Complexity is not necessarily bad for business, say Julian Birkinshaw and Suzanne Heywood writing for McKinsey Quarterly. However, there are different types of complexity and the problem for many executives is that they're not always sure of the type that their organisation has.
The failure to differentiate between institutional complexity and the individual highlights a blind spot suffered by many executives which prevents them from managing complexity effectively and can lead to wasted effort and finances.
KNOW YOUR ENEMY
To help executives identify complexity and to make a judgement as to whether or not it has value, the authors provide a guide outlining four basic types:
- Imposed complexity includes laws, regulations and intervention by external organisations, etc (not typically manageable by companies).
- Inherent complexity is integral to the company and can only be cut out by losing business.
- Designed complexity results from the choices you make about where the business operates, what you sell and who you sell it to. It is possible to remove it but that might mean "simplifying valuable wrinkles" in the company's business model.
- Unnecessary complexity arises from an increasing gap between the organisation's needs and the processes supporting them. Once identified, it is easily managed.
CUT IT OR SHIFT IT
The aim should be to identify where institutional complexity is an issue, and where complexity is caused by factors such as a lack of role clarity or poor processes. Then, organisational effectiveness can be boosted by: