How the Pandemic Highlighted the Benefits of Decentralised Companies
‘Decentralisation’ has become something of a buzzword over the past year-and-a-half. Companies have had to pivot much faster than they would have liked in order to react to the disruptions caused by the COVID-19 pandemic. Many companies were already exploring decentralisation and digital transformation, but the pandemic accelerated these plans by an average of 6 years, with 97% of enterprise decision makers saying their plans have been affected to at least some degree.
One of the major changes that many companies, large and small, have had to make is a massive increase in employees working from home. And this won’t end as the pandemic does; it is predicted that, post-pandemic, less than 30% of employees currently working from home will fully return to the office. But as the saying goes, “with crisis comes opportunity.”
The Advantages of Decentralisation
Working from home has allowed companies, especially large companies, to decentralise their operations. From IT systems to supply chains, decentralisation is often seen as a positive attribute for large systems. Although they can be harder to manage, decentralised systems come with built-in redundancies and are significantly more resilient in the face of disruptions. The internet was developed as a way of decentralising communications, while in more recent
years cloud computing has decentralised storage, while blockchain technology has brought about decentralised cryptocurrencies.
These systemic advantages translate directly to decentralised companies. Many major fast food chains are ahead of the curve on this, letting local franchises work towards common, central goals. Subway is one such company that works on a hybrid centralised / decentralised model. Other companies such as the gaming company Valve Corporation, Illinois Tool Works and Johnson & Johnson have also discovered the benefits of decentralisation.
The most commonly cited benefits include: flexibility and speed of decision making; increased morale and loyalty amongst employees; improved flow of information; creation of local metrics; an improved ability to pinpoint strengths and weaknesses; lower costs and overheads; access to a wider talent pool, and more. As a recent McKinsey post stated, “Many leaders are reflecting on how small, nimble teams built in a hurry to deal with the COVID-19 emergency made important decisions faster and better. What companies have learned cannot be unlearned—namely, that a flatter organisation that delegates decision making down to a dynamic network of teams is more effective.”
The Winners: Local Communities & Strong Infrastructure
This increase in decentralisation has not just benefited the companies themselves but also the local communities they have moved into. It’s only logical that a centralised company with offices in one or two main locations will have a large impact on those communities but little reach elsewhere, whereas a more spread-out company will impact more locations. In a general sense, decentralised companies have much to offer local economies. Decentralised supply chains will often use local vendors for raw materials, components and other supplies. Larger companies will often have their own standards in terms of safety, hygiene, training, quality assurance etc., which they will bring with them to the local communities they work with. International standards and foreign investments may also have a positive impact on reducing local corruption.
Geographically, a decentralised workforce is already having both micro- and macro-level effects. At a national level, it seems that more developed countries benefit the most from decentralisation. Obviously the internet is the glue that holds together a decentralised workforce, and so countries with more internet penetration and higher-bandwidth connectivity are better able to support these workers. Even large economies such as Brazil and China are losing out to countries such as Belgium and Estonia due to their lack of widespread, reliable internet.
At a more local level, bigger and more expensive cities are losing out while suburbs and smaller towns are benefiting. High cost cities such as New York and San Francisco are seeing a reduced demand for office space. Having fewer workers in these locations is also having a knock-on effect to local supporting businesses, such as restaurants and cafés. Earlier this year, Starbucks reported that their average in-store transactions were at 90% of pre-pandemic levels. But the big city loss has been the suburban and rural community gain. Local businesses are benefiting from having more people in the area and local property values are rising as people move out from big cities. Even the environment is benefitting from fewer commuters, translating to decreased consumption of fossil fuels and reduced emissions.
Utilising Local Knowledge and Enthusiasm
The largest impact a decentralised company can have on communities is by hiring local talent and using local partners and suppliers. The act of ‘putting more money in the system’ will have both a positive effect on the local economy and improve the company’s image in the community. A famous example of a company with this impact is Apple. Although Apple is well known to complete a large part of its product assembly in China, their supply chain involves suppliers in 43 different countries across six continents. Each of the communities they work in is directly affected by Apple’s presence.
Hiring locally is possibly the most significant way to both put money in the local economy and to benefit the company directly. Local hires generally serve as an entry point to that community’s talent pool and markets. Cultural differences can affect both marketing and relationships with clients, vendors and partners, so having someone who knows how to navigate those waters can be critical. Additionally, local hires will have a better understanding of local laws, regulations and red tape. A diverse workforce also enriches an international company’s culture overall.
For many companies, managing a decentralised workforce isn’t the future, it’s the present. Rather than changing their organisational model by choice, they are instead finding ways to benefit from the situation that the pandemic has thrust upon them. Regardless of how this situation has come about, it shouldn’t be seen as a problem so much as an opportunity. There are many ways in which a decentralised structure can benefit companies directly, while at the same time benefiting local businesses, employees and economies. And as with so many cases, those who are agile and adaptable will benefit the most.
In the end, companies are now seeing the benefit of maintaining a model that has helped them to survive a difficult time. For many companies, decentralisation may have been a reaction to a particular disruption; the COVID-19 pandemic. But looking forwards, it makes sense to think that whatever has helped this time may also help to mitigate disruptions in the future. We don’t know
what tomorrow may bring, but it seems logical to maintain a model of organisation that has proven to be more resilient in times of crisis.