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Putting organizational complexity in its place | McKinsey & Company

Posted on by Brandon Klein

Putting organizational complexity in its place Not all complexity is bad for business—but executives don’t always know what kind their company has. They should understand what creates complexity for most employees, remove what doesn’t add value, and channel the rest to employees who can handle it effectively. May 2010 | byJulian Birkinshaw and Suzanne Heywood

Despite widespread agreement that organizational complexity creates big problems by making it hard to get things done, few executives have a realistic understanding of how complexity actually affects their own companies. When pressed, many leaders cite the institutional manifestations of complexity they personally experience: the number of countries the company operates in, for instance, or the number of brands or people they manage. By contrast, relatively few executives consider the forms of individual complexity that the vast majority of their employees face—for example poor processes, confusing role definitions, or unclear accountabilities. Podcast What executives need to know about complexity Download

Authors Julian Birkinshaw and Suzanne Heywood discuss what kind of complexity is most harmful to companies’ performance, why senior executives are often oblivious to it, and how it can be addressed.

This is not a trivial difference in perception. Our experience suggests that such a disconnect highlights a blind spot many executives have when it comes to managing complexity effectively. A focus on institutional complexity at the expense of the individual kind can lead to wasted effort or even organizational damage. What’s more, failing to tackle complexity as most people experience it can, as we’ve shown before, be financially costly.1

Once senior executives recognize that employees typically see complexity very differently than they do, they can begin to take straightforward steps to pinpoint where in their organizations complexity hinders productivity and why. The goal? To identify where institutional complexity is an issue, where complexity caused by factors such as a lack of role clarity or poor processes is a problem, and what’s responsible for the complexity in each area. Companies can then boost organizational effectiveness through a combination of two things: removing complexity that doesn’t add value and channeling what’s left to employees who can either handle it naturally or be trained to cope with it.