Complexity is a natural phenomenon. We see it all around us, but we rarely do much about it. This is because complexity does not announce itself as an issue. It infiltrates organizations bit-by-bit, day-by-day. Moreover, complexity is most often the result of success which is not something we normally don’t want to examine too much.
A few years ago, I was developing a training program for a 40-year-old engineering company that had grown from a single, simple product to having dozens of product lines including large scale customized solutions. It was a very successful, innovative company, but it had a complexity issue.
To prepare the training, my colleague and I asked a few simple questions of the senior management team:
“How many employees do you have?”
This question was met with rounded guesses that proved to be about 30% too few.
“How many divisions do you have?”
This question spurred a counting exercise that, ultimately, was wrong.
“How many products lines do you produce?”
This was never fully answered.
The concept that a successful company may not be fully aware of its employees, divisions or product lines seems ridiculous, but it happens more often that one might think. Products that were offered long ago and thought to be retired may be held out for one or two clients that still rely on them. They are long forgotten by management but still supported by the organization. Processes are added to support a particular function, product or service, and over time, becomes an assumed part of the business even if activities they support are no longer useful. Perhaps they are kept alive to support jobs or maintain budgets or simply because everyone assumes they are necessary.
There are many reasons why superfluous products, functions and processes may exist. Once, I was reviewing service processes for a company. One of their ancillary services was to fill out forms on behalf of their numerous clients, then submit them to a regulatory organization. The forms had to be filled out in every international market where the clients operated.
I noticed there was a step in the process during which the forms, once completed by the headquarters, were sent to the local office before being forwarded to the regulatory body. I asked, “Why aren’t they sent directly to the regulators?” The answer was that the local operators benefited from the process financially, so they should have something to do in the process to add value. “So, the forms are sent overseas to a local office so they can then mail them to the regulatory body and this is done to give them a good feeling that they earned their commission?” This was confirmed. It turned out that this extra step added an unnecessary layer of complexity, weeks of delay, and hundreds of dollars to the process.
It is not unusual for companies to find hundreds of such examples throughout their system if they look for them. Still, probably the most difficult impact of complexity for management to grasp is the unpredictability it creates and additional cost of trying to control it.
I was once working with a marketing & sales outsourcer whose primary complaint from their employees was that the company had no clear strategy. In fact, the company was growing revenues consistently, was a leader in its category, and was well respected by its clients; but its margins were getting thinner each year. After a bit of investigation, the reason for these challenges became obvious. This company had approximately 60 franchise offices and nearly 90 clients who it was marketing to with thousands of outlets. In an industry where personal relationships are the key to success, this is a lot of relationships to maintain. Doing a quick analysis, we estimated the potential for client/office/HDQ interactions at any given moment at approximately 4,000. This analysis assumed only one person from each office, and one person from HDQ could interact with the one person from each client. It did not account for interactions with suppliers, retailers or the end customers. Altogether, the number of potential interactions was more like 1.47475E+12 at any moment. At this level, the occurrence, result and impact of an interaction is impossible to predict let alone manage. Instead, the leadership could only react to the interactions that were identified and escalated as issues, the “fire drills.” This was enough to keep them busy all of the time. They never knew how their day was going to go, they could not plan, and so they had no time to move the company forward.
Owners of smaller businesses may see complexity as a problem for the future. “I have too much to deal with keeping my company afloat.” Yet none of the businesses discussed above are that large. They range from around 400 –1500 employees, but their businesses have become just as complex as some Fortune 500 companies.
How do you know if you just have a complex business or if complexity is a problem? Here are some of the triggers I have experienced:
- You have difficulty describing what your business “does” because of the permutations
- Leadership works very hard but never seems to have time to set direction
- Managers cannot set their agenda for a day without it being scrapped due to a “fire drill”
- The culture of your business is to reward “super efforts” in your people to accomplish their jobs
- Annual goals cannot be set for employees due to shifting sands and job descriptions are fluid
- Margins are declining even though you are getting more business
- You have volumes of documents explaining your company procedures, or (worse) none at all
- When you attempt to solve one issue, your issues seem to multiply
- Mapping interactions between stakeholders seems like a daunting task
Going forward, we will begin to explore how to best solve the issues related to complexity and how companies have experienced great success by viewing their organization through the Complexity Lens.