Abstract
A high organizational complexity above the cognitive limits of employees and management can contribute to a business performing sub-standardly in comparison to its competitors. As businesses can grow over time into a state of high complexity, an active approach to complexity management has to be taken. This paper presents the NES classification method, aimed at facilitating the modeling and assessment of organizational complexity. Here, any system is classified as belonging to one of three classes: class N natural, class E engineered, or class S slipped systems. Operationalizing NES by applying the Tree Attribute Matrix modeling method, this paper describes exemplary observations made as part of consulting projects that demonstrated typical underperformance situations resulting from their organizations “slipping” into structures of high complexity, and includes management measures to reduce complexity and thereby improve performance.
Highlights
There are many potential reasons for an organization performing below the level of its competitors: the inability to adapt to a changing market [1,2], a value creation process inferior to that of the broader industry [3], the low motivation or inadequate training and flexibility of personnel [4,5], and many others
The Tree Attribute Matrix (TAM) modeling method is based on the observation that the organizational structures of well-formed human-centric systems, i.e., systems designed by humans and for human usage, typically exhibit similar patterns that can be visualized by arranging the system into components that can be seen as trees, attributes and matrices [34,35,57]
To illustrate the application of NES and TAM, and to further highlight the risk of organizations gliding from class E to class S over time, and becoming more prone to suffer from high complexity as a factor contributing to underperformance, we describe a number of examples of typical symptoms of slipped systems
Summary
There are many potential reasons for an organization performing below the level of its competitors: the inability to adapt to a changing market [1,2], a value creation process inferior to that of the broader industry [3], the low motivation or inadequate training and flexibility of personnel [4,5], and many others. In NES, any system is classified as belonging to one of three categories: natural systems (class N), engineered systems (class E), or slipped systems (class S) This classification of systems is based on the cognitive limits of human understanding as researched in cognitive theory, by Miller [36] and others. This paper continues with a short introduction to the NES classification method, putting a specific focus on the structure, dynamics, value creation, and inertia of natural, Businesses 2022, 2 engineered, and slipped systems (Section 2). It goes on to discuss a method to operationalize the NES classification method to identify organizations with a high potential for underperformance, proposing to use the TAM modeling method [35] to discern such slipped systems from their natural and engineered counterparts (Section 3). The paper concludes with a short summary of the lessons learned and an outlook on further research (Section 5)
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