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At some point of the organization’s growth, complexity kicks in. Before that threshold, you had two problems: managing growth and managing the complexity of the business that comes with growth. Then, at a crucial tipping point, you have not two, but three problems: (1) managing growth, (2) managing the complexity of the new business situation and (3) managing the complexity of the complexity in itself. I have written about this before (‘Every successful company’s growth contains seeds of failure. At some point, organizational complexity could outweigh the business benefits’)

The third problem is the hardest and may overtake in importance (effort, airtime, resources) the other two. That leads to the familiar picture of large and complex organizations becoming progressively inwards looking, consumed by the internal processes, systems and structures that they themselves have created. It is the equivalent of a Formula 1 driver looking at the engine instead of looking at the road ahead. Ouch! That hurts!

‘Problem Three’, as I call it, that is, managing the complexity of the complexity, is manly self-inflicted. It has a high degree of predictability, yet either warnings are ignored or reactions to address it come too late.

The UK National Heath Service (NHS) is a good example of massive Problem Three. To deal with the massive cost increase of a (socialised, or as the American Republican Party would call, socialist) public health system, dealing with logarithmic challenges in terms of demographics, UK governments of different political inclination have imposed different ‘solutions’. First a massive new managerial structure: invasion of professional managers to manage the progressively unmanageable. Then, outcomes targets (health targets, waiting lists) imposed under the naïve assumption that the existence of targets, by itself, would trigger managerial effectiveness. What these targets in fact triggered was the need to have more managers to manage the targets. Then the decentralisation of decision making was imposed, devolving locally what it was held centrally, under the assumption that this would be more manageable and efficient. In fact it was a gigantic ‘passing the monkey’ to structures (local, general practitioners) with very limited skills to do so. Now, another managerial tsunami is in place: a enormous system of internal competition (what I call a Gran Bazaar strategy) which de facto  breeds another huge system of ‘internal bidding’ and converts old collaborators into new competitors.

Increasing layers of self-inflicted complexity try to deal with the previous complexity in a colossal Entropic Catch Up, which has very limited future life in its current format. If the NHS was a civilization, it would be close to collapse and disappearance.

An article by Polly Toynbee in The Guardian (If the way the NHS is organised seems absurd, that’s because it is) is revealing. An interviewed senior Finance Director who is giving up and taking early retirement reveals the absurdities of what he calls ‘a permanent Maoist revolution’ inside. He has to deal with more than 100 contracts with ‘internal and external providers’ and shows some examples of external (private) ones competing on cost, not quality and being clearly worse than the old existing internal mechanisms. Nurses and junior doctors leave the NHS to join external agencies that send them back at higher costs, exactly more than double the equivalent staff in the case of  doctors.

Problem Three needs a completely different solution from Problems One and Two. Problem Three is dangerously close to a Wicked Problem.

The main treatment of Problem Three is prevention. After prevention, if unsuccessful, it comes Reboot. If unsuccessful, it is system collapse. The rest is archaeology.

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