In a recent TED talk by BCGs Yves Morieux suggested six simple rules to manage complexity and improve agility and effectiveness. These rules are worth sharing. The world is getting increasingly complex. There are more demands from customers, shareholders and regulators. There is ever-increasing competition. The change is occurring faster and it is getting difficult to create value. Organisations typically respond by adding more rules, structures and scorecards. This, in, turn just increases complexity and makes it harder for the staff to actually do the work. Managers often spend 40% of time writing reports and the remaining time in coordination meeting of one type or another. They often have several performance criteria to meet. Boston Consulting Group (BCG) complexity index has gone sixfold since 1955.
Current approaches to complexity reduction are wrong
According to BCG, organisations either try to take the ‘hard approach’ (structures, incentives and systems), which assumes that people are the weak link an
d tries to control them. Otherwise, they use the ‘soft approach’ (team building, leadership style, off-sites) focussing on interpersonal relationships, in a way using psychology to control people. In trying to get control, they make the organisations complicated. It then becomes hard to manage the complexity. What we need is less direct control, fewer systems and processes, more flexibility and autonomy. This would help create more nimble organisations by increasing people’s capacity for judgement and energy.
Rule 1: Understand what your people do
You must find out what is really happening in your organisation. How is work actually getting done? What are people trying to do? What methods do people use to meet these goals? How do they use time, information, budget, expertise or cooperation of colleagues? What are the things that hinder people from achieving their goals? Hence, what do they try to avoid, cut or sidestep? Understanding these issues would help you understand the contexts that shape behaviours.
Rule 2: Look for and strengthen cooperation
Find out how cooperation happens and who makes it happen. Cooperation means understanding each other’s goals and constraints and working together to increase effectiveness. What is important is the result. Collaboration and coordination is about process. During collaboration and coordination it is often easier to avoid conflict and making hard choices. In cooperation, you are working together on a single ‘thing’ where choices must be made. During cooperation people are taking personal risks for the benefit of the entire task. People or groups who enable cooperation are the ‘integrators’. These bring together others and drive results.
“An effective integrator has both an interest in making other cooperate and the power to make them do so.”
You can boost cooperation by increasing the power of the integrators and reducing layers and rules that hinder them. Rely on judgement over pseudo-precise metrics. If some managerial roles don’t influence people to cooperate, remove these roles.
Rule 3: More power to more people
Power is the possibility for one person to impact on issues that matter to someone else. Power is often a result of authority given by a third-party and not necessarily the place in the hierarchy. For example a compliance officer has power due to some regulation or rules. If managers have more power, they are allowed to think about and act on broader performance requirements. Power gives the capacity to impel cooperation. It supports strategy and leadership. By giving managers more power to decide or organise may seem tactical, but used in the right situations, that can have a real impact on performance. Therefore, look to increasing total power in the organisations when changing structure, process and systems.
Rule 4: Increase interdependence (reciprocity)
Work is becoming interdependent. Encourage more people to rely on each other than relying on coordination structures, interfaces or rules. Reciprocity is created when people (or units) realise that they depend on each other to meet their goals. Making people more interdependent increases reciprocity. It makes people cooperate more autonomously and not because of rules. This makes the organisation simpler. To increase interdependence, you must first eliminate units that don’t need to take into account the needs of others to succeed. For example, if architects can succeed without thinking about the developers, they can define rules that make life difficult for the development team. Create more shared resources and communities of practice where people have to interact and think about each other’s requirements.
Rule 5: Extend the shadow of the future
The term ‘the shadow of the future’ comes from games theory. It means people have to experience the consequences of their actions that result from what they do today. Often people have short-term goals or have no idea of the consequences of their actions on other part of the organization or the value created. Delays or design changes in one unit may have significant future impact on customer satisfaction or maintainability that are not visible to the originating unit. Making them experience these consequences will improve performance. Increasing the importance of these consequences to people would make them think more about the future consequences during their actions today. These changes can be small but their effect on reducing complexity can be significant. Simple steps such as job rotation or better feedback opportunities can increase the visibility of these consequences. Another idea is to make sure people are involved right to the end when these consequences become visible.
Rule 6: Reward those who cooperate
Problems and failures do happen. Often the result is to blame others. Fear of failure can result in avoiding risks. Instead of using performance reviews to punish failures, use them instead to punish those who failed to help or to ask. Find out who helped out in achieving the results. Try and understand how everyone contributed to the effectiveness of others. Discourage blame shifting. Focus the goals on the best group outcome and not individually for each function. Refuse to get involved when issues escalate. This is an sign that cooperation is not working. When managers refuse to get involved, it makes the people work hard and address the conflict.
The key message here is that increasing cooperation and mutual dependence within an organisation would improve performance and cut complexity. Earlier rule and structure based approaches have merely delivered more complexity. Making people and units think more broadly about the goals and constraints of others is a key to simplicity and performance gains.