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12/10/2011

Managing Complexity in Kuwaiti Organizations


Managing Complexity in Kuwaiti Organizations
www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6, No. 3; March 2011
142 ISSN 1833-3850 E-ISSN 1833-8119
Managing Complexity in Kuwaiti Organizations
Dr. Ahmad Assaf Alfadly
Faculty of Business Administration
Gulf University for Science & Technology (GUST), Kuwait
Kuwait; Al-Faiha, block 9, street 91, villa 14
Tel: 965-99-554-424 E-mail: [email protected]
Abstract
Joining collaborations and keeping relationships has become a most important concern for managers in most
organizations. This change arises to a great extent due to the globalization of markets and the ongoing
specialization of organizations, fostered by the possibilities of information technology and data communication.
However, such a structural change requires adaptations by companies to fit the characteristics of industrial
collaborations. In particular, the increasing complexity of collaborations in highly dynamic environments often is
under estimated. In Kuwait, most organizations lack the analytical tools and associated operational bandwidth
required to manage complexity. Reducing and managing complexity aims mostly at structuring organizations
and implementing organizational changes. This article explores the implications of the emerging science of complexity
for the management of organizations in Kuwait. It is not intended as an introduction to complexity
thinking, but rather an attempt to consider how thinking �complexly� might affect the way in which managers do
their jobs. In a sense, complexity thinking is about limits-limits to what we can know about our organizations.
And if there are limits to what we can know, then there are limits to what we can achieve in a predetermined,
planned way.
Keywords: Managing complexity, People and knowledge, Kuwaiti organization, Propose, Values
1. Introduction
The world has moved beyond the key triad markets. Internationalizing companies from developed and
developing economies try to tap the benefits of globalization to an unprecedented degree and therefore face - as
well as contribute to - the complexity of eroding boundaries. Sometimes abolishing boundaries creates new
homogeneity in a larger area (e.g., the Euro currency), but mostly it doesn't. Various motives rank high on the
list of possible drivers for foreign expansion: learning, spreading risk, gaining access to new customers, realizing
economies of scale and scope, or optimizing one's value propositions with partners. But the road to the Promised
Land turns out to be more demanding than expected, and complexity is the most common and pervasive
challenge that arises. A core challenge to today�s and tomorrow�s Kuwaiti companies� complexity cannot be
simplified, and it is not going away anytime soon. Managing complexity therefore must become a core competency
of top executives and management in Kuwait. As a first step, it is crucial to understand what drives
complexity (Colotla et al. 2008).
2. Organization and Environment and complexity
Today, industrial companies are challenged by a highly dynamic environment, which requires them to develop
and manufacture products at a high level of flexibility and quality for low costs. Due to these challenges,
companies are forced to specialize in order to both minimize product complexity and reduce production costs. At
the same time, they have to intensify their collaborative activities in order to keep their level of service offering.
More than a decade of intensified research in the field of enterprise networks reveals further reasons for an
increasing amount of networks and collaborations, mostly emphasizing emerging market opportunities.
Participating in collaborations and maintaining relationships within these thus has become a major concern for
managers in industrial companies. This change requires companies to adapt in the way they manage their
operations. In particular, the management in highly dynamic environments needs to address the increasing
complexity of collaborative industrial structures. Globalization entailed a far-reaching erosion of boundaries and
trade liberalizations allow for a substantially easier flow of goods, capital, people, and knowledge around the
globe.
In our study, we've identified four major sources that interact to create today's environment. Each of these
sources of complexity was created by the erosion of boundaries, but their effects differ from each other.
www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6, No. 3; March 2011
Published by Canadian Center of Science and Education 143
2.1 Diversity
Kuwaiti organizations face a complex set of challenges characterized by diversity both inside and outside the
organization � across every aspect of the business itself and its strategy drivers. Inside the organization,
executives must manage and respond to more diversity in the (internationalizing) HR pool; more variety in the
management systems; more variation in the means and ends, ranging from simple financial goals to a more
comprehensive view; and different business models for different types of business units. Outside the
organization, there is higher diversity: heterogeneous customer needs; differing cultural values; a plethora of
stakeholders with different claims (investors; customers; employees� regulation; etc.); various political; economical;
legal environments; and finally, competitors� differing strategies. Most firms today increasingly face
each of these types of diversity. Managing these differences is not trivial, and reducing diversity often means
being less responsive.
