Tuesday, June 24, 2014

How to Simplify a Complex Organization

Complexity is not just a phenomenon, it can be perceived as a property of a system.

How to manage business complexity becomes one of the top agendas for today’s corporate management, though complexity does not always mean the bad thing, design complexity or collaboration complexity are the key digital factors in business competency. Still, simplicity is the ultimate level of complexity, to make things simple, but not simpler.  But what are the challenges to simply a complex organization?

 1. Complexity and its Root Causes

 Different types of complexity: Considering there is no universally agreed definition of complexity, there seems to be a lot of hype about organizations becoming more complex (in the sense of the ontological complexity of social systems, rather than epistemic complexity of leaders' minds), but are we clear enough about what we really mean? it would be useful to sharpen up what we actually mean when we speak about the complexity of organizations. In the corporate scope, there are hierarchical complexity, environmental complexity, information complexity, collaboration complexity, governance complexity, etc. For example, hierarchical complexity, as opposed to other forms of complexity, applied to leaders' minds, their roles, their organizational cultures. And to dig through complexity by asking:  
- are they increasing in hierarchical complexity because they need to coordinate more things?
- are they increasing in information density complexity because of advanced in technology and information processing? 
- are they increasing in some kind of fractal-like patterns of self-similarity? 
- are they increasing in network complexity because of the number of nodes and connections in the organizational environment? 

-are they increasing in governance complexity because the management discipline and GRC practices are interdependent than ever?

The root causes of complexity: It may come from senior management "invisible culture" instilling the (wrong) values. Single dimensional business values further Inhibit companies from becoming sustainable and "future proof." More of the "old" does not work anymore. Decision processes and decision makers are in general the unsuccessful kernel. The wrong persons are at the wrong place. Managing risks without taking any responsibilities to avoid behaviors may miss the motivation and expertise.

2. How to Measure Complexity

Organizations are indeed becoming more complex. Some organizations are too complex and need to be more flexible and re-organized in a simple way using a clear measure of complexity. Being able to measure the complexity of a business becomes extremely beneficial when one can plot the trend of the complexity, or especially the resilience, over time. Knowing that the complexity or resilience is increasing or decreasing and looking for changes in ratios like profit/sales, profit/assets, sales/wages or sales by product / total sales etc.

Assess complexity: You may not be able to "measure" organizational complexity directly in the scientific sense of the word, but there is a categorically distinct set of metrics for human/ organizational behavior. You should certainly be able to "assess" it –What you can measure is the consequences of complexity, for example, you can measure costs in dollars or lead time in weeks or days. However, people may stay away from measures because then they can be held accountable. This is why managers in numerous companies prefer NOT to measure. When you make a claim (or a strong claim), because it is backed by quantitative analysis. You have to be consistent and pay the consequences.

Using surveys to measure organizational complexity: Some organizations use surveys that address motivation, inspiration, stress, etc. to measure the complexity of the organization. Then link these properties to the financial performance of the company, which of the above-mentioned parameters impact revenue, etc. Surveys provide an indirect (proxy) measure of complexity. If you want to MEASURE complexity, then you need numbers to start with, you may use surveys on the one hand or financial performance on the other. There are also other aspects, but they are not easy to measure and cast into numbers.

Indirect metrics to measure complexity: You are measuring complexity through the efforts to control it. The more complex organization, the higher number of control actions that are implemented. For instance, the interactive communication such as meeting is a control mechanism to reduce complexity. If people agree or are directly informed, their behaviors will have less uncertainty. The capability of a meeting to reduce uncertainty depends very much on its coordinator (if there is a proper agenda, the higher meeting quality, and effectiveness) and it can be itself another source of complexity because as any control system it is complex itself. 

Providing the complexity measurement data or ratios to management: and looking at the corresponding values of profits has certainly made many of them sit up and take notice of complexity or, rather, the benefits of simplicity. Many of them have taken steps to limit the growth of conditions that seem to make the business more complex and difficult to manage, and they have removed some layers of products, projects, processes or customers, etc and have found that profitability has improved. Organization change is a way to reduce complexity, but there are other actions that can contribute to reducing it such as communication.

Complexity is not just a phenomenon, it can be perceived as a property of a system, hence, managing it well will directly impact business’s bottom line for cost efficiency and top-line business growth.


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