Simplicity-Minded Management

Big companies have always been complex. But to cope with new challenges such as globalization, they’ve increased their complexity—with proliferating products, tangled reporting relationships, and duplicated processes.

They’ve become unwieldy, ungovernable, and underperforming. And nobody likes it. Customers complain about not having a single face to a company. Employees bemoan poor communication and competition among units. Analysts demand clearer numbers. Investors decry duplication of functions.

To combat performance-sapping complexity in your organization, first declare simplicity a hard business objective, advises Ashkenas. Then attack the major sources of complexity, including accumulated changes in organizational structure, endless new-product launches, undisciplined processes, and managerial habits such as time-wasting meetings. For example, periodically audit your product portfolio, retiring offerings that have run their course and are no longer profitable.

Reducing complexity pays off handsomely. At Nortel, for instance, a companywide simplification drive generated 900 ideas that ultimately saved $14 million.

The Idea in Practice

Ashkenas recommends combating complexity along four dimensions:

Organizational Structure

Symptoms of extreme complexity in this dimension include more than seven reporting layers between the CEO and front-line workers, more than five committees or councils that review or make significant business decisions, and redundancy in support functions.

To simplify: Periodically adjust structures to ensure they serve your business strategy and market needs and are as simple as possible. Example: 

At ConAgra, a spate of acquisitions had generated success while worsening complexity. Each business unit contained its own support functions, and the company had no common method for tracking, reporting, or analyzing units’ results. The CEO consolidated support functions (such as HR, IT, and legal) into units that served the whole enterprise.

Products/Services

Signs of excess complexity in this dimension include constant package-design tweaks, proliferating product features, and mounting SKUs—which all require changes in manufacturing, marketing, and other activities.

To simplify: Periodically audit your portfolio, asking, “Which offerings are profitable? Which have the greatest growth potential? Which have run their course? Which no longer match customers’ needs?” Example: 

ConAgra had 100+ brands that competed for marketing and investment dollars, making resource allocations free-for-alls. It sorted its brands into three categories: “growth” (give priority for investment), “manage for cash” (maintain), and “potential for divestment” (put up for sale).

Processes

Business processes—budgeting, performance management, customer relationship management—evolve as companies’ circumstances (new leadership, new regulations) change. If processes develop too much variability (for example, business units each have their own approach to budgeting), they become inefficient.

To simplify: Rewire or eliminate processes as needed to introduce discipline. Example: 

ConAgra’s newly united finance function couldn’t analyze unit sales because brands had different units of sale. The company established a reporting protocol for units of measure (such as pounds or kilograms), product units (e.g., cans or cartons), and organizational units (division, brand, or sub-brand). With standardization, ConAgra could build a companywide reporting system.

Managerial Habits

Some managerial habits—poor meeting management, information requests that trigger a cascade of reports—further worsen complexity.

To simplify: Encourage managers to identify how their behavior patterns complicate matters. Commit to simplification yourself. Example: 

ConAgra’s CEO asked his senior team to suggest ways he could manage more simply and effectively. They suggested that when he raised a cross-unit issue, he specify who should take the lead to resolve it, thus avoiding confusion caused by his occasional failure to assign responsibility.