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Managing Complexity | London Business School
The document discusses the challenges and strategies involved in managing complexity within organizations, highlighting the dual nature of complexity as both beneficial and detrimental. It emphasizes the need for leaders to balance organized structures with emergent processes while addressing inefficiencies that arise from growth and entropy. The author, Julian Birkinshaw, advocates for a thoughtful approach to leadership that fosters collaboration and openness to external influences.
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- 1. Cl ient Relatio ns Mar keting Execu tive R eceptionist ITDirector Co m mercial Direc tor S ecurity Guar d Cl ient Relatio ns Mar keting Execu tive R eceptionist IT Director Co m mercial Direc tor Cl ient Relatio ns R eceptionist IT Director Co m mercial Direc tor Cl ient Relatio ns IT Director Co m mercial Direc tor S ecurity Guard Cl ient Relatio ns Mar keting Execu tive R eceptionist IT Director Co m mercial Direc tor Strategist S ecurity Guar d Per sonal Assist ant Accountant R eceptionist IT Director Op erations Manag er H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt Strategist S ecurity Guar d Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist A ccount Manage r Co m mercial Direc tor S ecurity Guar d S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Accountant Cl ient Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director A ccount Manage r Co m mercial Direc tor S ales Assista nt Strategi S ecurity G Cl ient Relatio ns Mar keting Execu tive Op erations M A ccount Manage r H Co m mercial D S ales Assista nt Strategi P S ales Assista nt Strategist Pe nt P Q uality Contr ol S ales Assista nt Strategist Pe nt P Q uality Contr ol S ales Assista nt Strategist Pe nt P Q uality Contr ol S ales Assista nt Strategist Pe nt P Q uality Contr ol Strategist Pe nt Q uality Contr ol P S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Account Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Accountant Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Accountant Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt S ecurity Guar d Per sonal Assist ant Accountant Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol S ales Assista nt Strategist S ecurity Guar d Per sonal Assist ant Accountant Cl ient Relatio ns Pu blic Relatio ns Mar keting Execu tive R eceptionist IT Director Op erations Manag er A ccount Manage r H ead of Digital Co m mercial Direc tor Q uality Contr ol CEO At the heart of organisational complexity is the battle between emergence and entropy. Julian Birkinshaw charts the best way forward. Are you managing complexity?
- 2. Are you managingcomplexity? What is complexity? It is easy to label big companies as overly complex. But what does this mean in practice? When a small business receives payment for consulting work for a big “megafirm”, and it takes more than a year and a half to be paid, that’s complexity. 2
- 3. 3 Are you managingcomplexity? When companies become too complex to manage, they create costs for others. Complexity is a double- edged sword. It is never easy separating out the complexity we value from the complexity we need to cut back on. Two faced complexity complexity
- 4. 4 Inventing complexity There arethree processes underway that collectively determine the level of complexity experienced by people in the organisation. Are you managing complexity?
- 5. 5 Are you managingcomplexity? The allocation of roles and responsibilities through some sort of top-down master plan. Design process1 A ccount Manage r H ead of Digital Pu blic Relatio ns Mar keting Execu tive Cl ient Relatio ns CEO Op erations Manag er IT Director Co m mercial Direc tor
- 6. Are you managingcomplexity? A bottom-up form of spontaneous interaction between well-intentioned individuals – known as self-organising. Under the right conditions, individual employees will come together to create effective action. The role of the leader is to foster ‘emergent’ order. 6 Emergent process2 S ecurity Guar d R eceptionist H ead of Digital IT Director Mar keting Execu tive Strategist IT Director Cl ient Relatio ns
- 7. 7 Are you managingcomplexity? The gradual trending of an organisational system towards disorder. Most companies are only semi-open to outside influences. The second law of thermodynamics comes into effect: a closed system will gradually move towards a state of maximum disorder – that is entropy. Entropic process3 entropy
- 8. 8 Are you managingcomplexity? As organisations grow larger they become insular and complacent. Inefficiencies and duplications creep in. Employees become detached and disengaged. The organisation becomes aimless and inert. The problem with entropy A ccount Manage r R eceptionist S ecurity Guar d H ead of Digital Co m mercial Direc tor Strategist Pu blic Relatio ns Op erations Manager
- 9. 9 Are you managingcomplexity? More and more the leader’s job is to manage the social forces in the organisation. This can take very different forms. So what can we do differently?
- 10. 10 Are you managingcomplexity? This is the equivalent of tidying your teenager’s room. It involves taking out layers of management, getting rid of old bureaucratic processes that are no longer fit for purpose, or replacing the old IT system. Keeping entropy at bay1
- 11. 11 Are you managingcomplexity? This is the equivalent of giving a bunch of bored teenagers a bat and ball to play with. It is about providing employees with a clear and compelling reason to work together to achieve some sort of worthwhile objective. Inspiring emergent action2
- 12. 12 Are you managingcomplexity? Leaders have to continually look for ways of bringing new perspectives into their company, and exposing internally focused procedures to external scrutiny. Keep the company open and transparent3
- 13. 13 Are you managingcomplexity? 1.The art of managing complexity It has to be tackled in a thoughtful and holistic way. Leaders need to think about both faces of complexity – the costs and the benefits.
- 14. Julian Birkinshaw (jbirkinshaw@london.edu)is Professor of Strategy and Entrepreneurship at London Business School and the author of Becoming a Better Boss (Jossey Bass, 2013). The full article was published in London Business School Review Volume 26, Issue 3 2015. Visit the website: www.london.edu/lbsr