Too big to fail.
That became the mantra during the recent economic crisis. As markets and public confidence plunged, political and financial leaders agreed to pump billions of taxpayer dollars into major financial institutions, insurance and auto companies, keeping them on life support until someone could figure out how to save them for the long term.
But does it make sense to bring these giants back to life if the underlying illness isn’t cured? What if, in addition to being “too big to fail,” some of these companies were also too big to manage?
Complex World
- The Situation: Companies are dealing with increasing amounts of complexity. Sometimes it’s the good variety, wherein a large business derives value from multiple product lines or diverse units. Other times, it’s the bad kind, involving dysfunctional management or burdensome regulations.
- Our Advice: Companies must deal with complexity by understanding how it affects the way each person does his or her job. An in-depth questionnaire, for example, can discover where problems exist in the organization, but also where the potential exists to add complexity of the good kind.
- The Payoff: Once a company better understands its own issues of complexity, there are various strategies for either reducing complexity or increasing it. Both can improve a company’s overall efficiency and productivity.
There were lots of factors in play in each case, but many observers believe that some of these organizations had reached a scale and complexity that made risk-management errors almost inevitable, while others had become so bureaucratic and top-heavy that they had lost the capacity to respond to changing market demands.
Such companies, in other words, were unable to cope with their complexity. They were simply too big to manage.
Understand: Complexity isn’t always bad. There is often value in having multiple business units and operating on a global scale. Complex management structures can help mergers and acquisitions succeed. Complexity can also be part of a successful business plan, like Dell Inc.’s vision to custom-build and quickly deliver computers.
But other kinds of complexity are dysfunctional—and lead to huge operational problems.
To better understand when complexity does and doesn’t work, we interviewed executives at 900 companies. Most said certain kinds of complexity were causing serious problems for their companies, from weak customer responsiveness and inefficient processes to high levels of confusion and stress among employees. They cited pressures from stepped-up M&A activity, product
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An enjoyable article – many commentators shy away from the issue of complexity in growing businesses, because it’s, well… too complex.
However, there’s a key distinction to be made between (on the one hand) the complexity found in younger, growing organizations where – to use the authors’ terminology – ‘inherent’ complexity is allowed to morph into ‘dysfunctional’ complexity, and (on the other) the type of complexity encountered in older, more arthritic organizations, where the pain caused by complexity most often comes from that which is ‘designed’ and ‘imposed’.
Unsurprisingly (and this is where the article is weakest, I believe), the solutions in both situations need to be fundamentally different: the founder/owner/management team in the younger organization that hits the growth stage I call ‘Whitewater’ (when complexity kicks in) needs to develop – and/or upgrade – their ability to recognize and manage complexity, whereas the senior executives in those larger, more bureaucratic organizations that hit the over-processed phase I call ‘Treadmill’ need to concentrate on reigniting the entrepreneurial zeal, risk-taking, personal initiative and creativity that forces over-complexity out of the organization.
No amount of ‘complexity-wrangling’ will help the large organization in ‘Treadmill’ unless it’s accompanied (in fact, led by) by the re-injection of entrepreneurial vigor.
Les McKeown
It’s a good article and the definition of different complexities, by the author, is provides more clarity what ails many companies.
Inherent complexity is probably well understood by executives but the effect of dysfunctional and designed complexities require some understanding by people. One must clear up the place when they move and learn to adapt as times change. But often the ones that take the lead fails to see the disorder behind causing dysfunctional complexity.
When we design complexity we must be aware of its side effects as well as its sell by date. Otherwise they will diminish the positive effects and, in Les McKeown’s words, cause the arthritic pain
Complexity supports dysfunctional behavior and silos that add no value as I discuss in my Blog : http://nosmokeandmirrors.wordpress.com/2009/08/14/silos-are-great-for-shooting-missiles-not-for-growing-market-leading-organizations-tear-down-your-dysfunctional-silos-and-become-a-market-leader/ .
When you focus on your market, its needs and problems and align your team to solve those problems the complexity goes away.
Market losers build complexity and need performance management systems to manage the missiles they fire from their dysfunctional silos.
Market leaders focus on the market, start at the market and build roadmaps that are in alignment. Market leaders focus on execution management and creating execution velocity.
What type of organization are you in?
Mark Allen Roberts
http://www.outbsolutions.com
really a beautiful article to learn something extra ordinary……….the author beautifull described about the complexitu with real example …
Excellent post! For some thoughts on how complexity can impact your customers read more:
http://pivotpointsolutions.net/2009/11/13/too-big-to-manage-too-big-to-succeed/
Hi -
I am shocked by this article! You are conflating complex with complicated! They are NOT the same and hardly even related!
The comments are naive too.
Gasp!
Time to brush up on complexity, complexity science and complex adaptive systems.
Start here…
http://en.wikipedia.org/wiki/Complexity_science
http://en.wikipedia.org/wiki/Complexity
http://en.wikipedia.org/wiki/Complexity_sciences_and_strategy
I suggest/urge you recall/rewite this acticle. It is confusing and incoherent, with almost nothing to do with complexity.
Cordially,
-j
Given that the author of this article, Heywwod, has no business experience I find the solutions naieve and largely theoretical. They have no basis in real world practices.
Is she trying to sell Mckinsey? Doesn’t show them in a good light.
I’ve worked in a number of companies where to get anything done you had to go through so many levels of bureaucracy it was a joke. Some countries such as the UK has forced banks that it bailed out to either sell some of their assets or split the company into smaller self contained units.