Nearshore is Not Only an H-1B Alternative; It’s a Key Component of the Post-Pandemic Organization

After the Trump administration set its sights on the H1-B visa, several IT companies pivoted their talent relocation strategy to nearshore countries like Canada and Mexico as a temporary solution, but the region is much more than a place to find talent.

With the widespread adoption of remote work bolstering the use of talent platforms for highly skilled temporary workers, businesses have an opportunity to bolster their resilience with lean operating structures that support a hybrid workforce. However, most don’t have the configuration to classify on-demand workers as essential elements of important projects, or the experience to manage a primarily remote workforce.

As organizations start to rethink their business models to leverage the contingent workforce in their region, a flexible operating model that uses nearshoring offers the opportunity to fundamentally change organizational cost structures—win-win for everyone involved.

Let’s take a deeper look at why organizations added Nearshore operations and the trends that are shaping the region’s potential to evolve post-pandemic organizations.

Extending the Talent Pool

For those who aren’t aware, the H-1B visa allows employers in the US to hire overseas workers on a temporary basis. Big tech companies use it most often to attract skilled specialist workers from around the world since there is a talent shortage in the States. Tech companies rely on development methodologies that require close customer collaboration to tackle business-critical projects, so the ability to import talent and send workers to customer sites on short notice is a notable benefit of H-1B.

In 2020, when US President Donald Trump introduced a temporary ban on H1-B and other visas due to Covid-19, it prevented some overseas workers from entering employment in the country. Companies saw nearshore as a viable alternative as it provides an additional talent pool in the same time zone.

Canada and Mexico provided additional advantages, such as the USMCA trade agreement and the presence of cities with similar travel times as flying domestically—it’s no surprise that Mexico took China’s US Top Trading Partner title in 2019.

Despite these benefits, companies only saw nearshore as a temporary option, hiring contractors via staffing firms or internet portals, which resulted in expensive compliance mistakes for some. Others chose to hire workers via international payroll providers but left organizations looking for good workers in unknown markets for their business-critical projects. A third option was to subcontract a nearshore IT company, which incurred additional costs and the customer-sharing risks of partnering with a competitor.

Still, a few new options arose that are worth mentioning, as they show how the organization could include these new capabilities as part of their business operation model.

Reimagining the Pandemic Workforce

As the pandemic begins to ease, many companies are planning a new combination of remote and on-site working—a hybrid virtual model. This model promises greater access to talent, increased productivity, lower costs, more individual flexibility, and a better employee experience. But, if managed poorly, it risks the emergence of two detrimental organizational cultures.

A recent Mckinsey report found that a hybrid virtual team’s experience in the same time zone varies significantly from those in multiple time zones. Among other ills, unmanaged time-zone differences make sequencing workflows more difficult. Equally dysfunctional is asking or expecting team members to wake up early or stay up late for team meetings. It can work for a short period of time, but in the medium and long run, it reduces the cohesion that develops through real-time collaboration.

This takes us to culture development, for which face-to-face interactions are essential. Also, the customers may be okay to receive services remotely, but they will favor those that provide face-to-face meetings for planning, status updates, and other critical tasks. This is why organizations are planning to take a middle ground when using the benefits of remote work, expanding their talent search outside their cities where they have an office but limiting it to those cities that are a short flight away from their locations. Thus, creating geographical hubs.

Head of Remote

The “Head of Remote” role is expected to become commonplace in the organizational structure. The consensus responsibilities for the head of remote role are:

• Review existing workflows, policies, and cultural underpinnings to ensure that they are adapted for a mostly remote workforce.
• Serve as a trusted advisor to existing workstream leads, ensuring full optimization throughout the different geographies that their workers are situated.
• Advise existing executives on proven remote work practices and lead a systematic organizational process update, to suit the modern-day reality of workplace expectations.

There’s a common misconception that the head of remote should be responsible for updating organizational processes related to cross-border teams, even without the expertise to do so. Contrary to popular belief, the head of remote should never work alone unless they are at a C-level. If they start changing the organization’s entire operating model, they could have a negative impact on HR, accounting, engineering, or international operations.

What they do need, however, is the ability to tie cross-border operations to these departments. If any of your team members are located nearshore, for instance, the head of remote can help to optimize those cross-border teams, ensuring you get the most of them.

Cross Border Operations

While remaining close, remote workers from the US are moving to cities that offer a better quality of life. Because time zone alignment matters, much of the workforce is spreading to different cities in neighboring countries—and top expat destinations—Mexico and Canada. As such, new organizational structures will require cross-border operations and the capability to integrate temporary workers living the company culture.

There is a growing number of advisory and service providers that can help, as not all companies have the ability to add subsidiaries in new countries, including larger companies that will prefer having the flexibility to enter and exit new markets.

Companies can host new organizational capabilities in the new subsidiary or share them with headquarters, which is just one of the key decisions that need to be made. Key lessons that we have seen are:

• Recruitment and payroll expertise go together in the new country. Getting the wrong team member could be just as costly as local compliance mistakes when hiring (contractors or employees).
• Local managers for maintaining a cohesive culture. They should have the industry know-how to get the right team combination and how to handle proactively issues that are typical in your business.
• Look outside your industry. The manufacturing industry has a shelter model option, which lets companies have their own full operation in another country without a local legal entity, minimizing risk and cost. It includes IP protection and other benefits that have been added during the more than 30 years of the shelter model’s existence.
• When possible, use your local service provider’s economies of scale. Not only will this prevent the need to hire a full administrative staff for the operation, but it will also help with local procurement costs and the use of shared infrastructure. Also, if you are not known locally, you risk losing your hiring and firing power for accountability, so it’s wise to use a local already established locally.

Any type of learning curve means additional cost, so using cross border operation framework like Subsidiary as a Service will help to shorten the curve. The advisors or service providers that you hire should specialize in your industry, but also be careful that they don’t have a learning curve on their own, as the remote workforce movement has created new entrants to the market that may lack the appropriate experience. Be sure that they provide examples of similar companies to yours and can mention lessons learned.

At the end of the day, the post-pandemic organization will need to have a new set of capabilities built in, as mentioned in a recent Harvard Business School Panel on Managing the Future of Work, Bill Kerr suggests that organizations should rethink their business models in ways that leverage the contingent workforce in new and differential ways. “Instead of resorting to these strategies in a reactive mode, organizations would benefit from a more systematic approach”.

The new set of cross border capabilities will be dependent on each other, so be sure to partner with someone who has the whole toolbox, not just a hammer. Spoiler alert: The North America Nearshore region is a good place to find them.