Risk and uncertainty are part of the territory when you run a business. But in today’s turbulent world, it seems that some companies can navigate change successfully while others suffer in comparison. If you’re concerned about your outcomes in these times, you want to study and emulate the former. Here’s why the difference might lie with how each organization manages complexity.
Dealing with complexity is an inherent part of business operations. Even routine arrangements with a third party will run the risk of one side not living up to expectations. That’s why you typically have a law firm specialized in business litigation negotiate contracts. Business structures and procedures have evolved to deal with such potential complications.
But not all complexity is equal or has a uniform effect. Sometimes, you can’t avoid the complications stemming from external interventions or changing industry regulations. But the growth and expansion of businesses can create unexpected wrinkles or redundancies of function in systems and processes. Left unchecked, this creates a creeping inefficiency in the business model.
Moreover, when you operate at the leadership level of any hierarchy, you can be blind to the nature and effects of complexity as employees perceive it. To perform their roles, employees don’t need to consider institution-level complexity. What affects them is clarity of processes, scope, and accountability.
When management focuses too much on structural issues or the success of a newly launched site, specific manifestations of complexity might go unaddressed. This results in wasted productivity and effort, higher financial costs, and friction within the organization.
Reducing the strain on individuals
Among the detrimental complications, you want to focus on the ones you can control: the unnecessary factors. These can result from straining to apply the original business model when growth and expansion demand change. In addition to bogging down business operations with inefficiency, they expose the company to a higher level of risk.
Many companies experience this sort of organizational bloat. They expand or enter new lines of business or acquire other companies without reorganizing the hierarchy or evaluating the business model. Doing so places increasing emphasis on the individual to cope with systemic complexity. And not all people will respond in the same way.
Your people can make a difference in managing complexity. But they rarely come with necessary qualities built into their capabilities. You have to give them the tools to respond. That means training and preparing those who function in crucial leadership positions.
Effective leaders will be able to see through ambiguity and make effective decisions with the big picture in mind. They won’t suffer decision paralysis or allow complexity to trickle further down to the level of the individual employee.
Proactively managing complexity
However, placing the burden solely on leadership doesn’t resolve issues of unnecessary complexity. A growing company that fails to do so will increasingly have to deal with nonlinear complexity.
The impact of the pandemic provides ample evidence of the pitfalls of allowing organizational complexity to grow in a nonlinear manner, unchecked. Central leadership is left scrambling for solutions. Old business models are instantly rendered obsolete. Businesses need to tackle the problems of complexity on every level. In doing so, they can continue to benefit from its emergent potential.
Think back to how a typical startup evolves. The founders have a promising concept, but no defined structure. They have proposed models, and go through them in quick cycles to find one that works. Once a model is proven to be repeatable and successful, they run with it.
Problems arise if you allow the OODA loop to end there. When you no longer take sufficient action on feedback, focusing only on optimizing the existing processes, you end up pursuing marginal gains while suffering exposure to potentially massive disruption.
Today’s companies need to be able to respond quickly to a more chaotic world. Individual employees can only do so much in this regard without the necessary structural changes. Organizations must revisit their operational framework and become decentralized. Local units must be empowered to act with autonomy and possibly work under a different model, depending on what proves effective in driving their outcomes.
Adopting such an agile organizational model won’t make complexity go away. Instead, it puts you in a better position to manage it. At the same time, it makes your business open to positive changes and innovation coming from each individual who feels empowered to contribute to your success. And if you’re struggling with organizational bloat, this change could be a massive step towards sustained future success.
