Guide To Complexity Of Business Operations

4 years ago

Globalization, high-speed telecommunications links, regulatory requirements and technology are among the reasons for more complex businesses. Large businesses are inherently more complex because decisions involve more stakeholders. Managers and employees of complex organizations must learn more technologies and processes, adapt at the speed of the Internet, and expect and embrace change every day.

What is Complexity of Business Operations?

Complex organizations involve people, information, assets, technology and processes. Complex systems are interconnected, interdependent and dynamic. They cannot be articulated simply by describing the inputs and outputs of the components or subsystems. These interconnections make relationships among resources, people, information, assets and processes not easy to understand, control, and manage for large business organizations.

What are the main characteristics of Complex business organisations?

Complex business operations involve the following characteristics:

  1. Large businesses are more complex because there are more people involved in the system, all with different objectives.
  2. In such organizations, the number of possible interactions among people, information, assets and processes is high.
  3. Combinatorial explosion occurs for more complex organizations. Since there are more possible combinations of lines of activities, the number of different possible organizations is much more than any other system. Combinatorial explosion refers to the fact that the number of combinations of things that could happen is very high.
  4. Order is hidden, not evident.
  5. Information processing and sharing is increasingly complex. Most business operations involve lots of data. As the number of stakeholders in business operations increases, and the types of information these stakeholders need also increases, the need for effective information processing and communication intensifies.
  6. Technology influences the process of data sharing and information processing. With Internet and e-mail communication, the volume of information can increase several folds.

What are the different levels of complexity that businesses may be operating at?

Irrespective of what level of dynamics, organizations are in there will be a lot of factors affecting the different levels of complexity. These types of factors will either affect the dynamics of a business or move it to different levels of complexity. 

Some of these factors include:

  • Relationship among people
  • Relationship among different departments
  • It relates to the relationship with suppliers
  • The relationship with customers
  • The relationship with society
  • Distance from stakeholders
  • Number of stake holders
  • Objectives and expectations
  • Changing stakeholder requirements

How to tell if your Business is Simple or Complex

The essential point is people, information, assets and processes (PIPS) are in a complex relationship with each other, and such relationships are constantly changing. The relationships are also complex (not easily understood). To reduce complexity of a business a business needs to simplify its relationships.

Two Ways to Reduce Complexity:

  1. Bring about unity through separation
  2. Develop a systematic approach through a stuctured process

How to tell how simple or complex are your Business Processes

The complexity of a business process can be identified at any stage of the process by the following indices:

  1. Number of cycles (or iterations) required to complete the process
  2. Number of types of participants required in the process
  3. Level of unique knowledge required for each participant
  4. Number of hand offs or communication links needed to complete the process
  5. Number of third parties required in the process

What to do if your Business is simple or complex

If your business is complex, in the absence of a structured approach and a systematic process, it will be difficult for you to evaluate processes, formulate benchmarks or compare with others’. A business process can be defined as the entire set of actions required to deliver a service or product to a customer. A systematic process is a process that is made predictable and repeatable. A systematic process focuses on developing repeatable tasks through the development of process maps. These maps are used to create process models. Process models are more detailed at the beginning of the model-building process, and less detailed at the end. A structured approach to process benchmarking is to follow these five steps:

Collecting data used in preparation of the process map

  • Process descriptions are collected from key managers,
  • Data is collected from process flowcharts, process maps, and process calendars
  • Effort and productivity data is collected for each step of the process

Process Data Analysis

  • Process Calendar Data Analysis
  • Process Flow Chart Analysis
  • Process Map Analysis-to create a process model use process map templates
  • Comparison with star charts

Process Model Development

  • Process analysis is done for one process map at a time
  • The process map is analyzed to identify process steps
  • Process analysis is done for all process maps to simplify the process maps

Process Performance Benchmarking

  • Process performance benchmarking is achieved through the comparison of critical process steps using bar charts or through Pareto analysis.

How to tell if the level of complexity of your Business Process is manageable or unmanageable

To have a better idea of the level of complexity of your business operations, consider the following:

Number of people involved in the operation

For example, if you have a business with a small staff and your organization is relatively small, it probably does not have to deal with many people outside the organization. If your organization is large, it must interact with a large number of people. The larger the number of people who are involved in the operation, the greater the complexity.

The number of processes involved in the operation

If number of people involved is a risk factor, number of processes involved in a business operation may pose a threat. The more number of processes involved in a business the higher the level of complexity.

The number of times the process needs to be done

Business operations such as product manufacture and transportation need to be done multiple times.

The number of locations involved in the management of your operation

Increasing the number of locations can increase the level of complexity.

The number of environments in which the business is operating

If your business is operating in multiple environments, for example, you have offices in multiple locations, it will become more complex.

The number of technologies involved in the business operations

The higher the number of new technologies which are involved, the higher the level of complexity.

The number of media through which the business operates

For instance, the number of media through which customers or employees may interact with your organization

The changing nature of the environment in which your business is operating

The business landscape is changing at an ever-increasing pace and that change is increasing the level of complexity of business operations.

The type of products of services that a business provides

The more diverse a business is, the more complex it becomes.

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