Competition is good! Competition is bad! At some point in every leader’s careers he or she will have to decide whether or not to use competition to motivate staff. Some...
Warren Bennis in his classic book, Why Leaders Can’t Lead: The Unconscious Conspiracy Continues, discussed the forces that impact leaders and diminished their ability to lead. Bennis knew that the environment in which a leader operates impacts his or her ability to lead. A great leader in one setting may be totally ineffective in a different setting. Many of us have found this true in our own careers.
As Bennis considered the inability of leaders to lead, he saw multiple causes for this phenomenon. The first part five posts in this series addressed what Bennis call ominous social trends. T his article deals with the second major issue Bennis described – issue of complexity. Bennis clearly saw the impact of bureaucracy, over-regulation and low value work that strangles productivity and innovation and inhibits leaders from leading.
There once was a farmer who sold apples out of the back of his pickup truck. He bought the apples for $2.00 each and sold them for $1.00 each. When asked by an astute consultant (ok, that was lame), how he could possibly make a profit, the farmer replied, “Get a bigger truck.” This story illustrates most business’s approach to dealing with organizational complexity. It doesn’t matter whether something adds value just do more of it!
Defining Complexity Is Like Seeing The Wind
Wikipedia defines complexity as “ something with many parts where those parts interact with each other in multiple ways. There is no absolute definition of what complexity means; the only consensus among researchers is that there is no agreement about the specific definition of complexity.” https://en.wikipedia.org/wiki/Complexity
According to a recent IBM survey of 1,500 business leaders, complexity was cited as the most significant issue facing leaders today. http://www.businesscomplexity.com/bcgl/
Managing a business today is fundamentally different from it was just 30 years ago. The most profound difference, we’ve come to believe, is the level of complexity people have to cope with. https://hbr.org/2011/09/learning-to-live-with-complexity
Just as the wind blows and we can feel it but not see it so do leaders and staff feel the impact of complexity without seeing it.. Yet the consequences and damage of complexity to organizations is just as powerful as tornadoes are to communities.
Sources of Business Complexity
There are two sources of complexity in organizations. The first area is complexity whose source is external to the organization. This major source of external complexity is government over-regulation. There is no doubt that government is out to kill the golden goose through over-regulation that funds all its programs. However, there is little businesses can do to impact this issue except for lobbying and the political process. Additional source of external complexity include technology acceleration and increased global competition. Anticipation, forecasting, market intelligence and rigorous risk assessment are tools leadership uses to address this area. The purpose of this article, however, is not external complexity.
The second area is internal complexity, which is self-inflicted by organizations. Internal complexity slows organizations and diverts focus from high value to low value work. It is an issue that frustrates employees on a day-to-day basis because this type of complexity minimizes the percentage of their time that is spent adding value. It frustrates employees when parts of the organization do not work in alignment with each other. Most importantly it is the area in which management and leadership is expected to structure the work so value is easier to focus on and create, not harder. This area of complexity is at least to some degree controllable. Therefore when it exists in excessive amounts it is leadership’s responsibility for failure to act on this critical area.
How To Think About Complexity
Organizational complexity is much like arteriosclerosis. It is a silent killer. But just like cholesterol that causes arteriosclerosis there is good complexity (HCL) and bad (LDL) complexity. Organization do not want to, nor can they, rid themselves of all complexity. Some complexity is good because it keeps strategic customers or it leads to significant innovation. Most complexity is bad and only clogs up the organizational arteries. The goal of leaders is to minimize the amount of bad complexity and divert the time and attention that is being spent in these areas to high value opportunities. In this way an organization can optimize the use of its resources.
Unfortunately complexity is endemic and unavoidable. It does not occur by accident or even because people love complexity or are inherently wasteful. Complexity increases over time with growth, with customization, with continual improvement and with the leadership expectation of being excellent in every area (especially staff functions).
What Is Complexity?
For the purpose of this article the definition of complexity is low value work. This includes any activity that consumes resources, (time, attention, creativity dollars, etc.) but produces little or no value. When this occurs, it requires leadership action to minimize or eliminate the issue. Employees and staff feel the impact of complexity but by themselves can do little or nothing to address the issue This is why when organizations become slow and lethargic due to excessive complexity, employees begin to blame leadership for not addressing the “silent killer” “ but no one can put their finger on what is creating the organizational “drag”. Deming said it this way, “85% of all problems faced by any organization are caused by its own leadership.”
Leadership And Complexity
Most leaders are aware that their organizations are too complex but, unfortunately, most leaders are unaware of the impact of complexity. To many it is just the way of organizational life. As a result, many leaders try to manage complexity but few try to eliminate or minimize it.
