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Balancing stones

In talks with our customers about simplification of their business, a recurring subject is how to find the right balance between local responsiveness and central control. Organizations are challenged with changes in customer behavior, new technology and increased regulation. Changes which request central control to align activities and people. To maximize customer intimacy however, organizations need to have a local touch and feel.

So: "How to balance between the need for local responsiveness and central control?"


Three examples of customer conversations:

A customer in Machine Manufacturing is confronted with new technology which enables remote control for the machines they produce. To remain in business they must stay on top of these new developments, get people with the right skills and re-define their design- and production processes as quickly as possible. Within the existing structure the organization is struggling to adapt at the speed required.

A customer in the Retail business has to deal with an ever changing blend of stores sales and internet sales. Their key questions are: “How can we manage and reward our sales staff in such a way that they support both points of sale”.

A Tax Manager of a customer in the Chemical industry explained that the new OECD rules on Base Erosion and Profit Shifting (BEPS) will change the international tax system significantly. Due to more strict compliance rules he has a strong need for central control to ensure that legal entities in the different countries are fiscal compliant.

Do you recognize your own organization in these stories? The examples show that different types of organizations struggle with changes which require local responsiveness, e.g. to stay on top of local customer/market needs, and at the same time, central control for reasons of profitability, branding, compliancy, efficiency and standardization.

Balancing stones

Local responsiveness and central control can go together, but in an international organization with multiple (legal) layers the combination of the two will cause complexity and to find the right balance will become a real challenge. Finding the right balance is something organizations have to deal with, but complexity is something we can influence.

How to influence complexity?

Traditionally, organizations evolve over time via organic growth or M&A’s and in many cases their business structure does not always fit with today’s business reality. Instead of dealing with or automating complexity, organizations should take a step back and start with identifying and visualizing the root cause.

In many cases the visualization will make clear that complexity has multiple, interconnected causes, being for example, the number of legal entities in the countries, the complexity of (local) business processes, the trading flows between legal entities or the number of ERP systems used. All being elements of a so-called business operating model, the company’s design for where and how the work in an organization gets done. Tuning your business operating model will simplify your business and support you in finding the right balance for your company.

Do you want to know more about the benefits of changing your company’s business operating model and how it can support you in your challenge of balance? Look for our future blogs and posts!