Organisational complexity is a major impediment to business success. It drags down both the ‘thinking’ and ‘doing’ capability of an organisation and hence, limits its ability to respond to opportunities and challenges. This impact is even more pronounced in tough times as organisations need to make bold decisions and execute them faster. No wonder, the current ongoing pandemic has forced many businesses to look within and ask the uncomfortable but important question – is our organisation too complex?
Organisational complexity drags down both the ‘thinking’ and ‘doing’ capability of an organisation.
Here are some tell-tale signs of an overly complex organisation:
- Everybody is accountable and hence, nobody is accountable – It is hard to pinpoint accountability for critical business outcomes such as growth, profitability, customer experience.
- There is not much ‘strategic’ about the strategy – Strategy is run as a perfunctory exercise and typically avoids the tough choices. Every year the strategy feels largely the same as last year.
- Decision making is over-reliant on consultation – Everybody needs to be consulted on almost every decision; progressively more and more decisions appear to fall in the “too tough” category; proliferation of committees/meetings.
- Confused performance management and rewards – Performance management seems ‘confused’ and rewards appear to be either very skewed or very homogeneous and have dubious link to actual business performance.
- Reliance on ‘buying’ talent rather than ‘building’ – In general, there is more confidence in the capability of talent coming from the market than the talent pool within the business.
Based on Korn Ferry’s experience of partnering with clients in delivering effective organisational simplification, we believe there are some key guiding principles in simplifying an organisation.
Operating model before structure
In pursuit of simplification, there is a natural tendency to start with usual suspects of complexity such as layers of management and spans of control in the organisational structure. But what we miss in this haste is the chance to pause, reflect and ask the fundamental question: what is the operating model i.e. the underpinning organisational design logic on which the structure is built and how well does the operating model align with the strategic priorities of the business.
In pursuit of simplification, there is a natural tendency to start with the usual suspects of complexity such as layers of management and spans of control.
Customer is the True North
You must keep the customer at the centre of your design decisions when simplifying your organisation. It must be noted that by ‘customer’ we mean the external customers/clients. Simplification demands clarity and prioritisation. Applying a definition of customer that is too broad can obfuscate the simplification effort – especially when resources are limited. An optimal organisation design should provide a clear and easy-to-understand answer to the fundamental questions: who are our target customers and how do we engage and serve these customers in the most effective manner. Customer centricity is the key principle that ensures we do not make rash decisions when simplifying an organisation.
Blend top-down approach with bottom-up
Designing organisations from the top-down ensures alignment to strategy and focus on governance. On the other hand, the bottom-up approach exposes the clutter and opens new perspectives on how work should be organised. Bottom-up approach forces us to ask critical questions like: what is the most effective design of frontline jobs that leverages the various systems and technologies available? what is the minimum possible layers of managerial governance needed for the frontline workforce? When simplifying organisations, it is vital to blend the top-down approach with the bottom-up.
Structure is only one of many levers
Simplifying an organisation is more than just simplifying the structure. To deliver desired business results, Korn Ferry recommends organisations to pull one or more of seven key levers: organisation design, performance management & rewards, work processes and systems, management processes, individual & team capability, values & culture, and leadership effectiveness and alignment. While most companies focus solely on organisational design when seeking simplification, you may need to pull a combination of levers to truly simplify your organisation and deliver business impact.
Complexity hampers effectiveness and impedes your efforts of achieving the desired results. It sucks out the organisation’s ‘energy’ and limits the ability to respond to opportunities and challenges. A genuine effort to address complexity and simplify your organisation could very well be the difference between success and struggle. And your first step begins by asking the question – are we too complex?