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Yes, You Can Simplify Your Organization

We're all drowning in complexity and information overload. Do something about it, writes Ron Ashkenas.

business Updated: Aug 18, 2009 18:14 IST

Over the past 30 years, I've worked with hundreds of senior executives, and not one of them has said, "My goal is to make the organization so complex that people won't be able to get things done." Yet almost every manager I know complains about convoluted decision-making, endless budget planning cycles, confusing data, unnecessary reporting, unproductive meetings and a host of other excesses of complexity.

The truth is that most organizations are indeed too complicated, especially now that we're in an age of global supply chains and markets, increasing regulation, technological disruption and communications overload. And the way we design and manage our organizations unintentionally adds to the crisis of complexity. It too often makes work feel like an exhausting marathon rather than an exhilarating sprint.

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It doesn't have to be this way. Managers can confront complexity and do something about it. Here are three initiatives that you can take:

Insist on common processes: In big organizations with multiple locations, everyone wants to do things their own way, since they naturally think that their products or services or markets are unique. But when everyone has their own home-grown processes, it not only drives up costs but also makes it harder to share resources, compare performance and communicate effectively. It's like trying to manage construction at the Tower of Babel.

At SEB, in Stockholm, one of Europe's leading financial services firms, Annika Falkengren, the chief executive officer, confronted this type of process complexity by insisting that each functional area within the company (information technology, operations, marketing, finance, communications, human resources, legal) deliver its services the same way in each business segment and in every country.

"One function and one solution for one SEB" became her battle cry for driving consistency, simplicity and cost-reduction. To make the concept come alive, she and her team created an operational excellence program for SEB managers, called the SEB Way. The program not only fostered a common culture and language across the company but also introduced tools for driving simplification and standardization, which the managers all had to apply in their areas.

In the first year of the SEB Way, 180 transformational projects were launched across the company, many focusing on cost reduction, systems rationalization and creating common functional practices. By the end of 2008, costs and people equivalent to 7% of the workforce had been freed up by the initiative, and SEB was functioning much more as one company--which was critical for enabling it to weather the economic turndown.

Reduce product variation: The popularity and ease of making things customizable has made it natural for companies to assume that they should give customers as much choice as possible in tailoring products and services. But the promise of extensive choice forces businesses to gear up for the rare exceptions, not just the basics, and that significantly adds to complexity. The Herman Miller ( MLHR - news - people ) Aeron chair is a case in point.

When Mary Stevens became senior vice president of product management for Herman Miller, with responsibility for the Aeron chair, she discovered that having 19 customization steps, each of which allowed for multiple choices, meant that the company was offering its customers 140 million possible configurations of the chair.

Because of all these one-time configurations, the supplier that provided the mesh suspension material for the chair was dedicating 80 % of its manufacturing capacity to only 20% of its output. And internally the systems and finance departments were maintaining extensive price files for each possible unit, while marketing was continually preparing new material.

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