Let's be honest about customer support: if you can't make a PB&J sandwich, you're not making crème brûlée. Yet the B2B2C company's support team was drowning. Tickets up 300%. Response times tripling. The executive team's solution? Add headcount. Buy better software. The usual expensive playbook.
But the data revealed a different problem entirely.
The team was overwhelmed, yes. But not because they lacked resources. The tickets climbing the queue told a specific story: the company's clients (other businesses) should have been the priority. Instead, most tickets came from their clients' end-users. A significant majority of those tickets could have been resolved through better end-user education, or were issues only the client could address.
The root cause wasn't capacity. It was policy.
The executive team had decided months earlier that "all help requests immediately enter the support queue." Noble intent: deliver personalized, human touch in customer support. Wrong model: it couldn't scale, and it buried priority clients under a flood of misdirected requests.
We stepped back. Listened to what the data said. Then aligned customer support policies with business strategy. We designed how support requests should move through the company, then ensured systems had the data needed to create the correct filters and gates.
One policy change. New workflows aligned to strategy. Zero additional costs.
Within 30 days: tickets dropped 30%. Average time-to-first-response dropped 50%. Client ticket response time dropped 67%.
That's the Complexity Tax in action. And most companies pay it without realizing they engineered it themselves.
The Hidden Cost Most CFOs Can't See
Between $10M and $500M in revenue, something predictable happens. Companies grow. Product lines expand. Org charts deepen. Technology stacks multiply. The things that drove early success (speed, simplicity, founder intuition) get replaced by process, structure, and "best practices" borrowed from companies ten times their size.
Margins shrink. Decision-making slows. Teams spend more time coordinating than executing. What used to take days now takes weeks.
The culprit isn't competition. It's not market forces. It's the Complexity Tax: the accumulating cost of policies, processes, products, and organizational structures that made sense individually but create friction collectively.
Here's what makes the Complexity Tax so insidious: it doesn't show up as a line item. You won't find it on the P&L. It hides in:
- Meetings that should have been emails
- Products that generate revenue but destroy margins
- Systems that require three other systems to function
- Policies created for one situation that became permanent
- Decision rights so unclear that nothing moves without consensus
The companies that break through their growth ceiling don't just work harder. They diagnose where complexity is bleeding cash, then systematically simplify before they scale.
Five Sources of the Complexity Tax
Source #1: Product Proliferation Without Portfolio Discipline
A $600M+ educational institution had opened campuses in markets too small to drive sustained, profitable growth. They had also lowered academic standards to meet short-term demand. Revenue climbed. Margins collapsed. Cash flow turned negative.
The diagnosis revealed campus sprawl without strategic discipline. Some locations were in markets with insufficient TAM. Physical footprints didn't match academic programs. Facility utilization was poor. The lifetime value of customers was declining because product mix strategy was reactive, not intentional.
The fix required brutal honesty: campus mergers, some closures, optimized square footage requirements for new locations, and a product expansion strategy that increased market offerings without proliferating complexity.
The outcome: the company delivered its first profitable year within 12 months.
The diagnostic question: In the past 24 months, how many products or services have you added versus eliminated? If the ratio is higher than 3:1, you're likely paying the Complexity Tax on product portfolio management.
Source #2: Policy-Process Misalignment
This is what killed the B2B2C company's customer support. Well-intentioned policy divorced from operational reality.
Another example: a DTC primary care company struggling to scale across multiple states. Care Coordination was buried under complex policies and processes that had accumulated over time. Each policy made sense when created. Collectively, they created gridlock.
The solution wasn't more sophisticated process management software. It was simplification. Scaled and simplified Care Coordination policies and processes allowed them to serve 25% more patients without increasing headcount while maintaining a 10-minute response time.
In the same engagement, innovative operational approaches reduced clinician licensing costs by 64% in subsequent years. Not through negotiation. Through policy redesign that eliminated unnecessary complexity in how clinicians were deployed across state lines.
The diagnostic question: When was the last time you eliminated a policy or process? If your answer is "I don't remember" or "never," your policies and processes are accumulating faster than your ability to execute them efficiently.
Source #3: Tech Stack Bloat
A Fortune 500 executive recently told me they had "fully embraced AI." When I asked how, they proudly said, "We bought 200 ChatGPT licenses."
That's not AI strategy. That's tech stack bloat masquerading as innovation.
Tech stack bloat happens when companies add tools faster than they integrate them. Each tool solves a problem. Each tool requires login credentials, training, maintenance, and integration with other tools. Each tool creates dependencies.
The average mid-market company uses 137 different SaaS applications. How many of those are actually integrated? How many duplicate functionality? How many were purchased because one team needed a feature and IT said the timeline for adding it to existing systems was too long?
Every unintegrated tool is a tax on productivity. Every duplicative system is a tax on training. Every orphaned application is a tax on IT resources.
The diagnostic question: How many software applications does your team use daily? Can you draw the integration map between them? If you can't visualize how data flows through your tech stack without asking IT, you're paying the Complexity Tax.
Source #4: Decision Rights Ambiguity
A major technology corporation (the kind with >$100B in revenue) couldn't move fast. Executive meetings consumed massive operational lift. Three months of preparation. Country-level meetings feeding into regional meetings feeding into global meetings. Bloated attendee lists. Multiple communication channels creating confusion instead of clarity.
The complexity wasn't the business itself. It was the governance vacuum around who decides what, who needs to be informed, and who actually has to be in the room.
