How to Deal With Corporations' Complicatedness: A Brazilian Example

How to Deal With Corporations' Complicatedness: A Brazilian Example

Manuel Luiz (Boston Consulting Group, Brazil)
DOI: 10.4018/978-1-7998-3115-0.ch004

Abstract

This chapter discussed how companies in the 21st century need to simplify their internal processes in order to become competitive in the external market and foster productivity. The authors focus the discussion in Brazil, an emerging economy that suffers the effect of globalization (as much as other developed economies) but, at the same time, is plagued by structural factors that hinder the country's competitiveness, a concept that is referred to as “Brazil cost.” The chapter suggests a possible framework to address the need for simplifying the company's internal context and driving performance in order to fight the growing external complexity.
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Introduction

Twenty-one century corporations currently face a business environment that can be best characterized as more complex and sophisticated. This environment demands adaptation and is facing external challenges such as dealing with increased customer demands and dealing with a more intense competitive environment. To respond to this external challenge, many corporations increase their structures (adding more departments, hiring layers and creating more functions), design new performance indicators, create new decision committees and thicken performance reports, among others responses. Because of these practices, which The Boston Consulting Group (BCG) has labeled as increased “Complicatedness”, corporate managers spend 70-90% of their time in meetings and in the production of corporate reports, lacking time for what should be their focus: managing people (BCG, 2019). In a developing country such as Brazil, fighting complicatedness emerges as an opportunity to reduce bureaucracy and increase competitiveness. This chapter discusses how companies in the 21st century need to simplify their internal processes in order to become competitive in the external market and foster productivity. The authors focus the discussion in Brazil, an emerging economy that suffers the effect of Globalization (as much as other developed economies) but, at the same time, is plagued by structural factors that hinder the country’s competitiveness, a concept that is referred to as “Brazil cost”. The chapter suggests a possible framework to address the need for simplifying the company’s internal context and driving performance in order to fight the growing external complexity. Fostering the desired corporate behaviors, namely promoting cooperation among employees, could be a solution to simplify organizations and increase their competitive advantage (Luiz, 2017).

Key Terms in this Chapter

People Management: Includes all activities that managers promote in order to attract and retain employees and ensure that they have high performance and contribute to the organizational goals.

G20: The Group of 20 is an organization of finance ministers and central bank governors from 19 individual countries and the European Union. It includes Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, the United States and Turkey. It bills itself as the “premier forum for international economic cooperation - The group meets every year and collectively, its members represent more than 80 percent of the world’s gross domestic product. Established in 1999 after a series of major international debt crises, the G20 aims to unite world leaders around shared economic, political and health challenges. It is a creation of the more select Group of 7, an informal bloc of industrialized democracies. (Based on information from The New York Time, 2019).

Boston Consulting Group (BCG): Is a global management consulting firm. BCG partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. To succeed, organizations must blend digital and human capabilities. BCG’s diverse, global teams bring deep industry and functional expertise and a range of perspectives to spark change through leading-edge management consulting as well as data science, technology and design, digital ventures, and business purpose. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization to deliver results that help our clients thrive.

Complexity: Reflects the increased number of market variables that affect the decision making process of Corporations. These variables exist in the Corporation’s environment (improved client sophistication, fiercer competition, increased information availability, etc.) and therefore they are externally given.

Gross Domestic Product (GDP): Is the standard measure of the value added created through the production of goods and services in a country during a certain period. As such, it also measures the income earned from that production, or the total amount spent on final goods and services (less imports). While GDP is the single most important indicator to capture economic activity, it falls short of providing a suitable measure of people's material well-being for which alternative indicators may be more appropriate.

Sma rt Simplicity Concept: While complexity is a fact of business life, complicatedness doesn’t have to be. Smart Simplicity, BCG’s innovative approach to solving this issue, can simplify organizations by helping them identify and resolve unnecessary complicatedness and deliver lasting, measurable change. More information in “The Smart Solution to the Productivity Paradox,” BCG article, January 2016, and Yves Morieux and Peter Tollman, Six Simple Rules: How to Manage Complexity without Getting Complicated , Harvard Business School Publishing, 2014. This publication references the work of Herbert A. Simon, who, in 1978, was awarded the Nobel Prize in economics for his “pioneering research into decision-making processes within economic organizations.”

Context: Refers to the different corporate elements that are shapeable with the purpose of driving employee’s desired behaviors.

Complicatedness: Reflects the (over-proportional) effects of Corporation’s response to dealing with the Complexity (more layers, thicker governance, committees, etc.). Complicatedness arises from businesses’ reaction to complexity (and therefore is internally driven).

Brazil Cost: The increased cost associated with doing business in Brazil in comparison with doing business in other countries.

MERCOSUL: The Southern Common Market (MERCOSUR for its Spanish initials from Mercado Comum do Sul ) was created by the Treaty of Asunçión in 1991 which is a free trade purposed association for goods, people and currency, and that includes Brazil, Argentina, Paraguay and Uruguay. Venezuela became a member in 1995 but has been suspended since 2016.

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