Complexity is moving onto the balance sheet - even when accounting cannot see it
Companies rarely record “complexity” as an expense. Yet its effects appear everywhere: slower decisions, duplicated software, extra management layers, longer onboarding, more reconciliations, higher compliance effort and teams spending time coordinating work rather than producing it. As organisations expand across products, regions and systems, these costs can accumulate faster than revenue.
The issue is becoming more important because many economies are struggling with weak productivity growth. The OECD’s 2026 Foundations for Growth and Competitiveness report points to subdued business investment, declining firm dynamism and slowing technology diffusion as structural constraints. When productivity is difficult to raise, reducing unnecessary internal friction becomes a more attractive source of improvement.
Growth creates complexity faster than leaders expect
Complexity is often the by-product of sensible decisions. A new market requires a local process. An acquisition brings another technology stack. A major customer asks for a bespoke workflow. Regulation creates additional controls. A product team adds a feature rather than retiring the old one. None of these decisions looks excessive in isolation.
The problem is accumulation. Over time, the organisation can end up supporting multiple ways to perform the same task. Each exception creates training requirements, testing, data mappings, controls and documentation. The cost is not limited to the team that introduced the variation; it spreads into finance, technology, legal, operations and customer service.
This makes complexity a network cost. A new product can generate revenue in one business unit while imposing hidden work on five supporting functions. Traditional business cases may miss that because the incremental burden is distributed across budgets.
The first cost is decision latency
One of the clearest consequences is slower decision-making. As organisations add committees, approval stages and reporting relationships, simple decisions can require more hand-offs. The delay may not be obvious in a monthly cost report, but it affects the speed of pricing changes, hiring, product launches, supplier decisions and responses to customers.
Decision latency is especially expensive when market conditions change quickly. A company that requires three weeks to approve a commercial adjustment is at a disadvantage to a competitor that can reach the same quality of decision in three days. The cost is the value of opportunities lost during the waiting period.
For this reason, some companies are beginning to map decisions rather than just processes: who owns the decision, which inputs are essential, who has veto rights and how long each stage takes. The exercise can reveal governance that has grown by addition rather than design.
Technology can automate complexity - or institutionalise it
Digital transformation does not automatically simplify a company. It can simply make a complicated process run faster. When organisations automate workflows without first challenging the underlying steps, software can preserve exceptions that should have been removed.
The OECD’s work on digital transformation and business investment highlights the growing importance of digital and intangible assets to productivity. But the strategic benefit depends on how technology is deployed. Fragmented applications, duplicate databases and point-to-point integrations can create a large maintenance burden even when individual systems perform well.
A more useful technology metric is therefore not simply how many processes have been digitised, but how many systems, interfaces and manual exceptions are required to deliver a customer outcome. Simplification before automation can often produce a larger long-term benefit than automation alone.
Complexity weakens accountability
As responsibilities spread across more functions, it becomes harder to identify who owns an outcome. A customer issue can move between sales, operations, finance and technology while each team completes its part of the process. The organisation remains busy, yet the problem persists.
This is a structural form of inefficiency. It can also create control risk because people assume another team is responsible. Clear ownership does not mean centralising every decision. It means defining which role is accountable for the end-to-end result, even when many teams contribute.
The cost shows up in working capital and service quality
Complexity can also consume cash. More approval stages can delay invoicing. Inconsistent master data can create billing disputes. Multiple procurement processes can make it harder to consolidate spend. Bespoke customer terms can lengthen collections. Inventory can rise when product portfolios become too fragmented.
These effects connect organisational design with finance. A company may focus on revenue growth while complexity quietly lengthens its cash conversion cycle. When financing is more expensive, the economic cost of those delays increases.
Why simplification programmes often fail
Simplification is easy to endorse and difficult to sustain because every exception has an owner. A legacy report may be unnecessary to most teams but essential to one executive. A product variant may be unprofitable overall but important to one salesperson. A redundant system may still support a critical historical workflow.
Successful simplification therefore requires evidence. Companies need to understand usage, cost and dependency before removing anything. The strongest programmes also set explicit rules for reintroducing complexity. Otherwise, the organisation can simplify for a year and then gradually rebuild the same structures.
A useful discipline is to treat complexity like capital expenditure. New variants, systems and approval layers should have a clear owner, a defined benefit and a review date. If the benefit disappears, the complexity should be retired.
Business dynamism matters at the company level too
The OECD has documented a broader decline in business dynamism across many member countries. At the economy level, weaker entry, exit and resource reallocation can reduce productivity. A similar principle applies inside companies. Internal resources need to move from declining activities toward stronger ones without excessive friction.
Organisations that cannot close projects, retire products or move people effectively become internally static. They may still grow, but a larger share of resources is trapped maintaining yesterday’s decisions. Simplification is therefore partly about restoring the ability to reallocate.
Measuring complexity as an operating metric
Companies can make the issue more concrete by tracking indicators such as number of applications per employee, number of approval steps for common decisions, percentage of transactions requiring manual intervention, product variants with low volume, duplicate reports, management layers, supplier count, exception rates and time spent on internal coordination.
The goal is not to drive every measure to zero. Some complexity is economically valuable because it enables customisation, control or market access. The important distinction is between complexity customers will pay for and complexity the company has simply accumulated.
The next productivity programme may be subtraction
For years, corporate transformation has often meant adding something: a new system, analytics team, governance forum, product line or specialist function. The next phase may place greater emphasis on subtraction.
In a slower-growth environment, companies cannot assume that scale will absorb inefficiency. The World Bank’s 2026 outlook describes resilient but subdued global growth, reinforcing the importance of productivity and private investment. Businesses that can reduce internal friction may be able to improve margins while also becoming faster and easier to manage.
Complexity will never disappear from large organisations. The strategic question is whether it is being deliberately purchased for a reason, or simply inherited. Companies that can answer that question clearly may find that simplification is not only a cost programme, but a source of speed, accountability and growth capacity.
References
OECD - Foundations for Growth and Competitiveness 2026
OECD - Productivity and business dynamism
OECD - Business investment in the face of the digital transformation
OECD - Insights on Productivity and Business Dynamics: United Kingdom