1 good news. 2 bad news
The good news is: There are a number of highly effective tools that help us to identify complexities and respond appropriately. Agile approaches are proving very useful for this purpose and have been gaining enormous popularity.
Bad news #1: Business complexity is mostly homemade. This means it stems from within organizations and is not induced from the outside. An empirical study by Severin Bischof at the University of St. Gallen impressively illustrates this: The biggest complexity drivers are generated within the companies themselves.
Bad news #2: If you now try to "agilize" companies with a lot of effort and resources, you may just be trying to manage your home-grown complexity.
The real tragedy is that these agile transformations fail precisely because of this self-created internal complexity. This is also evident in my consulting practice. I am often called in for “agile emergencies” – when the well-intentioned agile path is threatening to end in a trap. Clearly, there is a better and simpler way.
Managements sets the traps
Let’s start with the big picture. The aforementioned St. Gallen study led by Severin Bischof has identified a total of eight complexity dimensions and their respective drivers.
Source: Severin Friedrich Bischof and Thomas Rudolph in Absatzwirtschaft Magazine 3, 2019
The main complexity drivers in companies thus are:
- forecasting behavior and budgeting processes
- unclear organizational structures
- large task range
All three drivers can be clearly and directly influenced by a company’s decision-makers. To put it bluntly, management itself sets these complexity traps. In most cases, managers are not even aware of this. They fall back on proven approaches, which are often recommended by much-acclaimed consultants. However, many of these methods were developed under the assumption of a stable environment. Clearly, this no longer exists.
It's high time to examine specific issues within your company!
The following suggestions will help you do so:
Tip #1: End the forecasting madness!
Streamline your costly, multi-stage, highly detailed forecasting processes. Make room for common sense. Rely on a step-by-step rolling approach and take advantage of automation through digitization. Instead of looking at extensive plans that won't be valid for long anyway due to rapid market change, focus your attention on your customers.
Even if you have already embarked on your agile journey, take a close look at your forecasting and budgeting processes. The benefits of agile approaches are lost if your agile results and product innovations run up against traditional governance processes – with lengthy management approvals for relatively small projects.
Beyond Budgeting might serve as a useful resource for escaping the financial bureaucracy and micromanagement trap. This does not mean that you should arbitrarily spend. You will need to plan your spending, but not with a centrally controlled plan that does not leave any flexibility to respond to changes. Instead, use smaller and shorter planning units to enable rapid (re)action.
As J.D. Eisenhower put it: "Plans are worthless, but planning is everything."
Tip #2: Create clarity in your organization
Unclear responsibilities and decision-making processes make collaboration difficult and increase the complexity for everyone involved. This has become particularly evident now that we are collaborating remotely, and informal ad hoc coordination has been eliminated.
Simply redesigning the organizational chart won’t suffice. You will have to clearly and explicitly define responsibilities, live them in practice, and regularly review them, asking: "How do our structures help us meet our goals?"
Ideally, you will replace those good old job descriptions with a more flexible and transparent role system. This will allow you to adapt your organizational structure whenever needed and eliminate overcrowded meetings with uncertain outcomes involving everyone who might somehow be important to the decision. Tedious, time-consuming endless loops in decision-making – sometimes in the form of email marathons with tens of participants in CC – will become a thing of the past.
Check your standard communication and workflow processes. Are they really standardized or do they resemble a black box with ad hoc character? Lean Thinking can be very helpful here, paired with digital collaboration tools.
Tipp #3: Adopt the right degree of task diversity
Admittedly, the third internal complexity driver left me a bit perplexed at first. The study showed that a large task range enormously increases perceived complexity. But aren’t flat hierarchies and empowerment supposed to boost motivation and performance among employees and managers?
Upon closer inspection and comparison with my own consulting work experience, I’ve found the following explanation: Many companies are already stretched thin in terms of human resources due to numerous efficiency and cost-cutting programs. This means that employees as well as managers already have to handle an enormous workload and task range.
If you now introduce more self-organization and team collaboration in the course of agile transformations, additional tasks and skills will be required. Viewed individually, these new challenges may be highly motivating. But in combination with a large number of already existing tasks, the complexity may be overwhelming.
The decisive factor for reducing internal complexity is thus to find the right degree of task diversity. Start by asking yourself which tasks within your company can be dropped. Or put another way, "What would you stop doing if you started over?" This famous question from Malik’s Systemic Waste Disposal is also very helpful for solving organizational and job design issues.
Tip #4: Ask!
Are you still not sure whether your company’s complexity is homemade? Ask your people. Interestingly, managers and employees tend to have very different perceptions of the drivers of complexity. This has also been confirmed by a McKinsey study.
And while you’re at it, ask your customers, too. Internal complexity tends to radiate outward. Just think of your own wondrous or even frustrating customer service experiences. They almost certainly included statements like: "I’m sorry, I can't decide that." – "This may take a while." – "I don't know who is in charge of that." – "I would be happy to help, but management..."
My customized program for this topic: