Why all the way around the world?

Analogous to classic offshoring, nearshoring involves the relocation of tasks to foreign production facilities and service centers located in markets with lower labor costs. Instead of relocating corporate tasks to India, China or South Africa, many European corporations are increasingly turning to emerging Eastern European markets such as Poland, the Czech Republic or Slovakia. This brings with it a number of advantages: while nearly the cost benefits of offshoring are achieved, nearshoring suffers to a lesser extent from typical complications such as the large time difference or the considerable cultural differences that make cooperation difficult.

In hybrid nearshoring, only parts of operational organisational units are relocated, which continue to exist in the onshore company in a manageable form. This has some positive effects: The loss of knowledge and top performers can be reduced, while the proximity between service provider and home organization remains significantly higher than would ever be possible with the complete relocation of company divisions to nearshore or offshore locations. On the other hand, there is the continuous coordination effort between onshore and nearshore, which ties up resources in the long term. Only if a comprehensive and efficient nearshoring concept is set up and successfully implemented can savings potentials be realized that go beyond the additional effort. In this context, a framework is presented here that accompanies the successful conception and efficient set-up of nearshore units (cf. Figure 1). In general, six critical success factors have emerged that influence the successful planning and implementation of a hybrid nearshore unit. These can be divided into three basic thematic dimensions.

1. define the organisational framework

The basic framework of a hybrid nearshoring organization is the organizational framework. Ideally, this is developed at the beginning of the planning process. It forms the foundation of the new organizational form and thus creates important framework conditions for the remaining phases of the development and implementation of the nearshore concept. This encourages the organization to ask itself important and potentially uncomfortable questions at the beginning. How much competence and specialist knowledge is one prepared to concentrate in the nearshore unit in the medium term? Which areas of work will be eliminated on the onshore side in the future and what are the consequences for the onshore workforce? What interfaces will result from the new constellation? What personnel requirements will result for the onshore and nearshore location?

Since nearshoring organizational units often face a multitude of internal and external demands (for example, maintaining functionality and output quality while reducing costs, safeguarding the interests of onshore employees, or complying with data protection regulations) that the new organizational form must meet, there is a risk of getting lost in the complexity. Often, the path of least resistance is sought to meet these demands, forgetting the long-term perspective. Therefore, it is incredibly important to start the search for the right organizational framework at the "meta-level". Detached from the various constraints, a functional target picture for the new organization can be developed here in the form of a functional diagram - the vision of the new organizational unit. This vision can then be tested and adapted in a next step with the various requirements and specifications in terms of quality and efficiency demands, capacities, competencies and technical/legal obstacles.

2. personnel

In order to make the neashore location a fully-fledged, productive component of the new form of organization, the right personnel selection for the nearshore branch to be set up is of essential importance. Nearshore locations are often deliberately chosen in locations with a strong supply of potential workers. The managers of the onshore organization are therefore often in the luxurious position of being able to choose from a wealth of motivated candidates with very diverse educational backgrounds and work experience. Experience has shown that this task is often made more difficult by the fact that onshore operational managers, as the most important (professional) stakeholders, are only peripherally involved in the personnel selection process. Particularly in the case of larger nearshoring projects in a corporate environment, the entire recruitment process is often carried out centrally in the nearshore location. Onshore managers are consulted about potential candidates, but interact little or not at all with the candidates before they are hired. In addition, there is usually a limited understanding on the onshore side about the education and work situation in the nearshore location. This can lead to onshore managers finding it difficult to select the workforce with the best fit for their organisation. To overcome these obstacles, it is worthwhile for onshore executives to be conscientiously prepared for the selection process. It is important to develop a good understanding of the training systems of the nearshore location as well as a realistic picture for the actual skills of the candidates and their expectations. Therefore, it is often worthwhile to maintain an intensive exchange with the local HR managers, the nearshore project coordinators and with representatives of other onshore organizational units who have already gained experience with the nearshore location. Furthermore, it helps to formulate the requirement profiles for the nearshore positions as concretely as possible before starting the recruitment process. Often, managers tend to acquire the best available workers (university degree mandatory). However, hiring overqualified and highly motivated nearshore employees for highly repetitive jobs without much room for development can lead to conflicts of interest. In the short term, this approach allows for rapid familiarisation, but in the medium term it can lead to underperformance, dissatisfaction and high staff turnover on the nearshore side.

