Prior to last September 11, the debate between consolidation and dispersion of a company’s operations usually revolved around matters of cost and efficiency.
Over the years, we have seen corporate sentiment bounce back and forth as to which was the best strategy. The entire “back office” industry grew out of this debate, as companies determined that, while corporate management might need to be located in expensive real estate in Manhattan -- or in downtown San Francisco or Chicago -- the IT, or HR, or accounting departments didn’t. For them, places like Pittsburgh or Memphis or San Antonio -- with their lower real estate and personnel costs -- made much more cost-effective locations for the corporation’s ancillary operations.
In an age of modern telecommunications, you could be located literally anywhere and still have the same communications as you would being located 10 floors down in the same building.
In recent times, the general trend among companies has been to consolidate operations. As companies sought to slash expenses in order to protect profits, consolidation meant being able to dramatically reduce costly real estate expenses by bringing everyone under one roof, so to speak. As an additional benefit, the theory went, communication among the heretofore disparate departments would also improve.
One of the disadvantages of everything being co-located is that, if something catastrophic happens, the entire company is put in jeopardy. Clearly, this was the case with more than one company located in the World Trade Center.
As a result, the pendulum seems to be swinging back the other way, and the reasons appear to be more strategic than financial. Many executives are now, more than ever, concerned about putting all of their (company’s) eggs in one basket for fear of losing their company in one cataclysmic event.
Many are now thinking in terms military commanders have long understood. Most involve basic common sense.
Having redundancy in critical systems -- power, communications, etc. -- enables a company to withstand outages without missing a beat.
Maintaining back-up systems physically removed in two or more locations will enable a company to survive a major mishap and be back up and running with a minimum of interruption.
Dispersing one’s assets provides not only protection, but also important flexibility. Stuff happens, and the ability to shift production (or management) from one location to another to accommodate unforeseen events (natural or manmade disasters, as well as basic market forces) allows a company to weather storms that might otherwise prove costly.
In the military, we used to call it protecting the force. It didn’t mean shielding it from all risk; rather, it meant ensuring that it always retained the ability to successfully perform its primary mission, regardless of unforeseen circumstances.
In a time when our nation is engaged in a global war against terrorism, that’s something American companies might want to pay closer attention to.
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