Managerial complexity: In addition to structures, products, and processes, managers also cause complexity through their own ways of directing and leading organizations. Particularly in dynamic environments, when processes and structures don’t provide clear guidance, managers create the neural networks that give people direction about what to do and how to do it. When managers are clear with their instructions, they can actually reduce complexity. But when managers unintentionally give nebulous assignments, open-ended deadlines, conflicting instructions, mixed messages, and foster fuzzy accountability, they create enormous amounts of additional complexity and confusion. For example, leading up to and during the financial crisis, executives at many financial firms gave their staff extremely mixed messages about continuing or stopping product transactions, were unclear about what data was needed for decisions, and rewarded people for poor performance.
It is impossible to counter managerially-generated complexity completely, since much of it is unconscious and unintentional. But directors can hold a mirror up to their executive leaders to help them make their own assessments about the clarity of their directions, the crispness of their decision processes, and the discipline applied to getting things done.
In addition, directors can make sure that executive compensation plans are simple, straightforward, and geared to rewarding the right strategic actions over time versus only short-term performance. Finally, directors can insist that succession plans take into account the ability of managers to simplify their organizations.
Simplification as a Business Imperative
Almost every company quite naturally focuses most of its attention on growth, particularly in today’s highly competitive environment, adding more products, services, geographic locations, and employees. But what companies don’t do very well—unless they are forced by an economic or competitive crisis—is prune these growth shoots. Managers don’t like to say “no” or make choices, especially when they are trying to respond to customer needs, beat their competitors, and satisfy shareholder expectations. So, instead, managers keep adding more plants and fertilizer to the garden and end up with a tangled jungle. But to maintain healthy organizations, managers and executives need to constantly prune while simultaneously fostering growth, without waiting for a crisis to force the issue.
The crisis of the past year forced almost every company to cut back, perhaps faster and more deeply than anyone would have preferred. But as the crisis passes, and companies move back into growth mode, it will be easy to slip back into old patterns as the lessons of Lehman and the pain of the financial downturn fade away. One way to prevent this from happening is for directors to insist that simplification become an ongoing business imperative for their companies, such that executives keep a focus on simplification not only in bad times, but in good times as well.
Ron Ashkenas is a managing partner of Robert H. Schaffer & Associates, a Stamford, Conn., consulting firm and the author of the forthcoming book Simply Effective: How to Cut Through Complexity in Your Organization and Get Things Done (Harvard Business Press, December 2009). He can be reached at ron@rhsa.com.
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