2.2 Interdependence
Companies must manage the effect of global interdependence to an unprecedented degree; everything is related
to everything else, and the impact is felt more rapidly and pervasively. Value webs have replaced traditional
value chains. Reputation, financial flows, value chain flows, top management, and corporate governance issues
have reached advanced levels of interdependence. The less clear-cut the boundaries of a company become, the
more it is exposed to impacts on the value chain flow through mistakes, frictions, reverse trends, or even shocks.
Interdependence creates opportunities for globalization, but taking advantage of these opportunities raises
difficult challenges.
2.3 Ambiguity
The business world today is characterized by too much information with less and less clarity on how to interpret
and apply insights. Diverse accounting standards render financial figures ambiguous. Studies, scenarios, survey
results, and reports become less reliable due to ever-increasing uncertainty. Many businesses find it more and
more difficult to discover what their clear value drivers are. Are they image price-related services, privileged
relationships, speed, knowledge, or something else? The cause-and-effect relationships become blurred.
2.4 Flux
As if these three complexity drivers were not enough, managers have to face yet another one: flux or change.
Even if you arrive at temporary solutions regarding interdependence, diversity, and ambiguity for your specific
company, industry, and/or personal situation, the situation can change the next day. Today's solutions may be
outdated tomorrow.
3. The repercussions
Everything is diverse, and nothing is stable; everything is in "fast flux": interdependence is flowing in changing
directions. The future no longer is the prolongation of past industry �breakpoints�; fundamentally altering the
value proposition in industries occurs more rapidly. The variety of options could overwhelm traditional decision
making as information often lacks clarity and is ambiguous. Multiple interpretations of the same facts are
possible, depending on the perspective or cultural framework. Shared understanding cannot be assumed per se,
whether inside or outside the organization. Thus, interdependence, diversity, and ambiguity � all in flux � are the
building blocks of managerial complexity and explain why global companies often are perceived as the most
complex organizations. Many people have tried to simplify complexity and contemporary management literature
is misleading when trumpeting the success factor. Studies typically examine successful companies to see what
managers "did" then conclude that all managers should do the same thing. As unpredictability makes us
uncomfortable, delusions are created about performance as a voluntaristic matter of choice (companies can
choose "to be great"); we like the certainty promised by these solutions. But in an interdependent world, much
depends on contingencies, with no clear correction between input and output. Accountability of managers
therefore has an arbitrary element: yes, managers are responsible, but results are influenced by factors beyond
their control. Navigating through this complexity requires a different way of thinking, acting, and organizing
than the typical "control" mentality. A long list of advantages lures companies into globalizing. Geographic
expansion abroad offers the vast potential benefits of a much larger market arena; it spreads risks, scope, scaleand
location-based cost advantages, and broader exposure to a variety of new product and process ideas. The
practical consequence of complexity is that a managerial dilemma often shapes the decision-making process
when there are two or more conflicting legitimate goals. Both cannot be achieved simultaneously with the given
resources. Kuwaiti companies in the financial service industry set up competing distribution channels, but expect
far-reaching cooperation across the company (shared services and product platforms) to reap economics of scale.
www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6, No. 3; March 2011
144 ISSN 1833-3850 E-ISSN 1833-8119
In manufacturing, one ongoing dilemma is between global standardization and response to local market needs.
Any required priority decision nevertheless results in ongoing tension. As dilemmas cannot be solved, they need
to be managed continuously.
