Complexity Brings Paralysis

With well-intended policies and processes for purchasing requests, expense reports, management reports, document submissions, committees, tasks forces and Annual Operating Plans who has time to do any real work?

When 2+2 makes 3

Transaction cost theory explains the formation of companies as a way of lowering the cost of doing business. Simply put, the theory states that it should be more efficient to transact within the company than outside of it. With the availability of online communications and low cost cloud services I have my doubts that this still is true. Who finds it easier to get something done inside a large company than outside of it?

I once used to work for Philips in Amsterdam. Like most multinationals Philips was (and is) struggling with complexity. Too many business units, layers, stakeholders, titles, structures, processes and business controls. Decision making was very fast at times but implementation across multiple divisions was painfully slow.

Recently, I did an assignment for a large Danish industrial company. Their local offices faced the challenge that aside from servicing their markets they had to embrace a steady stream of new initiatives from HQ. None of the initiatives were coordinated or aligned. Global Sales would present new ways of working in the format they preferred, Global Marketing would then approach the same people in the  local offices in entirely new ways. Each time the local offices had to make sense of comprehensive material. People would be left with multiple roles and ways of working that they had to incorporate into their daily work. Imagine how they felt about the advantages of having expert assistance from HQ.

So, while scale economies suggest that 2+2 can be 5, the end result can easily be 3. What goes wrong?

Too many perspectives and too little common ground

If you look at each of the new ways of working and tools in isolation then most of them make sense. They are introduced by smart people with good intentions. The trouble is that when companies employ thousands of smart, highly paid people and then place them into the pigeonholes of a corporate hierarchy, then people do what they get paid for. From each of their pigeonholes they develop intricate systems, structures and processes that they broadcast to their colleagues.

Add to this that each function looks at the company from a very different perspective. To the Communications department all challenges relate to communications. To the finance department everything can be boiled down to hard numbers. To the HR department it is mostly about incentives and proper training. On top of this, people have different nationalities. In this situation the common ground for collaboration is very limited.

Last week, I talked with the CIO of a large retail chain. He had the point that people have a habit of blaming the IT system for what is wrong with the business. He had realized that many times it was the business process that was wrong. When the business process is invisible and not clear to many then what is perceived as the problem? The IT system, of course.

The end result  is an overwhelming amount of demands and information that override the cognitive abilities of the individual employee in a large company. He spends his energy navigating conflicting demands and finding information. The question is how can we make the large company easier to navigate?

A common language can reduce big company paralysis

If we assume that all functional areas as well as global, regional and local organizations have parts to play, then how can they be aligned for the benefit of the individual employee? The starting point must be a common language that allows the different perspectives to work together across functional silos and nationalities. A common language can enable common understandings of company challenges and strategies to address them.

I will argue that the business process is the closest thing we have to a common language in a large, complex corporation. The trouble is that business processes are dreaded by many as complex flow charts of symbols that you need special training to understand. They are designed by quality and IT people that are too distant from the real life of business. Sometimes they are also highly rigid and unable to adapt to changes. However, in the simple form of a high level diagram that shows how activities flow through departments to the end customer then business processes become a map that can help us collaborate and guide us through complexity.

Couple this common language of the business process with a better and clearer mandate for the individual to exhibit value adding behaviors then we may have the first ingredients for a recipe to tackle complexity. If we then can connect systems and documents to the parts of the process where they make sense, then the company is much easier to navigate for the individual trying to get work done.

Further perspectives

Once the common language is in place then management philosophies such as Lean thinking and Systems thinking offer comprehensive ways of discovering and eliminating unnecessary activities.

In this video Eric Berlow provides a useful guide for that empowered corporate citizen to further tackle complexity: