BCG: Six simple rules to manage complexity

By | May 18, 2014

BCG

The Boston Consulting Group (BCG) has a refreshing new book which makes the argument that companies have a bad habit of responding to complex business environments by simply getting more complicated. This is so true. For those of us who have worked with Fortune 500 clients, there seems to be an endless number of committees, processes, policies, dashboards, and metrics. For too many organizations, management = control. It’s logical, but BCG argues it is wrong.

  • Summary (50 pg free) here
  • Book (240 pg affiliate link) here.

The authors – Yves Morieux, and Peter Tollman – argue that most companies deal create a false choice by either dealing with complexity by offering two insufficient management approaches. See a 6 min TED talk here.

  • Hard approach – structure, process, system, metrics (insufficient)
  • Soft approach – feelings, interpersonal relationships, traits (insufficient)

Instead, they argue for 6 simple rules to change the way that companies think about, and deal with complexity.  It’s a pretty radical solution which recommends fewer systems, more flexibility, and more autonomy.  Almost the opposite of control.

#1. Understand what your people do. This sounds basic, but I see this confusion all the time. One team does not know what the other team is doing.  BCG says “people always have reasons for the things they do. . every behavior is a solution to a problem” No one comes to work wanting to do a bad job. They are just reacting to what they think is right (often sub-optimized) from their silo, myopic view of the environment.

#2. Reinforce integrators. BCG argues that companies should remove unnecessary rules and managerial layers, and instead, focus on the integrators. Focus on the people who get things done cross-functionally and empower them with the resources, authority, and incentives to get the job done. BCG notes that this is not an easy task; integrators are usually loved or hated because they push to get things done. They do more than coordination and collaboration. They drive cooperation which often involves individual risks, pain, and sacrifice. Getting work across silos is difficult.

BCG - Integrators

#3. Increase the total quantity of power. This one is less clear to me, but it argues that you can create new centers of power which do not necessarily reduce someone else’s power. It is not a zero-sum game. Seek out a win-win, where people can make smart decisions closer to the customer, and where the value is added.

#4. Increase reciprocity. Enhance the connections between teams and groups. Mutual success = my success. As “touchy and feely” as this sounds, this sometimes means you have to take away resources so that people cooperate more. This means tolerating fuzziness in responsibility when it drives cooperation.

#5. Extend the shadow of the future. Make it clear to people who what they are doing today determines the future. Tighter feedback loops. Forcing teams to understand how their work impacted others. Keeping people involved until then end

#6. Reward those who cooperate. I believe this is the most important element, which actually sums up the entire argument. BCG’s summary explains this the best:

Blame and risk aversion are at the heart of organizational culture. But smart organizations accept that problems happen for many reasons, and the only way to solve them is to reduce the payoff for those who don’t contribute to a solution.

Performance evaluation and reward systems are the key—but instead of using them to punish failure, use them instead to punish failure to help, or to ask for help.    

Makes sense. I find this argument quite relevant and compelling. The world is only getting flatter, more competitive, and faster. Need to fight complexity with simplicity.

Organizations cannot just make more rules, process, and policies to control their companies.  It is dehumanizing, bureaucratic, and boring. It does not tap into the judgment and creativity of employees. It degrades the practice of management to merely avoiding risk. Sad and two-dimensional.

Instead, executive needs to clarify their thinking. Cast a vision of where they see the future, set a strategy on how to get there. Empower people in the organization who “get it” and make it unacceptable to not cooperate with other people. Get rid of the pharisees who talk about process, policies, and procedures – at the expense of customers and progress. Look for the more elegant and simpler solution. It is likely the one that is harder to create, but easier to sustain.

BCG - Six Simple Rules

Caveat: This is not for everyone.  For the organizations that are barely trying to survive, who suffer from leadership gaps and turnover, this is not a cure-all.  Without having the basics of organizational performance, this type of freedom and open-ended cooperation will make it worse, not better. This is harder – not easier – than the traditional top-down, managerial bureaucracy. It’s always easier to make rules.

I see it as a maturity model, where this type of decentralized decision-making organization is the type of place where thoughtful and motivated people want to work. It encourages judgment, cooperation,and responsiveness to changing customer needs. In plain-speak, it is awesome.

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