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Cracking Complexity

Optimize Blog - June 6, 2016 - 0 comments

We view complexity in two ways. First there is the institutional complexity – which results from the number and types of interaction within the organization. This type of complexity is the result of strategic choices around structure and organizational systems and it grows ever more complex as an organization adds products or geographies or customer groups.
The second level of complexity is individual complexity which is concerned with the way leaders and staff experience and deal with complexity – in other words ‘how hard it is to get things done’.
Clearly both these levels of complexity are closely related but the distinction between them is important and we find that generally organizations pay most attention to the institutional complexity issues and in many circumstances this is a legitimate approach.
However, we believe that focusing on the second level of complexity perhaps delivers greater value. Reducing the degree of individual complexity by making detailed organizational and operating model choices, clarifying roles, setting clear boundaries, refining core processes and developing appropriate skills and capabilities among the employees and leaders creates the capability to become more agile.
The good news is that increasing institutional complexity does not necessarily lead to increased individual complexity if it is done right. The other bit of good news is that research shows that reduced individual complexity delivers higher returns on capital employed…….
The fact of the matter is that an organization can manage higher degrees of institutional complexity if it can reduce the degree of individual complexity. Equally, companies that manage complexity well are harder to imitate.
So how do we reduce individual complexity? It is critical to determine just where the complexity exists as once an organization knows where complexity is, then some form of action can be taken to reduce that complexity.
First we need to consider organizational design. Done well this can minimize complexity. Low individual complexity organizations are characterized by their ability to eliminate redundant activities, eliminate duplication and in the creation of clear accountabilities and targets.
Second comes the ability to align processes. Clearly processes and systems are important drivers of individual complexity. Effective management processes, operating processes and enabling IT processes demonstrate a low degree of individual complexity. It is critical to have systems and processes that are well integrated.
The third element to consider is the organizational capability. The degree of complexity reduces as the leadership capability increases particularly in the realm of the ability for leaders to take the initiative and work outside of the narrow definition of their roles. A lack of capability creates additional complexity as individuals struggle to determine how best to create value. Higher levels of capability (knowledge, skills and abilities) are essential in reducing complexity.
Fourth comes the requirement to provide clarity of accountability as a lack of clarity is one of the most important causes of complexity.
Fifth comes the requirement to have a good governance framework and effective controls.
Finally, there is the need to have an integrated and coherent approach to data, cross functional processes and integrated IT systems. Finding a way around elements that simply don’t work creates unbelievable levels of complexity and of course creates a significant drag on the organization as a whole.
Complexity is a fact of life and unavoidable for most organizations. To ensure that we can create value, become resilient and sustainable requires that we embrace complexity at the institutional and individual level. Understand where complexity matters and build the right processes, skills and culture to manage it………

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