One might ask, “Why do leaders not see complexity?” There are at least five reasons. First, leaders cannot understand the magnitude of complexity is because formal organizational data systems (especially accounting) hide the destructive consequences of complexity. A second reason is because leaders do not know where to look for complexity. A third cause is that complexity is often seen as very subjective. Everyone has an opinion about what is low value and the items identified are often work people do not like to do. Without hard data, coming to consensus about what is low value is often difficult and in some places, impossible. A fourth reason leaders do not deal with complexity is that they think the only action one can take is to eliminate a task. Since most leaders do not think activities can truly be eliminated, they take no action. Finally, the fifth reason leaders often confuse complexity with simplicity. While leaders desire a simpler organization. As a result, leaders do not see simplicity as important as other initiatives.
Therefore, little or no action occurs. “More than 7 out of 10 surveyed organizations rated the need to simplify work as an “important problem,” with more than 25 percent citing it as “very important.” Only 10 percent of companies have a major work simplification program; 44 percent are working on one. http://dupress.com/articles/work-simplification-human-capital-trends-2015/
The bottom line is that complexity consumes an organization’s scarce resources; it adds little or no value little in return; it impedes the organization’s speed and agility; it affects employee morale, an ultimately it causes the organization to be unprofitable but it is silent and therefore it does not receive the attention it demands.
Complexity And Pareto’s Law
Everyone is familiar with Pareto’s law. 20% of employees create 80% of the problems in an organization. 20% of products produce 80% of the value. In research on complexity Pareto’s Law holds true but the percentages are slightly off. In a given area (customers, products, strategic projects, etc.), the top 50 % of those items will produce approximately 80% of the value in that area. This means that an organization spends 50% of its time, and resources on the bottom 50% which only produces 20% of the value created. Therein lies complexity. It is also important to note that complexity resides in every area, even high value ones!
Where Does Complexity Hide?
Complexity resides in every part of the organization but it takes a different form in every area. Fortunately the method to analyze it is constant.
Without a detailed analysis to make visible the amount of complexity in each area, complexity will remain invisible to leadership and no action will be taken, eventually the cumulative effect has an impact on the organization culture that creates a bureaupathological culture.
Many leaders become very nervous when they consider complexity. They argue that they cannot eliminate 50% of the activities in a given area. That fear is valid but therein lays the misconception. Managing complexity is not entirely focused on elimination of activities. If that can be done without significant consequences then it is clearly a viable alternative. To manage complexity there are many appropriate alternatives to consider. Sometimes minimizing complexity is more important than eliminating it. This is why decisions around complexity must be made with data, a rigorous decision-making process and cross-functional groups to assess the most viable alternatives for a specific organization.
Impact on Leadership
Complexity has a cause and effect relationship with leadership. While all staff feel the repercussions of complexity, the causes usually remain invisible. Unless leadership “leads” to identify, analyze and resolve the causes, complexity only grows and gets worse. As this happens, leadership is rightfully blamed for an organization that is slow and sluggish and whose value is diminishing. Consequently frustration grows, and the leader’s ability to lead is minimized just as Bennis predicted.
8 Leadership Lessons
Lesson 1. Complexity cannot be resolved by doing the same old things.
To address and resolve complexity means leadership has to look at their organizations differently than they have in the past. The business systems that have hidden complexity for decades cannot be expected to magically reveal it. Knowing where and how to look for complexity and defining complexity with data are the keys to successfully beginning the minimization of complexity.
Lesson 2: Complexity impacts all parts of the organization.
Therefore representatives from all parts must be included in analyzing the complexity data and resolving the issues. This is a great opportunity for organization wide collaboration.
Lesson 3: Unchecked, complexity will continue to grow.
As a result value will not be produced in the same percentages that resources are added or consumed.
Lesson 4. Only leadership can systematically address complexity.
Complexity must be looked at from an organization wide perspective to assess its true impact. Individual employees or units see complexity from their perspective but only leadership is in a position to ensure the issues are seen company wide.
Lesson 5. Great leaders cannot excel inside an organization in which complexity is rampant.
An organization devoting excessive attention to low value will defeat great leadership every time. Therefore all the greatest leadership development in the world cannot succeed if the graduates of that leadership development are placed in overly complex organizations.
Lesson 6. Complexity limits talent.
Today’s organizations bemoan the dearth of talent. Perhaps one reason talent is not obvious is that complex organizations ties the hands of performers so that quality is difficult or impossible to create. When the creation of value calls for superhuman efforts of staff, one knows that the organization has become overly complex.
Lesson 7. An organization cannot get rid of all complexity. but every organization must get rid of some complexity.
Making complexity reduction decisions is one of the most important contributions leadership can make to the health and future of the organization. It is leadership adding value where no one else can. With the right data and the right involvement, leaders can shift some resources and create value in areas such as innovation that can have significant impact on an organization’s future. In previous projects, organizations that move the time and resources spent on 20% of low value complexity can experience a step change in productivity.
Lesson 8. Leaders must increase focus on internal complexity.
Leaders like to blame external force for complexity. Until and unless leaders see that their own organizations are rife with internal complexity, little or no efforts will be made to address the root cause. as result, leaders will continue to ask workers to work harder on lower value work.
If you are interested in learning more about complexity reduction projects that have helped companies experience significant results, please contact me.
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