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04/10/2018
Eliminating organizational chaos: The first step is admitting you have a problem
When you think about chaos, you typically think worst-case scenario – a company’s death spiral. But chaos is more common than you might realize. It’s what happens when a company – any company – operates in a way that’s siloed and disorganized. People, process, and technology are disconnected. Individuals “do their own thing.” Chaos occurs when there is no time to follow the rules and when no rules are established.
Chaos within an organization is not a death sentence. In fact, it is often a sign that a company is growing quickly or that the company is evolving. But that doesn’t mean it’s a good thing. In all cases, organizational chaos results in inefficiencies and less-than-optimal performance. Moreover, organizational chaos often results in significant lost productivity, frustration, and poor morale.
Many companies suffering from organizational chaos think they’re operating in a highly structured and controlled environment. How can that be? Here’s how.
In any organization, there is a line that delineates structured work from unstructured work. Above the line, there is a foundation of systems, such as enterprise resource planning (ERP) applications, that companies believe are managing, tracking, and controlling transactions across the organization in an efficient manner. This is the structured work.
Below the line is the unstructured work. Multiple, disparate processes exist where information is shuffled from department to department. Employees use email as a proxy workflow tool. There is a heavy reliance on Excel to augment or perform data gathering, reporting, and data analytics. Key files are stored on a local desktop rather than in a collaborative centralized repository. Information is collected on paper or hidden in one-off Word docs instead of being captured in a central location.
This lack of structure often leads to errors and inaccurate financial information that can impact the achievement of strategic objectives, financial performance, and entity value.
These are the symptoms of organizational chaos. And the reality is that many companies spend most of their time there, ignoring the symptoms or feeling too locked into the chaos to find a way out.
How pervasive is organizational chaos? A recent CohnReznick survey of more than 200 senior-level executives in various industries found that 91.9% of respondents identified chaos within their organization. Nearly half reported that chaos is pervasive across their organization. Unfortunately, only 27% have plans in place to fix it.
For organizations looking to become more efficient, increase value, or sell to an acquirer, chaos is counterproductive, to say the least. It adds cost, complexity, and inefficiency to the organization’s operating model, ultimately leading to operational, financial, and security risks.
The elimination of chaos must start at the top, and it cannot be viewed through a narrow lens. Senior managers must be fully engaged and willing to enforce difficult decisions to effect real change. People, process, and technology must all be on the table since, in today’s world, these are all intertwined.
And organizations must be patient. They can’t clean up chaos all at once. They must start with small steps. The key is to establish quick wins that demonstrate real value to the organization and to individual employees. Those first few wins should not simply be measured in dollar signs. Rather, they should have far-reaching impact and touch everyone within the organization. Then, they have a better chance of being embraced and repeated. That is how change takes root and grows.
Chaos is from the Greek khaos, which means chasm or void. The key to minimizing it is to connect people, data, systems, and information – all the time and everywhere. Here are some areas where chaos is common and how to address it.
Communication: Many process-related issues result from a lack of communication. If one part of an organization is not getting the information it needs from another part, inefficiency results, and, with time, the issue grows larger. Start by creating a standard for sharing information and developing a process that accounts for all vital information.
Data: It’s often disparate. Bring data from multiple business applications and sources together in one place to create a common language gateway throughout the organization. Provide access to those who need to make decisions on that data in a timely manner and with easy access to it. Let them spend most of their time analyzing data as opposed to collecting it.
Workflow or Automation: Too frequently, this is ill-defined. Well-defined workflow drives action, supports consistency, increases visibility, and improves control by connecting people to vital information. People are empowered to work better, smarter, and faster – ultimately delivering better business outcomes. The development of process-enabling business applications can provide organizations with the tools to reduce complexity, increase accountability, and enable growth. Many individuals are afraid of the word automation. The fact is, if a process is repeatable enough that it can be automated, it should be automated. If your organization does not automate your repeatable processes, others will. Maybe even your competitors.
Measurement: For any process or activity to be successful, it must be measured. To eliminate chaos, we need to understand how successful we are in reducing the number of steps in the process, the time it takes to complete the process on a consistent basis, and the causes of process bottlenecks.
In today’s always-on business environment, companies must continuously find ways to be more profitable, stay competitive, and drive market share. Chaos gets in the way. By creating faster, more consistent processes, companies can lower costs, reduce mistakes, increase value, and ultimately eliminate chaos – once and for all.
Insight
Organizational chaos is far more prevalent than people will admit. To eliminate chaos, start small. Establish quick wins that demonstrate real value to the organization – and to individual employees. From a transaction perspective, it’s important to distinguish organizational chaos stemming from a poorly managed company as opposed to organizational chaos resulting from a rapidly growing company. Your diligence team will be in the best position to help distinguish one from the other.Subject matter expertise
Swami Venkat
CPA, CISA, CFE, ACA, Partner, CFO Advisory Leader
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.