December 3, 2009 Business Pundit interviews Ron Ashkenas about his new book "Simply Effective" Interview: Simply Effective Author Ron Ashkenas Discusses How to Simplify Your Organization Have you ever been in an over-complicated work situation, the kind where you re amazed anything gets done at all? You spend hours in unproductive meetings. Communication between teams is convoluted. Decisionmakers stall until the last second. Your elaborate product line defies definition. Oh, and you receive at least five urgent, irrelevant emails a day. Complexity like this is common, according to Ron Ashkenas, a longtime Fortune 500 consultant and international speaker. During his years of consulting, Ashkenas figured out the causes, effects, and remedies for organizational complexity. In his new book, Simply Effective: How to Cut Through Complexity in Your Organization and Get Things Done, Ashkenas reveals the four major causes of complexity (hint: you re probably one of them), how they affect your company, and how to resolve them. The book, which comes out December 8, is an engaging read with useful case studies and how-tos. While some books only provide the background on an issue, Ashkenas book value-adds by providing you with tools to solve the problem. Managers, C-level executives, and consultants will find this book most useful, though as a small business owner and student of business practices in general, I enjoyed it, too. I interviewed Ashkenas to learn more about his book, the concept of simplicity, and who can benefit from reducing complexity. BP: How do you define simplicity in an organization? RA: It s the ability to get things done with the least amount of wasted motion, in a way that will satisfy both your customers and the people doing the work. Workers feel like there s a direct line of sight to what they re contributing and to what customers are receiving. Customers have a direct line of sight to what they re getting, and what the value is.
When you start adding all that up, it also means reducing costs, reducing inefficiency and non-value-added stuff that gets built in, and reducing lots of frustration. BP: Why do people tend to make organizations complex? RA: First of all, nobody wakes up in the morning and says I m going to try to make my organization more complex today. Some of it happens just by natural forces of business and competition, technology and regulation. All the environmental stuff that s continually bombarding organizations creates a level of complexity. My point in the book is that managers unintentionally and unconsciously contribute to and compound that complexity. Sometimes it s in the way that they organize the organization. Sometimes it s in the way that they manage processes or their portfolio of products. Sometimes it s in their own managerial behaviors. I go into all those four categories in the book. None of it is intentional or conscious. Nobody s thinking how can I make it really tough for people to get things done? BP: What are a couple of the most common sources of complexity that you have seen people create within an organization? RA: I ll just pick a couple. One is what I call product proliferation. We try to please our customers by continually either looking for new products, new services, new variations on the products or services, but rarely eliminate the old ones. We don t have sunset laws on products or services. So we re always adding more. Every time you add a new product or service, it creates a cascade of work down through the rest of the organization. Second, there s the sheer weight of the portfolio of things to manage. In the book, there s a case on Herman Miller, which was a great example. There was a notion over the last couple of years of mass customization, that we should do everything possible to customize our products for our customers. Herman Miller was following that trend with the Aeron chair. The company
created all these different customization possibilities within numerous categories that customers could select to create their own unique, perfect Aeron chair. When the product manager went back and looked at this, she realized that there were about 140 million different customization options being offered. The enormity of being able to manage that and be geared up to produce any of those 140 million custom configurations was putting a huge amount of extra cost into the supply chain, and into the whole value chain. In reality, customers don t want that much choice. Out of the 140 million possibilities, only about 4,000 had ever been ordered. Of those, only hundreds were high-frequency orders. By paring that way back, it was possible to both reduce costs and please the customers. There s a grocery store that s one of the most profitable, successful, and popular grocery chains in Germany (ed.: Aldi). They have a rule in their stores that they carry no more than 700 products. Instead of 20 choices of orange juice or yogurt or toilet paper, you get two. Customers flock to that store partially because they don t want to be inundated with all those choices. It makes their lives more complex. On a more personal level, there are lots of things that managers do in their own behaviors, unintentionally and unconsciously. It s really useful to step back and say am I creating complexity unintentionally? For example, every time you use the reply all button, you re possibly sending emails to hundreds of people about things that are irrelevant to them. Or managers send various versions of documents around to people, and after a while, it s hard to tell what s the source document and what s the most current document. Or presentations. I m sure you ve been in various meetings with PowerPoint presentations that were actually long reports made into presentations. There are all these things that we do unintentionally that create complexity. BP: Let s go back in time, a couple of years before the financial crisis hit. Let s say you have the chance to go in and simplify the financial industry. What would you have done? Do you think simplicity could have prevented this crisis from happening?
RA: The very simple answer is absolutely yes. There are at least two things that stand out. One is product complexity. Institution after institution created products that were so complex that even Warren Buffett said that he didn t understand them. There were CDOs-squared and CDOs-cubed, and you go on and on with these things. Companies lost the line of sight between the real asset and what the product actually meant. I think that s one area of complexity that if we had been more attuned to the way that complexity was starting to take hold there, it would have made a difference. The second was the regulatory structure, which is still highly fragmented and highly complex. There are different regulators for all the different parts of the financial industry. There are insurance parts, investment banking parts, it goes on and on. Then, there are parts of the industry that don t have any regulation, like hedge funds. All of these regulators aren t necessarily talking to each other. We ve got a fragmented, complex regulatory structure against a backdrop of institutions that are creating incredibly complex products. No surprise that when you put that together, it s sort of a toxic stew of not enough and poor regulation over things that we don t fully understand. I m sure there were many other causes, money and social policies and all kinds of things, greed, incentives. I could go on. But those are two of the major simplicity issues that I think could have made a major difference. BP: Anything else you d like to share? RA: If you re the CEO or the head of a large division, and you can create a simplification effort in a whole area, it really needs to be a business imperative. For example, there are lots of companies that somewhere in their mission statement or values it says simplicity. That goes back thousands of years. It has to be a business imperative that s actually going to make a difference in your business. On the other hand, if you re a manager at any other level, it s also important to think about the business imperative part of it. At the same time, think of what is it going to do to help you get you and your team s work done more effectively. That s the starting point.
Ron talks more about simplification and the financial industry at http://blogs.hbr.org/cs/2009/11/can_we_simplify_financial_regu.html. ************************ Full disclosure: We were sent a free copy of the book to review. http://www.businesspundit.com/an-interview-with-simply-effective-author-ron-ashkenas/ December 3, 2009