. Software applications and other offerings that are easily marketed, delivered and supported electronically, with global brand recognition, lend themselves to central operations with minimal geographical dispersion. However, products that are difficult or expensive to distribute (such as building materials and perishable foods) will still need to be physically present in all markets, even if they are marketed and sold electronically.
Drawing together these two considerations, firms can choose between having employees in some countries (low internationalization) or many countries (high internationalization).
Four Models for International Organizations
Bringing together an organizations task context and its degree of internationalization, we distilled four generic organizational models for international companies. We searched for examples of businesses that were willing to try each model. Each model reflects the views of our interview leaders and illustrates how remote working has opened up new organizational possibilities.
Large Hubs (low internationalization, relational task context)
The office-centric model requires employees to work together in order to complete specialized, knowledge-intensive or creative tasks. In a few countries, the organization is tightly structured. These hubs are where employees can come together to spark ideas and innovation. Remote working is allowed, but only within close proximity to hubs. It is expected that there will be frequent collaboration via physical presence at the office.
High-skilled international professional services firms such as architectural might co-locate their engineering, drawing and design development in one hub. The leaders of a global automotive leader indicated that they were open to this model being adopted by other creative, knowledge-intensive organizations. The IT director at a global automotive leader explained that new systems development is not centralized but is moving towards regional software and product development centers.
Hubs and Satellites (high internationalization, relational task context)
The model is office-centric and relies heavily on global hubs. However, satellite operations allow for smaller clusters of experts or specialties to be accessed. We spoke with leaders from professional services firms who use satellite offices to meet local needs. They combine local expertise with global perspectives.
This organizational model was adopted to allow international organizations to collaborate and share ideas in advanced markets. One vice president of an online advertising company spoke about how they are moving away from a large hub model and adding international satellites to the mix to increase access to talent pools in the region. The model is based on the belief that most interactions can be done face-to-face. It facilitates this by offering a wide network of offices in both major hubs and smaller satellites within easy reach for employees.
Distributed (low internationalization, transactional task context)
This model is ideal for tasks that are routine and high volume. They can be digitalized easily. The organization is well-suited for distribution. The availability and cost of talent determine where work is located. This will typically be limited to a few countries but not beyond. The company can access wider markets without having to be present in those countries, if necessary.
Aha! Software, behind Roadmap.com is the fastest-growing online community for product and business builders. Its employees are spread across the U.S., as well as a few other countries. This organizational model is also beneficial for established companies, as the vice president of a well-respected pharmaceutical company recognized its benefits, especially as more innovative drugs are available.
Global Virtual (high internationalization, transactional task context)
This virtual organization model makes it possible to access talent worldwide. This model is not driven by the search for talent or favorable labor cost. It works well for companies that need a global presence but have limited resources. Automattic, a billion-dollar startup, has over 1,300 employees in 79 different countries, speaking 99 languages. This model allows employees from many countries to work together in a virtual, global organization. They can interact across borders and choose their work location. They meet once per year to build deeper relationships. Physical offices are of little use in this scenario.
This model could also help organizations to be more efficient in transferring some tasks from one person to another, using technology and creative work methods that can cover tasks that normally require physical colocation. Many of our leaders were excited about this approach and embraced the flexibility and adaptability it offers. They also acknowledged that their organizations might still be far from this model. Today's scale-ups and start-ups like Automattic will be the ones that act as models for others in this sector.
To take advantage of the international remote work opportunities, leaders must select the right model for their company. The models presented in this article should be adopted by both established companies and start-ups. Which model is right for you?
