BUSINESS COMPLEXITY “IS LIKE A WEED”
Any mid-size company president or business owner knows that with growth comes complexity. In the early stages of a growing enterprise, it is reassuring and gratifying to be busy, handling multiple tasks every day. Later on, as the business grows, the demands of time and multiple tasks increased on management as there are new and changing systems, processes, HR policies and procedures, sales and marketing demands and the need for accurate accounting and financial reporting. From managing finances and people to ensuring strict legal compliance, Presidents and owners have to navigate their way through an endless stream of daily challenges.
Managers consequently become too busy doing “work”, mostly of a tactical nature to deal with all of the many things going on, and all of this is unproductive for the role. The president /owner is too engrossed in all parts of the business, and is enabling inefficiencies and complexity to fester. This is the root of clichéd expressions like “too much in the cornflakes”, “working in the business, not on the business”, and so on. In an article “The Focused Company” by Mark Gottfredson, he says that “complexity is like a weed, insinuating itself into every nook and cranny of an organization”.
There are 2 big concerns at play here; the President/owner is effectively not doing his job, and the performance of the business is deteriorating.
Effects of complexity
With company leadership preoccupied with non-strategic work, here is what can happen. Complexity can reduce competitiveness by increasing or duplicating costs. It reduces operating efficiency and profit margins. It can affect product or service delivery, customer service, response times and satisfaction; it also affects staff motivation and engagement when employees get frustrated and see bottlenecks where management are doing their work and not managing the business. A good warning signal as business grows is the lack of systems and core processes integration, unclear roles and accountabilities, and senior managers are too busy firefighting and doing other people’s work.
The best advice is to take time out. Step back and review how the business is operating. You need to identify and eliminate duplications, complications and activities that add no value in the following 3 areas (there may be more depending on the type of industry or business):
Business model – this may include product line (too many sku’s, excess inventory), production complexity and bottlenecks, inefficient go-to-market or distribution strategy, competing in too many fragmented or no growth markets.
Signals: late or lack of delivery against expected timelines, margin erosion- no systematic costing process and stalled growth.
Systems and processes– inefficient or lack of systems integration, conflicting core processes and operating policies, inconsistent decision making policies and levels of authority ( = there is a need for more delegation). It is important to flush out the linkages between costs, activities, and the root causes of what generated them. The goals are to identify and eliminate complications that add no value or waste effort and time.
Signals: duplication of work done, work not being done –assumptions that someone else was going to do it and conflicting non-documented guidelines.
Organization – Identify and address lack of employee alignment, job clarity and reporting lines, as well as create a simple oversight on key performance metrics and monitoring (dashboard), compensation and incentives fairness.
Signals: employees are under-utilized – ownership steps in and completes key tasks; a lack of clarity around what is really expected of each employee and a lack of certainty as to how they are performing, creating lower maral.
The benefits and upside of weeding.
Firstly by improving efficiencies and cleaning up, time is saved, frustrations are removed. Senior management is able to focus on the strategic issues facing the organization and can delegate and lead more effectively, and stay out of the time consuming day to day issues.
Faster, aligned and more streamlined operations lead to improved profit margins.
The reduction or elimination of complexity can create new opportunities, including providing a new competitive advantage, creating focus on priorities and how “we work towards a common goal”. It can clarify and enable the enterprise to gain share in existing markets, or expand into new markets.
For the President or Owner the most important consequence is that it frees the leader from day to day tactical handcuffs, thus enabling more strategic management and direction. It requires a plan, and follow through. For all stakeholders this also provides long term sustainability. It is about making sure that the business has an efficient operating platform, and that systems and processes support the vision and long-term growth.