1.
How to simplify a
complex
organization
Nicolay Worren, PhD
www.organizationdesign.net

2.
Organizations today are multidimensional
1960 2012
CEO CEO
CEO
Shared Services Product A Product B Region A Region B
HR
Engineering
Country A1
Production
Marketing
IT
Product B
Accounting
Product A
Country A2
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3.
Gettings things done requires intensive collaboration –
but one sometimes forgets cost and capacity limits
110
∆ = 20
100
90
80
70
Number of
potential 60
bilateral
interdependencies 50
40
30
20
10
∆=4
0
0 1 2 3 4 5 6 7 8 9 10 11
Number of employees
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4.
Collaboration is particularly challenging across the
interfaces in a matrix structure
Example
Product A Product B Product C
Region A
Whose goals do we prioritize?
Who resources what?
Region B
Who makes what decisions?
Who’s accountable for what?
Region C
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5.
Employees experience the consequences of increasing
complexity on an every day basis
Information Unclear More time in
overload accountability meetings
”We know who is
Corporate e-mail traffic responsible for solving
(billions of messages per year)
key business problems in
35
our unit”
30
25
40% 30% 30% 1960
20
15
10 NO YES
5
0 Typical result in employee
2003 2004 2005 2006
surveys in large corporations
1982
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6.
Surveys confirm that organizational leaders now view
complexity as a major challenge
“What is the level of complexity in your organization today compared
to three years ago?”
The same
Source:
Global PwC CEO 17% Somewhat lower
survey 2007 6% Much lower
Higher 2%
50%
N= 1400 27%
Much higher
“Are you experiencing a high level of complexity?”
Currently
Source:
Global IBM CEO 60% 40%
study 2010
Over the next five years
N= 1500 79% 21%
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7.
There is also a growing recognition that the
organizational structure may contribute to complexity
“Our organizational structure is contributing to an
increase in the complexity in our firm”
Source:
Economist
Intelligence Unit
Disagree Agree
Survey 2011 43% 57%
N= 300
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8.
The first step in a simplification process should be to
evaluate the current situation and set improvement targets
Example
 = Today  = Where we should be
To a great
Our decision processes enable us to Not at all extent
respond quickly to changes in the external
market
To a great
Feedback from our employees suggest that Not at all extent
there is clarity with regard to roles and
responsibilities in our organisation
To a great
The goals pursued by different functions Not at all extent
and units in our organization are
complementary
To a great
Our productivity measured per Not at all extent
employee is as good or better than the
average for similar companies
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9.
One should examine unit mandates and ensure that each
unit has a clear purpose and a distinct role
Example
- Units -
Unit mandate Mngtm team Corporate staff Shared Services
Create strategy X
Develop policies X ?
Provide support to X
business units ?
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10.
An internal customer-supplier model is an alternative to
the matrix that simplifies reporting relationships
Units/roles that deliver Units/roles that develop Units/roles that market
internal support services and deliver products or and sell products or
or resources to product services to end services
units customer
Requests Requests Requests
Delivers Delivers Sells
Support service product product
Products Region Customer
services
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11.
It’s also crucial to design a formal structure that is aligned
with the work processes (and vice versa)
Out Before Example
In
In Out
After
11

12.
More information
For more information:
http://www.organizationdesign.net/who-is-this-blog-for/book
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