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Coping with Complexity

The general view on complexity is that it is a bad thing and that simplification will bring value by removing unnecessary costs. Here at Optimize we are Lean Practitioners but nevertheless we disagree with the argument that simplicity in itself necessarily drives value.

When an organization views complexity as something that needs to be overcome, it is missing an opportunity. If on the other hand complexity is considered as a challenge that needs to be managed and potentially exploited, additional sources of profit can in fact be achieved.

To achieve this, leaders need to view complexity on two levels. Firstly there is Institutional Complexity arising from strategic choices and the external environment and the major choices made around operating models and organization design. Secondly there is People Complexity concerned with the way leaders and employees deal with complexity. Most organizations in our experience focus on the first level which may indeed be the required approach but not to the exclusion of the people level.

Perhaps a better response is to focus on People Complexity in order to reduce the level of individual complexity. Making detailed organizational and operating model choices by clarifying roles, refining key processes and developing core competencies and skills amongst employees and leaders creates the ability to deal better with Institutional Complexity and therefore allowing the organization to make better strategic responses.

The more complexity there is at the individual level, the less ability the organization has to adapt and react to external changes. Institutional Complexity can create value only if the organization manages individual complexity well. Arguably companies that achieve this ability are harder to imitate creating a potential competitive advantage.

So, in an ever more complex operating environment, how can we go about managing and leveraging People Complexity?

First we need to ensure that the Organizational Design is correct. Duplication needs to be eliminated, accountability needs to be clear and reporting lines and the flow of information need to enable the organization.

Second, the core processes need to be aligned. Poor management process, IT systems that do not communicate with each other and non-integrated HR processes for example all conspire to create individual complexity that has to be fought on a daily basis.

Third, the capability and capacity of the leadership and employees needs to be of the calibre that can deal with complexity allowing individuals to navigate the complexity effectively.

So complexity is unavoidable but the answer is not to simplify at all costs – this is frankly too simplistic an approach (pun intended). We need to understand where complexity matters and how to build the right processes, skills and culture to manage it. There needs to be clarity of accountability, sharing of key data and the standardization of critical, core processes that enable the source of value e.g. risk management.

Once an organization has determined where its complexity lies, leaders need to develop a culture that encourages collaboration, innovation and initiative taking. This in itself can result in the unintended consequence of additional complexity and so leaders need to be tuned in to the consequences through regular monitoring and being continually alert to value destroying complexity.

The world is not about to become less complex and so as leaders, managing complexity is a critical skill and one of our accountabilities. So if you look around you and you see your team struggling with complexity, recognize that your team is potentially hampering the organization’s ability to compete and create value……..

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