‘The Quiet Cost of Doing Nothing’: How Operational Complexity Erodes Margin Over Time
The most value-destructive choices in portfolio companies are rarely the standout newsworthy ones. They are the decisions that no one clearly owns, ultimately no one actively makes, and are invisible on a black-and-white balance sheet: the supplier contract that renews by default, inefficient processes inherited from an acquisition two years ago, or commercial terms that were favourable in past years but have not been looked at since. Complexity is not a discrete problem. Rather, it is the cumulative effect of multiple issues that build up over the years due to a lack of visibility or a series of non-decisions, and by the time it emerges, it has already become embedded in the operating model.
How Complexity Compounds
A global survey of 700 professionals found that organisational complexity drains an average of 7% of annual revenue [1]. The pertinent issue with operational complexity is that it rarely surfaces all at once; instead, it builds gradually over time in layers.
For example, a procurement process may get a workaround because the incumbent system could not manage a new product line. Fast forward two years, and no one questions it: it is now just common practice. The same patterns occur in finance, operations, and commercial functions quietly and consistently.
What makes this difficult to address is that each layer seems reasonable, since in isolation:
The acquisition made sense at the time
The contract terms were the best available given the circumstances
The reporting framework was designed based on the business structure in place
None of it looks broken on its own. But the cumulative impact on the margin is real and tends to accelerate if an intervention is not made. Teams spend time managing compounded inefficiencies rather than delivering results. As a result, high-value projects may be delayed, and as opportunity costs accumulate, the margins shrink year on year. As none of it is shown as a single line on a P&L, it rarely gets addressed until the root cause is investigated.
The Cost of Waiting
In most businesses, the default position is inertia. People are willing to admit that complexity exists. However, addressing such issues requires time, focus, and a willingness to change processes that are broadly functioning. The risk bias tends to favour leaving it alone until the margin pressure becomes unavoidable or a transaction forces the issue.
However, the complexity that is left unaddressed does not remain inert. It gets built around and becomes laborious and expensive to unwind. Research suggests that organisations that delay operational improvements can face 15 to 25 per cent higher operational costs than those that address issues earlier [2].
Furthermore, each year of delay effectively compounds what amounts to a growing inefficiency tax. Higher costs as teams work around outdated processes, duplicate effort, and use manual workarounds absorb capacity that would be better utilised elsewhere.
What makes this particularly insidious is that, unlike a failed project or a system outage, the cost of doing nothing rarely shows up as a single coherent event. It surfaces gradually across teams, processes, and performance metrics, slowly enough that it can be rationalised, normalised, and accepted as ‘just the way things are’.
By the time it becomes undeniable, years of accumulated drag are already baked in, and often blame is diverted to people's performance rather than the processes themselves. A senior lecturer at MIT notes that performance and thus margins improve when organisations deliberately simplify work and look across the system, not in the silos [3].
Simplification as a Value Creation Lever
Simplification is often treated as a cost-cutting exercise, something that is done when times are tough. However, in practice, improving internal efficiency is one of the most reliable ways to improve margin organically without touching revenue at all. When businesses take a structured look at accumulated complexity (such as supplier relationships, internal processes, and organisational layers), they constantly find value that has gone unnoticed.
The businesses that succeed at this all share a common approach. They:
Create visibility across functions rather than look at each area in isolation
Ask uncomfortable questions about the current ways of working
Are willing to implement change that may feel disruptive in the short term
These factors are not simply about cutting costs. They are more about understanding what the business needs to operate well today and removing what has been carried over from the past. It is often tempting to treat simplification as a finance-led cost programme or a strategy away-day exercise. But in practice, neither approach gets to the root of the problem, and the complexity quietly returns.
What delivers lasting margin improvement is a more deliberate bottom-up approach: a structured view across functions to identify where complexity is borne, a prioritised sequence of targeted interventions, rather than a blanket overhaul, and the execution discipline to embed required changes into the business's core operating model.
Currently, within an ever-changing commercial environment where complexity has accumulated quickly over time, the objective is not to overhaul everything at once but to systematically confront complexity. At Deecon, we work with organisations to identify, map, and address operational complexity, cutting through layers that have amassed over time to find structural improvements that stick and grow margin for the long term.
Written by James Barker
Edited by Kate Randall