Just about a year ago, I wrote an Insights column entitled "Simplify Complexity, Please!" I addressed some of the ways the 2011 revisions to the Baldrige Criteria for Performance Excellence can help organizations deal with complexity. I also stated that simplifying complexity is probably like the pursuit of the Holy Grail. I continue to be fascinated by the organizational challenges presented by the ever-more-complex environment in which U.S. organizations of every sector operate. And I continue to think about it. So I was particularly interested when the September 2011 issue of the Harvard Business Review (HBR) featured the topic of complexity. Reading that issue brought to my mind a classic article by Karl Weick on the Mann Gulch disaster, in which a crew of firemen suddenly had to deal with a fire that unexpectedly jumped the gulch and trapped them. A significant influence on complexity is the growing impact of social media on businesses (and other organizations), a topic that was featured in the September 26th issue of Forbes magazine (and also addressed by the 2011–2012 Baldrige Criteria). After rolling all those readings together with other random musings, I offer you 11 suggestions below for embracing complexity and living with the challenges and opportunities it presents.
Let me set the stage for the discussion with an interesting observation by Gökçe Sargut and Rita Gunther McGrath in their September 2011 HBR article. They talk about a sea change over the last 30 years in business systems, from complicated to complex. A complicated system has many moving parts that operate in patterned ways, so outcomes follow a logical and largely predictable sequence; a complex system's moving parts may operate in patterned ways but also are expected to have continually changing interactions. In complicated systems, one can usually predict the outcomes based on the input parameters. In complex systems, the same input parameters may interact to produce different outcomes based on the sequence and level of interaction.
In light of these and other considerations, here are my 11 suggestions for embracing complexity:
Recognize your cognitive limitations. In complex business systems and environments, no single leader or manager can understand or reasonably be expected to control all facets and operations of the enterprise. The first step in embracing complexity is facing up to the realities associated with complexity, starting with the recognition that it is too big for any one individual to address alone.
Recognize that complexity means reconciling conflicting requirements. To compete successfully, organizations must deliver both low price (or, at least, cost-optimized pricing) and reliable, high-quality products and services. You need to provide both customized offerings and standardized offerings in order to satisfy customer requirements related to personal preferences and price. To ensure organizational sustainability, you also need to innovate and to control cost and variability. You need to satisfy multiple stakeholders—including customers, stockholders, the local community, and regulators—who sometimes have competing interests. You also need to control health care costs even as you desire to offer high-quality health care to employees. You must be able both to identify these conflicts and find appropriate solutions.
Seek creative solutions, not complicated structures. In his September 2011 HBR article, Yves Morieux states that since 1955 complexity as measured by the number of requirements companies must meet has risen six-fold. During the same period, the complicated procedures, managerial layers, and coordinating groups put in place by companies have risen 35-fold. His solution to the dilemma is to avoid added layers, which add unneeded complexity, and, instead, to create an environment that fosters collaboration. You achieve such an environment by sharing information, empowering people, and motivating them to apply their abilities. Through feedback loops, you ensure that they witness the consequences (good and bad) of their collective actions.
Find creative solutions by recognizing interdependencies and interactions. Complexity means that components of systems interact with each other and create interdependencies. Actions in one part of the enterprise affect other parts. For example, one business unit's interactions with a customer might have an impact on another business unit. Work processes don't operate in isolation in a complex system. Embrace that reality, and act accordingly through information sharing and collaboration.
Reinforce the integrators. Provide encouragement and enhance opportunities for the people who bring about the cross-organizational and work process integration. Recognize their contributions, and encourage other people to follow their example. Empower the integrators to lead cultural change through strong role modeling and encouragement by organizational leaders.
Seek to illuminate your blind spots. All organizations have them. Be prepared for the unexpected by constantly scanning the business environment for unanticipated change and influencers. This means looking beyond your own industry. Consider some examples of major influencers that have come from outside an industry, such as the digital revolution's impact on the film camera industry, the effect of faxing on the overnight delivery industry, and the influence of online media delivery on the traditional movie and storefront DVD industry.
Recognize the need for "sense-making." This topic was first addressed for me in Karl Weick's exploration of the Mann Gulch disaster. "Sense-making" is the process of creating awareness and understanding in situations of high complexity or uncertainty in order to make decisions. In such situations, rules you developed through experience break down, due to the unexpected or unexplored complexity of the current situation. Being able to recognize these types of situations and developing a basis for resilience prepares an organization for sudden, apparent chaos.
Expect rare events. These are the events that require sense-making. They might repeat themselves, but if they do, this will not happen often enough for you to learn how to accommodate these events within your normal or even emergency operations. You must be prepared to expect the unexpected events that require you to respond with agility and adaptability.
Capitalize on social power. Social media are powerful and instantaneous forms of communication. You need to know what your customers and employees are saying about you. You need to communicate with them through the use of modern technology. YouTube, Twitter, blogs, and Facebook are instant, global communication vehicles. Consider the example of the national pizza chain whose employee posted a YouTube video showing him making a sandwich with cheese stuck in his nose; soon after this, the company's stock lost 10 percent of its value. All organizations need to have a social media strategy.
Benefit from embracing diversity in organizational thinking. The Baldrige Criteria define diversity as valuing and benefiting from personal differences. Included in these differences are differences in ideas, thinking, academic disciplines, and perspectives. Addressing complexity requires capitalizing on all these sources of diverse thinking, as well as the well-understood bases of diversity.
Remember, the whole is always greater than the sum of its parts. All the previous suggestions supplement the realization that complex organizations and situations are addressed most successfully when everyone understands individual responsibilities and also relationships. Only when you take a step back and get the 30,000-foot-high view do you realize the work of art that can be created. Take the time to observe, share, and enjoy the whole composition.
The challenge we face in updating the Baldrige Criteria is to keep them always at "the leading edge of validated management practice." I firmly believe that all aspects of complexity discussed in this Insights column are accommodated in the 2011–2012 Criteria. Please take another look at the Criteria through the lens of these 11 suggestions, and see if any of your answers to the questions need fresh consideration.
Baldrige Excellence Framework
Baldrige Excellence Builder
Has Social Media Changed Your Organization? (January 2011)
Is Your Organization Strategic When Considering Supplier Relationships? (February 2011)
Leadership Yin-Yang on the Road to Performance Excellence (March 2011)
Your Quest for Performance Excellence (April 2011)
What is Meaningful Use? (May 2011)
The Future of Organizational Quality (June/July 2011)
The Results Are In . . . What Leaders and Employees Believe (August 2011)
Strategy Integration: the Nerd (Scientist), the Car Guy (Design Engineer), and the Bean Counter (Accountant) (September 2011)
You need to have Acrobat Reader installed on your computer to view the PDF file. If you do not have Acrobat Reader installed on your computer, download the program at http://get.adobe.com/reader. People with visual disabilities can download tools and information at http://access.adobe.com to help make Adobe PDF files accessible.