Acting locally, as cliched as it sounds, is a strategy American businesses can deploy to reduce costs and offset losses at a time of record inflation, skilled labor shortages, and flagging sales.
If we are, in fact, entering a prolonged financial crisis, businesses will have little choice but to raise prices, cut operating costs, and deleverage wherever possible. This may buoy corporate bottom lines in the short term, but where does it leave customers, culture, and employees?
In 2021, enabled by the rise of remote work, the United States experienced "the great metro shrinkage" with an estimated 5 million people migrating out of big cities. In the first year of the pandemic, New York City lost more residents than any other metro area in the country — around 160,000 families — but by June 2022, the city's population had rebounded nearly 100 percent. Why? Businesses can't or don't want to support remote work long-term, and employees around the country are being called back to the office.
Smaller cities and regions in the US are rapidly losing talent and business as a result. Moving operations outside of large urban areas, staffing those offices with local talent, and tailoring sales and customer engagement to fit the specific needs and industries of small American cities and towns is the essence of localism as a business strategy. Conscientiously rolled out, localism can both add value to historically underserved communities and benefit businesses embracing the strategy.
In April 2021, I wrote about Transnational Localism for diginomica, detailing Zoho's creation of spoke offices around the world in small, mostly rural areas to provide economic and employment opportunities to local communities while supporting a hub in a nearby metropolis. Since then, the company has doubled down, most recently opening an office in McAllen, Texas, which sits on the US-Mexico border, roughly five-hours-drive from San Antonio — the nearest big city in the state.
McAllen and Zoho are a great match for several reasons. For one, the cost of living in McAllen there is roughly 30 percent lower than San Antonio, which affords employees a higher quality of life and the opportunity to purchase a home without accumulating large debt. McAllen employees can afford to live near the office, limiting commutes and maximizing time with family and friends. The biggest industries in the city by employment are health care, retail, and education — all verticals Zoho's technology currently serves, and target areas for customer and product growth. This is why most of the local hires in McAllen have been in sales and support roles, and that trend will increase.
Localism does not require business leaders to pick up and move operations from San Francisco or New York to the Rio Grande Valley, although some have. Zoho, for instance, still has an office in the Bay Area and its US headquarters is in Austin, Texas. We continue to support those offices while investing considerably in localism and the growth and addition of offices outside of major cities. The same strategy can be implemented by other organizations, so long as the location of spoke offices suits the needs of the local people and economy in stride with business growth.
In other words, the success of a business's spoke office is contingent on fit. Aligning customer and community outreach, events, and marketing with the values and culture of a new town creates stronger relationships and better outcomes for everyone. Once the decision is made to open a satellite office in a small town or city, the next phase of localism is hiring.
A century of urbanization in America has turned large, expensive cities into the base of operations for most large businesses, who hire locally — where competition for talent, salary expectations, and churn are extremely high. The vast majority of recruits haven't been local for long, either, having migrated to the city for opportunity. When businesses hire from a pool of recent transplants, they may miss out on great candidates with deep knowledge about and relationships with local customers, regional best-practices, and top industries in their towns. If businesses can bring employment opportunities that allow locals to work where they're from and add value to their community and economy, employees are more invested in the success of their employer insofar as it helps their hometown, which can be significant.
For localized recruitment to work in small towns, businesses will need to adjust how they evaluate potential hires. With so much migration to big cities, businesses expanding into rural areas may have to trade candidates with specializations and experience for prospects who are eager and open to learning new skills. (At Zoho, we rarely evaluate candidates by their resumes, and we don't require four-year degrees for this reason.)
Five years ago, for example, Zoho didn't have a customer support team in the US. Today, we have strong teams throughout Texas, in New Braunfels, Del Valle/Austin, and McAllen. Each is comprised of local employees whose expertize was built from the ground up to support customers in their region. In India, Zoho has taken it a step further, offering free courses in engineering, software development, design, technology and communication skills to high school students at Zoho Schools of Learning. Graduates of the program are guaranteed a position at the company. They can train at Zoho's corporate hub in Chennai, and eventually work from the dozens of spoke offices located around the country. We plan on expanding this program to other countries as demand grows.
Emphasis on hybrid
As Zoho prefers to build talent and expertize in-house, the company advocates for a hybrid work model. We've found that in-person collaboration and on-premise learning are critical ways to skill and familiarize new and less experienced employees. So, business leaders similarly interested in localized recruitment and hybrid are limited to talent living in or around the location of their offices.
Still, localism is a calculated risk. A hybrid work model in smaller markets allows businesses to maintain company culture, support in-person collaboration and expertize development, while still providing employees flexibility in deciding where they live and how best to contribute to their company's success in the region.
Over time, organizations with a native workforce operating from a local office will derive invaluable insights about the business conditions specific to that market. In the US alone, demographics and economies wildly differ even at the county level, making domain expertize invaluable. With boots on the ground, combined with earned local business relationships and community understanding, customer-facing teams can engage with clients more meaningfully and without relying on mountains of consumer data. The relative price of land, office space, housing, talent, manufacturing, and other assets outside of large urban centers is very low. Businesses can invest savings into further local expansion, diversification, or financial protection against an economic slowdown.
Today, providing effective and consistent customer experience is expensive and laborious. Personalization at scale requires tremendous investment with few guarantees. In smaller markets, sales and marketing teams can leverage local expertize to engage area customers with campaigns and products based on the particular needs and limitations of the region.
This may not be the right strategy for every business. After all, things move at their own pace outside of the city. Localism requires serious patience, management, resources, and maybe a little idealism. But under the right conditions and for the right town and company, localism can take advantage of regional communities, workers, and customers, as well as drive growth for businesses moving into town.