Too much complexity may suggest scandal

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One positive byproduct of Enron’s meltdown could be a broad push among businesses to simplify their models and processes. Many companies already have initiatives in place to pare back the thicket of business processes that have grown up over decades.

For instance, this is a basic goal of enterprise resource planning systems. But ERP efforts focus on the operational side of the equation—money that can be saved, say, by streamlining the steps in processing or fulfilling an order. That’s good, but not good enough.

CRM systems, an important companion to ERP, promise to unify (and simplify, from the customer’s standpoint) the multifarious connections between customer and company. Again, good, but not enough.

The extra element, post-Enron, is this: In addition to wanting their suppliers to be as streamlined and efficient as possible, customers (and shareholders) also want to be confident that suppliers are running sustainable and viable businesses. At least for the short term, operational or business model complexity carries the real risk of being perceived as deliberate concealment of unpleasant material facts. And it goes without saying that suspicious customers are unhappy customers.

To be sure, all marketing departments try to make their companies’ operations comprehensible to the outside world. This is typically done as part of that annual ritual called "writing the annual report copy." But, today, when an innocuous delay in posting quarterly revenues can send shareholders and customers scurrying in panic, CEOs and marketers must do more.

Step 1 ought to be a perception audit among your biggest customers and shareholders. Do they understand your core business? Do they fathom why, for example, your plastics company owns a stake in a Brazilian copper mining company? Can you explain the strategic ligaments that hold together your business units? (And, if you can’t, why do you own them in the first place?)

Step 2 should be a rethinking of the processes and goals of your marketing and public relations departments. The end game for both is the same: to provide the maximum degree of visibility into your business operations, short of revealing propriety information of value to your competitors.

As if this task weren’t daunting enough, you’ll also need to demand that your business partners do their own "complexity audit" and share the results with you. In the current climate, all it takes is just one nefarious trading partner with shell companies and hidden assets to pull your company into the scandal quagmire.

While Enron’s monumental collapse in December didn’t create this trend toward simplicity and visibility, it should accelerate it, giving executives at companies large and small a tangible, ominous object lesson about the perils of excessive complexity.

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