We applied a simple principle: right people, right cadence, right information. Eliminated country-level meetings or converted them to written reports. Ruthlessly curated attendee lists. Established governance around meeting orchestration.
Result: 70% reduction in executive time spent in meetings. Administrative overhead reduced 66%. Preparation time collapsed from three months to one month.
The diagnostic question: What percentage of your executive team's calendar is consumed by cross-functional alignment meetings? If the answer is above 40%, you have a decision rights problem, not a coordination problem.
Source #5: The Exception That Became the Rule
This is perhaps the most dangerous source of complexity because it's nearly invisible.
Someone needs to bypass the standard procurement process "just this once" for an urgent vendor contract. The exception gets approved. Six months later, three other teams point to that exception as precedent. A year later, the standard procurement process is effectively dead, killed by accumulated exceptions.
The same pattern plays out everywhere:
- Pricing exceptions that destroy pricing discipline
- Product customizations that fragment your codebase
- Hiring exceptions that break your compensation bands
- Process shortcuts that become permanent workarounds
Each exception costs more than the time saved. Each exception creates technical debt. Each exception makes the next exception easier to justify.
From our work on strategic sourcing effectiveness, we see this as one of five critical "leakage points" where procurement savings evaporate. Companies negotiate better terms, then grant exceptions that bypass the negotiated contracts. Savings never reach EBITDA.
The diagnostic question: How do you track exceptions to standard policies and processes? If you don't have a mechanism to sunset exceptions or convert them into new standards, you're accumulating complexity debt that will eventually require expensive restructuring to resolve.
The 5-Minute Complexity Tax Self-Assessment
Before you can fix complexity, you need to measure it. Answer these seven questions honestly:
1. Product Portfolio In the past 24 months, your ratio of products/services added versus eliminated is:
- 1:1 or less (we're disciplined) = 0 points
- 2:1 to 3:1 (growing thoughtfully) = 1 point
- 4:1 or higher (accumulating offerings) = 2 points
2. Policy Lifecycle When did you last eliminate or significantly simplify a company policy?
- Within the past 12 months = 0 points
- 12-24 months ago = 1 point
- Can't remember / Never = 2 points
3. Tech Stack Integration Your core business systems and tools:
- Are fully integrated with clear data flow = 0 points
- Have some integration gaps we're working on = 1 point
- Operate largely in silos = 2 points
4. Decision Velocity For routine decisions that used to take days, the timeline now is:
- Still days = 0 points
- Now takes 1-2 weeks = 1 point
- Takes weeks or requires multiple meetings = 2 points
5. Meeting Load What percentage of your executive team's time is spent in cross-functional alignment meetings?
- Less than 25% = 0 points
- 25-40% = 1 point
- More than 40% = 2 points
6. Exception Tracking How do you track exceptions to standard processes?
- Formal tracking with sunset provisions = 0 points
- Informal tracking / case-by-case = 1 point
- We don't track exceptions systematically = 2 points
7. Margin Trajectory Over the past 2-3 years as revenue grew, your EBITDA margin:
- Improved or held steady = 0 points
- Declined slightly (1-2 points) = 1 point
- Declined significantly (3+ points) = 2 points
Your Complexity Tax Score:
0-4 points: Manageable Complexity You're maintaining discipline as you grow. Focus on staying vigilant. Complexity accumulates slowly, then suddenly.
5-9 points: Warning Zone
Complexity is starting to drag on performance. Address the highest-scoring areas before they become critical bottlenecks. The Complexity Tax is costing you, but it's not yet a crisis.
10-14 points: Critical You're paying significant Complexity Tax. It's showing up in margin compression, decision paralysis, and execution drag. This requires systematic intervention, not incremental fixes.
From Diagnosis to Action
The Complexity Tax compounds. What costs you 2 points of margin today will cost you 5 points in three years if left unaddressed. But here's the counterintuitive truth: you don't need more resources to fix it. You need different focus.
Strategy → Policies → Data-Enabled Workflows → Technology and People
That's the sequence. Most companies start with technology and people: throwing tools and headcount at the problem. But if your strategy and policies are misaligned with operational reality, better technology just automates complexity faster.
The companies that break through their growth ceiling follow a different playbook:
They audit ruthlessly. Not the comfortable annual strategic planning exercise. The uncomfortable diagnosis of what's actually consuming resources without creating proportional value.
They simplify before they scale. Each source of complexity identified gets one of three treatments: eliminate it, automate it, or accept it as necessary cost of doing business. Anything else is technical debt.
They embed discipline. One-time fixes don't work. The companies that maintain low Complexity Tax build review mechanisms into their operating rhythm. Quarterly portfolio reviews. Annual policy sunsets. Monthly exception tracking.
The Customer Support story we opened with? That company now has standing governance around support policies. They review queue data monthly. They sunset processes quarterly. They ask explicitly: "Is this still the right model for our business at this stage?"
Because they learned what most mid-market companies learn the hard way: complexity doesn't happen to you. You build it, policy by policy, product by product, exception by exception.
The question isn't whether you're paying the Complexity Tax. You are. The question is whether you know how much it's costing you, and whether you're ready to do something about it.
Ready to See Your Full Complexity Tax Bill?
The 5-minute self-assessment gives you directional insight. But the real savings come from systematic diagnosis of where complexity is bleeding cash in your specific business.
Take the Full Complexity Audit
We've developed a comprehensive diagnostic that maps all five sources of Complexity Tax across your operations, revealing:
- