Taming organisational complexity—start at the top
Complexity is a serious threat to organisations around the world. It stems from a variety of sources, is challenging to address, and hinders companies’ ability to bring products to market in timely fashion, to serve customers effectively and to attract and retain employees. Ultimately, it’s a threat to the bottom line, but just how costly is complexity and what can be done to counter it?
In a recent survey of executives at large companies around the world conducted by the Economist Intelligence Unit (EIU), more than half say complexity has cut into their profits. Furthermore, 38% of all respondents report that managing complexity occupied 16-25% of their time—time that could have been spent on more productive pursuits—and 17% spent a whopping 26-50% of their workday dealing with complexity. That translates into at least 8.6m hours a week that could be spent more productively by executives in the US alone—or 45 minutes for every executive every day.
Executives indicate that the sources of complexity vary widely. It’s easy to think of complexity as simply a natural offshoot of growth, whether in size, product lines or geography, but that’s not necessarily and needn’t be the case. “I don’t use the phrase `Too big to manage’ because there are some small companies that are too complex,” says Jacques Kemp, former CEO and vice chairman of ING Insurance Asia/Pacific, now CEO of the Netherlands-based ToBecome consultancy where he coaches businesses on issues including reducing complexity. “I use the phrase `Too complex to manage.’”
The survey also shows how companies are trying to reduce complexity’s impact, with many taking a number of steps to address it, with none being more than moderately successful. Remarkably, 8% of respondents say their company has gone as far as deliberately slowing growth in an effort to reduce complexity.
Of course, not all efforts to reduce complexity are successful. Of those surveyed, 9% report that none of their efforts to reduce complexity succeeded. “Often people don’t realise they have a complexity issue. They think they have a cost issue,” says Torsten Lichtenau, a partner at Bain & Company in London. “Often they confuse complexity with cost.” That often results in short-term cost-cutting measures like lay-offs, rather than taking steps that fundamentally address complexity.