4. Core processes and decentralized authority
Core processes are those used by the entire company. These vary from business to business, but most managers
know what is vital. In a consulting firm, core processes might be knowledge sharing and recruiting; in a heavy
manufacturing firm, they might be capital budgeting and logistics; in a pharmaceuticals firm, they might be
research and development and go-to-market processes. A firm's core processes always should be standardized
(not necessarily centralized) and based on comprehensive accessible information platforms. As this imposes cost,
one has to be very clear what is needed as core. Such processes might change over time, and more often than the
business model or the core values. It therefore is important to erase old processes when introducing new ones.
But only standardized processes generate the transparency key for accountability on levels further down the
organization. With such transparency and accountability, therefore, decentralization is possible without the
company breaking down into political silos and bickering fiefdoms. With decentralization consistent with core
processes, local managers can engage complexity in the way most effective for them.
5. Unpredictable situations an early awareness system
Chaos is a degree of complexity in which few of the rules and drivers are understood. Compare it to a weather
forecasting system: never completely right, but rarely completely wrong. And early awareness doesn't need
sophisticated systems and much manpower. More than anything else, it is a mindset, a sensitivity that allows
"weak signals" that indicate emerging change and foresight to be understood. To deal with complexity, identify
the variables that create predictable outcomes when they're within a particular range and unpredictable outcomes
when they are not. As one executive recently told us, "We track hurricanes. As long as they stay outside of this
range, we don't pay much attention or put anything into action. But as soon as they hit inside this range, we rush
to put our contingency plans into place." When facing complexity, managers need to identify which "hurricanes"
they need to track and which levels or ranges should trigger contingency plans.
6. Leadership
Leading a complex organization requires an entirely different mindset. Hierarchy works if every level is doing
something distinct and specific. However, due to the interdependence in complexity, this is impossible in today's
organizations. By simplifying and clarifying vision and values, core processes and decentralization; and early
awareness systems, hierarchy can be complemented by another �hierarchy� � the interdependent, networked
organization in which every part reflects a different perspective of the whole and which is needed in today's
global business world. The boss no longer needs to "tell" the team members exactly what to do, but rather
depend on their initiative, creativity, and competence for success. The leadership and top management
commitment is the most critical and crucial prerequisite for institutional success when problem arise. In addition;
the management controls, arranges, does things right; leadership unleashes energy, sets the vision, does the right
thing. Russel (2000) state that successful leaders anticipate change, vigorously exploit opportunities, motivate
their followers to higher levels of productivity, correct poor performance and lead the institution toward its
objectives.
7. Mastering complexity in Kuwaiti organization
We have not yet come across a Kuwaiti company that has mastered complexity in organization. Perhaps there
are none; perhaps there never will be any. However, various sections of "Managing Complexity" point to several
companies in Kuwait highlighting various aspects of managing complexity, or the effects of not managing it well
The decade-long difficulties of Al-Ghanem � and to a lesser degree Al-Mulla � clearly have their roots in the
long traditional control mode, leading to Al Ghanem's vast bureaucracy and a typical outcome: mediocre
products due to risk aversion, mistrust of management (reflected in the high degree of unionization), high
transaction costs, and slow response. An opposite example is Lulu Shopping Center, with a very clear value set
(which now is challenged as it truly becomes a company all over the Middle East), a simpler model of core
business processes, and standardized processes throughout the Middle East.
8. Conclusion
In conclusion, Kuwaiti organizations should understand the elements of simplifying and structuring in the
management of complexity. The main challenge of today�s and tomorrow�s companies, complexity cannot be
made easy, and it is not going away in the near future. Managing complexity must consequently become a core
competency of top executives and management. Complexity is today frequently considered the latest business
www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6, No. 3; March 2011
Published by Canadian Center of Science and Education 145
world it reflects a current common reality but not a lasting one. Even though no company may ever master
complexity completely, it is possible, using these values, to at least find the way through complexity and even to
take advantage of it.
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