Complexity is killing your business

Hey everybody, 

I know a CEO who recently took a 6-week vacation from his business.

That’s a long time in our small business world. But my buddy was confident his team could take care of things, so off he went. 

Now, spoiler alert: the company didn’t crash. 

But when he came back, things were different.

Here’s what happened.

When the boss takes a long vacation, it changes behavior at the company. 

People have to make hard decisions, and they take on more responsibility. And if your org can make good decisions, that’s a win. 

So, when my buddy got back from vacation, he started looking over the decisions his team had made in his absence.

And he noticed a pattern: most of the decisions had increased complexity at the business.

Systems were more complicated. Three people touched what one person could do. Things got messy.

Entropy — the second law of business thermodynamics — was in full force. 

—

We were talking about this over lunch, and he had a realization:

As CEO, the best thing he could do is make things simpler. The less moving pieces his business had, the less chances for things to go wrong. 

But his employees were smart and capable. So why did they choose complex solutions so consistently?

My take:

Employees are highly motivated to increase complexity.

Two reasons:

In most American organizations, having more responsibility typically means receiving higher pay.

And responsibility looks like people working for you, bigger processes, more “stuff on your plate”. 

So the employee can make more money by choosing a less efficient solution for the company.

Saying “I manage 500 people” commands a higher salary than saying “I manage 100 people,” even if the same amount of work is being done.

As CEO or owner, your whole job is taking calculated risks. Your success rides on the business’s success.

But an employee generally doesn’t see much upside to taking a risk on a solution that might not work out. So often, they’re going to choose the safest, most foolproof option.

If a complex solution has redundancies, it’s less likely to fail. And for the employee, the top priority is usually covering their ass so their job isn’t at risk if things go wrong. 

—

If employees want stability / redundancy / predictability, and owners want efficiency, there’s an inherent tension.

And you can see why things slide into complexity when one side of that tension takes a 6 week vacation. 

Many CEOs I speak with are frustrated by this. And, of course, there are steps you can take to align incentives better (see below). 

But at the end of the day, you’ve just got to accept every CEO’s mission:

Always be at war with complexity.

That looks like constantly asking…

—

Looking back, I’ve written a ton about incentives. If you’re wrestling with alignment in your business, take a look:

Hope it helps!

Thanks for reading!

Michael

P.S. Please do check out my upcoming free events — on hiring, incubating businesses, and lots more! See the whole event calendar at lu.ma/girdley

MORE WAYS I CAN HELP YOUR BUSINESS

💡 START → ​The Low-Risk Business (ebook)
Get the 5-step framework I've used to build multiple businesses from scratch. 40 pages of hands-on, practical guidance.

📈 SCALE → join ​Scalepath ​
Connect, learn, and grow your business with expert guidance, vetted community, detailed playbooks, and other resources. For businesses making $500K+ in revenue.

🌎 HIRE → talk to ​Near ​
Meet your hiring needs with top-tier Latin American talent for 70% less than US staff. My team at Near takes care of all the headaches. Get in touch today.