Half of Surveyed Executives Say Organizational Complexity Has Cut Into Their Profits

Executives are spending an average of 21% of their time managing complexity instead of undertaking more productive tasks, shows the results of a new study: "Taming Organizational Complexity—Start at the Top," released by The Economist Intelligence Unit and sponsored by SAP.

If that share of time could be cut in half, the EIU estimates that 8.6 million hours could be spent more productively every week by executives in the US alone—that is 45 minutes per day per executive.

The report also shows that 55% of executives say that organizational complexity has cut into their profits over the last three years.

These are among the results of a survey of 331 executives drawn from companies across all regions and industries and with more than $500 million in annual revenue.

The study also found that 55% of all executives surveyed say their organization is very or extremely complex; only 1% say it’s not complex at all. Forty-four percent say both that their organization is very or extremely complex and that it’s very or somewhat difficult to get things done.

The most successful ways to reduce complexity cited by executives were to create cross-functional roles, implement new decision making processes and implement new technology. However, the most successful approach—creating cross-functional roles—was only found helpful by 56% of respondents whose companies had tried it.

The most commonly cited reasons when efforts to reduce complexity failed entirely were poor change management, a culture resistant to change, lack of buy-in across the enterprise and too much data or information to manage.

Both the successful tactics and the reasons for failure appear to relate to leaders making decisions to reduce complexity and following through on them—or not. In that context it is notable that 24% of C-level respondents, compared with 9% of other respondents, said it is easy to get things done at their organisation.

“The survey results suggest that consistent leadership is crucial to reducing complexity, but that most senior leaders see less pain from it than other employees. This may be one reason that so many companies are slow to address complexity,” says Josselyn Simpson, senior editor at the EIU.