Organizational Complexity: Definition & Strategies

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  • 0:04 Organizational Complexity
  • 1:11 What Makes an…
  • 1:51 Strategies
  • 4:13 Benefits of Reducing…
  • 4:38 Lesson Summary
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Lesson Transcript
Instructor: Ashutosh Juneja

Ashutosh has over 18 yrs of exp. in managing business & IT teams. He holds a Bachelors degree in Electronics Engineering and a Masters degree in Information Systems.

In this lesson, you will explore the things that make organizations complex. You will understand various strategies for reducing the complexity of an organization and the benefits of this reduction.

Organizational Complexity

Imagine that you work for a large organization. Not only does this organization have several departments but lots of different projects are going on with several people working on each project. If this was your company, you'd be considered a complex organization. To really understand this term, it's helpful to break down the definition.

Organizational complexity is how multiple entities of an organization differentiate among themselves. It refers to the number of resources that are involved in a division, project, or team. If the size of the organizational structure or system is huge that organization is said to be complex.

For example, a school is considered a less complex organization as compared to a hospital, simply because a hospital requires a large diversity of specialists and doctors in order to function properly. Organizations that utilize underlying technology are also considered complex, like a nuclear plant or Amazon's data center. To really understand organizational complexity, it's important to understand why an organization might be complex.

What Makes an Organization Complex?

Sometimes it's not bad for an organization to be complex. There are a few reasons that an organization might be complex, including:

  • Multiple stakeholders, like customers, suppliers, regulators, investors, media, and competitors
  • Multiple organizational structures, like divisions, subsidiaries, and joint ventures
  • Multiple people are involved in completing a particular job
  • Multiple steps that have to be followed in a process to get a job done

Now that we know why an organization might be complex, let's look at the strategies for simplifying organizational complexity.

Strategies

In many organizations, complexity poses a recurring challenge for management. It impedes competitiveness and lowers employee morale and retention. In a study by the Economist Intelligence Unit (EIU), more than half of executives at large companies around the world said that organizational complexity cuts into their profits. The effect of organizational complexity is found more in the IT and technology industry than in any other industries.

Many companies have taken a variety of steps to reduce organizational complexities. Among the strategies that have been applied are:

Avoid Strict and Complicated Rules

The first step in reducing the organizational complexity is to avoid strict and complicated rules and adopt a lean thinking process that helps prioritize and optimize the organization's management efforts. It will also save time, which can be devoted to other important activities.

Improve Customer Engagements

Apart from employees in sales and marketing, employees in development teams can also have regular interactions with the customers that help in understanding how they use products or services. Getting regular feedback and other interactions can add value to the products. Better understanding the customer can help to simplify the complexity.

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