Even the performance of the most capable employee is significantly influenced by the tools and knowledge that are made available to him for the completion of his tasks. Consistent training of nearshore staff is essential - but the time and planning required for this by onshore staff must also be taken into account here. Capacity bottlenecks can occur here, which temporarily restrict the ability of the organisational unit to function. On the other hand, there are the justified demands of the nearshore personnel to be adequately supervised, challenged and utilised during the induction phase. In addition, authorization concepts, which are often perceived as a necessary evil, often lead a stepmotherly existence in operational nearshore planning. The identification and implementation of the correct authorization roles is often challenging and is often the cause of delays in the rollout. Accessing and processing data across national borders also often poses challenges for companies.

Our project experience suggests that the development of a holistic training concept including detailed roadmap planning for the induction phase can make a significant contribution to the successful training of the new nearshore unit. Responsibilities for training and coaching on the onshore side should be clearly defined here in order to identify and avoid potential personnel bottlenecks during the training phase in good time. Furthermore, a training plan with defined milestones motivates nearshore staff and helps to assess learning progress. With regard to system access, it has regularly proven to be extremely worthwhile to address the authorization issue in good time. Clear authorisation concepts can be derived from the defined role profiles of the nearshore employees, which should be implemented and tested at an early stage in consultation with the necessary departments and supplemented by appropriate interim solutions in the event of implementation delays.

3. cooperation

The process model of the organizational unit forms the basic framework of the professional cooperation. Within this model, the internal and cross-organizational processes are defined. Interfaces to external units are usually not affected by department-specific nearshoring projects. However, the expansion of the organizational unit with nearshore employees usually leads to new internal interfaces and extensions of complexity. These must be consciously managed in order to meet the usual quality and efficiency requirements. Onshore as well as nearshore employees need to know exactly which responsibilities they have within the processes, which interfaces they serve and who needs to do the corresponding preparatory work to enable them in their role.

One of the basic prerequisites for this is a comprehensive process model, with clear responsibilities, activity descriptions, and input and output definitions for all processes on which the organizational unit acts. By developing the organizational framework, preliminary work has already been done here, as new internal interfaces can be directly derived from it. These can be captured, defined and anchored in the organization using common process tools, such as a RACI matrix. In the case of smaller internal processes, simpler representations are often sufficient - but it is important that the processes are clearly defined, documented and communicated. This underlying process concept ultimately structures the processes and communication channels so that the organization in the new structure fits together into a functioning whole.

Every organisational unit needs leaders who motivate, manage and develop the workforce with a view to fulfilling departmental responsibilities. In this context, the geographical distance between the controlling and executing forces can make the exchange of information and coordination more difficult. To overcome these challenges, a high level of commitment from the onshore executives within the development of the nearshore location is recommended, especially at the beginning. Regular bilateral consultations with the nearshore employees and participation in teleconferences as well as training courses and on-site visits are means to intervene and to get a picture of the structures in the nearshore. This sometimes takes a lot of time, but offers a platform to develop desired automatisms, forms of behaviour and quality requirements. In order to counteract capacity bottlenecks, it is possible to deliberately relieve onshore employees who take on management tasks for the nearshore location of other obligations. In the medium term, it is also advisable to specifically recruit top performers and

Building hybrid nearshore organizations is a valuable approach to unlocking cost reduction potential.

team leader in the nearshore location, as the presence of a trusted person on site cannot be replaced in the long term. Corresponding demands on the qualifications of individual nearshore employees should already be included in the personnel selection process.

Cultural hurdles, time zone differences and geographical distance are smaller obstacles in nearshoring projects than in classic offshoring. Nevertheless, these aspects also lead to considerable challenges in the nearshoring context that cannot be overcome by pure process optimization. Intensive efforts are needed to integrate nearshore employees into the overall organization. This can be promoted in various ways, such as joint events outside of the working day or on-site visits to the nearshore or onshore locations, although this is associated with high costs and time expenditure. However, there are also less cost-intensive but nevertheless effective means. If managers authentically demonstrate that nearshore employees are fully-fledged members of the organisation, this significantly increases the chance that this view will also become established among employees in the medium term.

Nearshoring - In brief

The development of hybrid nearshore organizations is a valuable approach to unlocking cost reduction potential - as long as the projects are carried out with the necessary systematics and attention. In the course of our project work, we have learned that, at the operational level, timely, comprehensive and structured planning of nearshore organizational units is more than half the battle for successful implementation. A well thought-out organizational framework makes all subsequent steps easier, more goal-oriented and maximizes the long-term performance of the organization. In addition, it makes it possible to avoid hasty decisions in connection with the essentially important personnel issue. In addition to the establishment of cross-border processes, the personal integration of nearshore employees into the organization is also of great importance.