Insight # 59 : These are the voyages...New Models & Global Operations

Global Business Operating Models - Getting Them Right

by Paul Freeman

The age old dilemma of how to set up a global business operating model always creates an interesting debate. Clearly this doesn't apply to purely local businesses; but just about any enterprise looking to operate in more than one location has to decide how to set itself up.

The operating model has multiple dimensions, and often confusion reigns because the wrong dimensions are given priority in formulating the business structure.

Setting Up a Management Structure

First, when deciding how to manage a business, please relegate legal entity structures to the lowest priority in the decision tree. Multiple legal entities are a necessary evil of multi-locational businesses. These structures are often driven by parochial local government or regulatory requirements or - worse - the diseased mind of the in-house tax planner.

Ignore the legal entity structure when setting up your business model. Let your accountants worry about filing appropriate accounts. The numbers at a legal entity level are totally irrelevant to running the business, and no one is going to make business decisions based on the legal entity data.

The main priority is to determine a management structure that allows you to coordinate and deliver your services to your clients as they need to receive them. In effect, follow your clients' model. Client-centricity is momentarily the "fad de jour" - and rightly so. Those firms that have it at the centre of their model are the ones most likely to be successful.

Operating Seamlessly across Borders

My clients, the universal banks, run global projects that are agnostic to geography and other artificial barriers. They expect Pcubed to provide a seamless delivery experience regardless of where the deployment might be and often cannot tell me from one day to the next where the next resource is likely to be deployed.

To respond to this requirement, we have set up our business with a global management team that operates as one unit regardless of its individual team members' physical location. Effectively, it is a virtual team that leverages all the communication technologies available to remain coordinated and eliminate time zone considerations. Countries and regions are of very secondary importance when managing a global business. We plan and budget globally and deliver in the same vein.

Our consultants have to be equally flexible and prepared to work in any location with little or no prior notice of the engagement. This therefore drives our recruitment process and attracts talent that thrives in such a dynamic environment.

As talent is the key service that we offer, attraction and retention of our people is a critical component of the business model. Career progression plans, reward structures and HR policies should be tailored to support the globalisation of the business environment and the people that execute in it.

We also review our management information at a global level, which is how our clients expect us to report to them and how they report to us. There is a need to show a national/regional split, but the MI at that level is only marginally more useful than legal entity reporting.

Finally and importantly, the revenue-generating activities must drive the composition of the operating model. Support functions, HR, finance, operations, etc. can coexist with the business without necessarily having the same model (for example, statutory reporting, discussed earlier). However, avoid the pitfall of having support lead and business follow. It does not work.

7 Steps to Building Your Global Model

So my quick and dirty steps to building your global model are as follows:

  1. Global businesses need global operating models.
  2. Be client-centric and match their needs when determining your model.
  3. Management teams must throw off the country/region shackles and operate in a virtual environment.
  4. Recruitment and talent management/capability must be completely aligned to the business requirements.
  5. Performance management systems should support the model. Data cuts at a regional or country level are secondary considerations.
  6. Support functions should be aligned to the model where possible.
  7. Legal entities may be a necessary evil, but have no role to play in determining the structure of the model.
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