How Complicated Is Your Company?

by Reinhard Messenböck, Yves Morieux, and Jaap Backx for BCG

Around the world, economic growth is slowing down. In developed and emerging economies alike, growth rates have declined considerably from their peaks, and there is little evidence that they will rise substantially any time soon. Anemic expansion of labor productivity is largely to blame.

We believe that the underlying cause of the recent slowdown has been the ongoing, long-term rise of complicatedness. We define complicatedness as the increase in organizational structures, processes, procedures, decision rights, metrics, scorecards, and committees that companies impose to manage the escalating complexity of their external business environment.

Recently, we surveyed executives and employees at more than 1,000 companies about their perceptions of the nature and degree of complicatedness at their organizations. The results highlight the strong connection between complicatedness and performance and indicate where companies should concentrate their efforts to simplify.

The business world is complex, and companies that develop strategies and design processes to respond quickly and effectively to complex business environments can gain a significant competitive advantage over their peers.

However, most companies react by piling on new levels of complicatedness in hopes of meeting external complexity head-on. The resulting changes kill reaction time and productivity through cumbersome structures, new rules, and inefficient processes.

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