Complexity gets a bad rap, but should not be viewed as an absolute measure, as its impact can vary dramatically based on an observer’s perspective. Common complaints about complexity include that it drives unnecessary cost, causes waste and creates confusion.
Judging by those complaints, it is apparent there is not only a strong bias against complexity, but there appears to be a consensus that it is an evil that permeates organizations and must be rooted out and eliminated. There is a simple solution: reduce a company’s product line to one SKU, serve one customer segment, through one distribution channel, and size an organization accordingly.
This simple, illustrative solution is a gross exaggeration, and wildly impractical. Most of today’s global organizations must have an array of offerings to successfully compete. This array brings, of course, more complexity, but it can create competitive advantages that can be difficult to replicate. Further, it is not the complexity itself, but rather an organization’s inability to effectively manage it that causes problems.
An effective CLO can play an important role in helping an organization reduce complexity by determining which activities create organizational impact, eliminating the non-value-added activities, and effectively managing complexity to create significant value for the enterprise.
The Eye of the Beholder
Complexity is rather difficult to define. The many definitions in the popular press seem lacking, either classifying something as complex that we intuitively would see as simple, or failing to characterize an obviously complex situation as it is. Still, there is a common, objective core in complexity’s different concepts. The word’s origin, from the Latin word complexus, signifies something entwined or twisted together. Similarly, the Oxford Dictionary defines something as complex if it is made up of usually several closely connected parts.
Organizational complexity is an interesting concept because its level depends on the observer’s perspective. What may appear complex or unruly from one point of view may seem quite simple from a different angle. For example, those who have braved the streets of midtown Manhattan at rush hour can certainly attest to the overwhelming chaos. However, when viewed from the observation deck in the Empire State Building, the complexity below appears ordered and almost balletic. Organizational complexity can be viewed much the same way. That’s why it’s important to weigh the issue from many angles, from multiple stakeholders’ perspectives.
For instance, when senior leadership teams are asked about organizational complexity they generally refer to the systemic manifestations of the business complexity they experience. They cite product proliferation, expanding geographical scope, increasing spans of control and conflicting organizational silos. By contrast, relatively few executives consider the forms of individual complexity the vast majority of their employees face — and the impact they have — including a lack of transparency regarding roles and responsibilities, ineffective business processes, loss of empowerment and overwhelming amounts of rework.
Senior executives’ ability to leverage an intuitive focus on systemic complexity is critical to effectively manage it on an organizational and employee level. A focus on systemic complexity without regard to individual complexity can lead to low productivity, high turnover and an inability to eliminate complexity from the organization.
A critical first step for senior executives is to understand that their view of complexity differs considerably from that of the rank and file. Only then can management determine where systemic complexity is an issue, where complexity is caused by factors such as unclear roles and responsibilities or ineffective processes, and what can be done to relieve it in each area. Organizations can then improve performance by eliminating complexity derived from non-value-added activities and funneling the remaining value-added complexity back into the organization where thoughtful operational improvements can allow different stakeholders to handle and benefit from it.
Knowing Where to Cut
Consider the following scenario. The CLO of a global consumer products company is offered a difficult challenge after the new CEO decides to dramatically reduce systemic complexity by reorganizing the company into silos based on product lines such as health-related products and beauty, and eliminating the regional silos that focus on all areas of business in a given region.
Although the reorganization succeeds in reducing senior management’s level of systemic complexity, the newly formed business units have difficulty offering the integrated global solutions their customers demand.
In response to the fragmented structure, the human resources group creates several new positions — business unit coordinators (BUC) — whose sole function is to tie together activities across the business units as well as with key corporate functions. In response to the new positions, the CLO launches a skill-building program to enhance the BUCs’ collaboration and team-building skills to help them more effectively bridge gaps among the business units. The training helps the BUCs learn to identify and accept the increased complexity, rather than allow it to fester uselessly.
CLOs are often uniquely positioned to ask the right questions to engage their staff and business partners in a dialogue about simplification opportunities. Here are some of the questions they can ask in common areas of concern:
1. When the problem is inefficient organizational design, consider:
• Are there opportunities to consolidate similar functions or departments physically, virtually or managerially?
• How many managerial layers are there between the department managers and front-level associates? Can layers be reduced and spans of control increased?
2. If the source of the complexity is product and service proliferation:
• Does the company have a robust process that regularly reviews the current product/service portfolio’s performance so the organization’s resources could potentially be redeployed to new or more successful products and services?
• How well does the organization test the internal rate of return for new products and services to make sure they do not cannibalize current offerings?
3. If unmanaged process evolution has caused organizational strain:
• Has the organization identified critical business processes — those processes that need to run smoothly and efficiently for the enterprise to be successful?
• Does the organization have metrics and a simple dashboard that transparently tells managers and staff how various processes are performing? Specifically, can leaders effectively quantify rework and non-value-added activities across the organization?
4. If unintentional managerial behaviors are a source of organizational complexity:
• To what extent have leaders clearly conveyed the strategic vision and goals throughout the organization? How well can front-line people articulate their contributions to overall strategic objectives?
• How much time do managers spend in meetings? Are they well-planned and well-run with clear goals and outcomes?
• How much time do managers spend coaching employees and demonstrating and rewarding expected behaviors?
Armed with the answers to some of these questions, the CLO can design learning programs to hone specific skills that will enable the organization’s key players to identify and eliminate the non-value-added activities often caused by complexity. Learning leaders can build programs that thoughtfully target reductions in individual complexity by role, critical business operation or strategy, educating employees and leaders to think about how they might engage in their day-to-day activities differently and empowering them to offer suggestions for development options or organizational changes that will improve their ability to contribute.
For instance, employees can be taught how to quantify the amount of rework, handoffs and non-value-added activities in a given business process where they operate. They could then use this data to generate heat charts that indicate where and why complexity is causing organizational pain and how effectively employees are able to cope with it.
For example, to reduce systemic complexity, learning leaders could augment managers’ networking skills and develop programs to enhance their ability to work in teams, with business partners across the organizations, to mitigate the complexity brought about from multiple silos.
Again, complexity should not be viewed as an absolute measure as its impact can vary dramatically based on the observer’s perspective. It is therefore essential that CLOs and the senior executive teams they support recognize different forms of complexity and learn what’s causing them. By doing so, companies can retain the kinds that add value, remove those that don’t, and funnel the rest to departments that can be trained to manage them. CLOs can then make complexity reduction an ongoing part of their strategy in a way that not only reduces costs, but helps the rest of the enterprise to thrive.
Brian Klapper is president of The Klapper Institute. He can be reached at editor@CLOmedia.com.Filed under: Performance Management