Chapter 12
Subsidiaries and subcontracting

In this chapter, we will return to the structure of organizations, already outlined in Chapter 8.

Up to now, at the level of the limits of the organization, we have only fixed an objectif of staff number in the hundred people range, by specifying that a significantly smaller or larger number had to be justified by particular constraints.
We also indicated that we are trying to limit the hierarchy. For this, we have defined only three management functions which are the president, the director and the treasurer.
It remains to specify the structure of this workforce. In other words, do we favor a horizontal integration, with consequently a massive subcontracting, and a workforce whose activity is largely uniform, or a vertical integration where the subcontracting is less, but at the risk of less scale economies on the heart of the activity.

The general objective set at this level is, within constrain of a staff number in the hundread people range, not to specialize the activity beyond what is necessary to obtain a satisfactory productivity. In other words, if a dozen people are sufficient to obtain satisfactory productivity in the core business, we will seek to integrate the maximum number of support functions to limit subcontracting, and conversely if the economies of scale are significant beyond a hundred people, we will concentrate the workforce on the core business and we will more heavily use subcontracting on additional functions to limit the total internal workforce.

We will see in chapter 16 which will present the structure of the tax, that there is a VAT on subcontracting, to limit the interest of subcontracting when this is not accompanied by a significant gain in productivity on the core business.
We will also see in Chapter 17 that the financing system that we propose eliminates the interest of any notion of subsidiary.

We end here the second part of this book. However, to understand the concrete functioning of organizations, one must also have read chapters 13 and 17 which describe their funding.