Business Case Studies, Executive Interviews, Michael Brimm on Managing Complexity

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Executive Interviews: Interview with Michael Brimm on Managing Complexity
August 2008 - By Dr. Nagendra V Chowdary

Prof. Michael Brimm
Prof. Michael Brimm is Emeritus Professor of Organization and Management at INSEAD.

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  • How do you define complexity/ complexities of a global corporation? What are the sources of these complexities in global corporations?
    All organizations have the inherent complexity of managing diverse functional specialties overlaid with diverse products and a varied customer base. Global organizations add the element of geographical diversity with the cultural implications of this mix. It should be noted that professional specializations vary significantly in culture as one might observe the difference in values and behavior between a sales function and the manufacturing one within the same organization.

  • However, the major dysfunctional source of complexity in organizations is the leadership. A fundamental task of leadership is providing simplicity of thinking a clear story that effectively communicates the mission and fundamental strategic path of the business. Failure to accomplish this yields a "cognitive complexity" that frustrates and paralyzes organization into inaction and failure to take necessary decisions.

    Why only global corporations? In what way global organizations present more complexities than geographically bounded organizations?
    The cultural diversity in global organizations is certainly a reality that requires understanding and skillful management. Respect for differing behavioral norms and values is a requisite for the effective functioning of the global organization. I should note that I consider a "global organization" in this sense as more than one which simply operates in a variety of world markets. Today's global organizations also distribute activities and operations to geographically diverse areas, but also incorporate a variety of individuals with different cultural backgrounds. The on-going academic debate about whether corporate culture can override elements of national culture provides little insight other than the fact of our inability to resolve the issue. The essential message is that both matter. In addition to confronting areas of apparent difference in values, the resolution comes from identifying key behaviors that emanate from these values to determine if the conflicts exist at that level.

    My experience is that there is a ready willingness to attribute many organizational conflicts to "cultural differences" when they are really basic conflicts in business functioning. Thus, the unwillingness of a subsidiary to adopt a new corporate proceduremay be quickly attributed to cultural issues when the basic dilemma rests in a conflict of business interests or goals.

  • Apart from globalization what other new business realities do you think have heightened the complexities of global corporations?
    The introduction of new technologies has had a profound impact on the structure and functioning of business organizations. While offering innovative new solutions to existing problems, the technology has created a new complexity, all its own. The "blackberry" which affords instant communication across a dispersed organizational group may prove to undermine the group's normal face-toface communication as people respond to the incoming emails during a meeting.

    In addition, new partnering arrangements to improve problemsolving among suppliers, customers and the organization have complicated the norms and traditions of "boundary management" between groups. Solution of a customer problem in Asia will be detected and sought in Europe and the US by others who may be informed well before the local affiliates of the central organization. Levels of transparency necessarily require careful management in the existence of coopetition that create partners of active competitors in a particular project. The trends toward "mass customization" add an essential element of complexity. Increasing numbers of SKU's add levels of complexity to the management of portfolios at product and brand levels in many organizations. Again, this is a complexity that obscures for many organizations a recognition of which products and customers are really profitable.

    Finally, I would argue that the rate of change is a major source of the complexity. Change is, and has always posed a complex task for management. As the "rate of change" increases, there is a "metacomplexity" that challenges leadership substantially.

  • Of the two prominent sources of complexities internal and external which one do you think is likely to cause more damage to the companies?
    I return to my premise that the fundamental task ofmanagement is to pride a level of simplicity to the essentially complex functioning of organizations. Both internal and external sources are equally challenging. (We have not discussed the market turbulence that add a new complexity currently to many businesses.) However, the fact of complexity is a reality. The response to this complexity remains as the essential determinant of performance in global organizations.

  • Can you share with us a few examples of how global corporations were affected by internal as well as external sources?
    It is easy to see how organizational complexity contributed to the outcomes at Bear Stearns and Societe Generale. In both cases, the outcomes were not simply a result of difficult markets, but rather an inability to see and manage the essential complexity of their organizations. The inability to present clearly the simple explanation of a new General Electric depressed the stock price well before the impact of missing a projected revenue number. The inability to simply express the synergic value of what may be exciting and positive changes has cost Jeff Imelt greatly.

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