For large multinational organisations, finding the right way to structure across global, regional and local teams is a tricky issue. Be too country-led, and you risk being inefficient with your resources and reinventing the wheel multiple times. Be too centralised globally, and you risk losing touch with the markets you sell to and serve. Finding the right balance between the two can be hard to get right first time, but it’s also unique to each company depending on its strategy and current state.

So how can organisations make the right decisions and avoid having to transform in the opposite direction a few years down the line?

Identifying what work is local by nature

One of the first considerations should be to define what type of work must be local, i.e. within the country or specific locality it serves. Despite hearing many arguments about needing local knowledge, I have only come across a handful of criteria which makes work truly local in nature:

It requires face-to-face contact with local customers
It requires face-to-face contact with local suppliers or partner organisations
There is a legal or regulatory requirement for the work to be done locally

When any of these apply, then it makes logical sense to have local people and teams to do that work. For all other work, there is a genuine choice about how you structure the organisation to deliver it.

The obvious choices to centralise globally

At the other end of the spectrum, there is the global centre for the organisation spanning across all countries and regions. Some activities and work are clear contenders for being organised within this global centre and are things to consider centralising first:

Work which needs to be done consistently globally, e.g. managing the global brand. One of the simplest ways to achieve consistency in a process is to centralise it, to make it easier to drive a single way of doing things.
Work which requires scarce resources, e.g. data scientists doing advanced analytics. Where there is a limited pool of people and skills in a certain area, it can make sense to turn this into a single, global team, to help encourage skills transfer and building up capability.
Brand new capability, e.g. if the organisation wants to do something new, such as customer experience development, or in-source something they have previously outsourced. It’s often beneficial to build fledgling new capabilities under a single, global team, to develop the processes, technology and people before expanding further.

This isn’t an exhaustive list of things which might be obvious choices to locate globally in your organisation, but they provide a good starting point.

How to make sensible choices about the rest

The organisation’s strategy, depending how clearly defined it is, may provide some direction for determining whether to organise the rest globally, regionally or locally. Using the three strategic value disciplines provides some clues:

Trying to be a cost leader? Then shifting more towards global structures allows you to do things once across the organisation and save costs.
Trying to be a customer-intimate organisation? Then shifting more towards local / regional may help to increase closeness, knowledge and tailoring to customers.
Trying to be a product leader? Then consider keeping global the things that are core to the products, such as product development and brand management, as well as centralising any capabilities which can support across multiple product lines.

It can also help to consider chunking up the work the organisation does into business capabilities and considering options for each individual or group of capabilities. Weighing up the global, regional, and local options means it is possible to consider the trade-offs for increased efficiency and effectiveness against the cost of making the change.

Creating regional structures is one way to effectively ‘chunk up’ the organisation to manage the bulk of the work, with the added benefit of being able to oversee and be close to the local teams. Geography is just one way of organising the business; but other options, such as by function, product, customer segment, or matrix could also be considered.

This thinking works not only for global organisations, but also for European ones and even National ones, across all industries. I used this same thought process to prioritise what a European travel company needed to centralise to reduce duplication across its different country operations, and to help one of the largest UK Government departments work through similar choices on re-balancing what should be national, regional or local within its operating model.

By working through these logical choices, organisations can build up a practical balance between global, regional and local that suits their situation. It’s only one set of decisions in the overall operating model that needs to be thought through and designed, but it’s a critical one.

How have you approached the global-local decisions? Are there other criteria organisations should be considering?