Chapter 12
Subsidiaries and subcontracting

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

So far, in terms of the boundaries of the organization, we have only set a target size of around one hundred people, specifying that a significantly smaller or larger number must be justified by specific constraints.
We also indicated that the aim is to limit the hierarchy. To achieve this, we have defined only three management functions: the president, the director, and the treasurer.
What remains to be specified is the structure of this workforce. In other words, do we prefer horizontal integration, involving extensive subcontracting and a largely uniform workforce activity, or vertical integration, where subcontracting is more limited, but at the risk of lower economies of scale in the core activity?

The overall objective in this area is, within a team ideally of around one hundred people, not to specialize activity beyond what is necessary to achieve satisfactory productivity. In other words, if ten people are sufficient to achieve satisfactory productivity in the core business, we will seek to integrate as many supporting functions as possible to limit subcontracting, and conversely, if economies of scale become significant beyond a hundred people, we will focus the workforce on the core business and subcontract more extensively on ancillary functions to limit the total workforce size.

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

We conclude here the second part of this book. However, to understand the concrete functioning of organizations, you must also have read Chapters 13 and 17, which explain their financing.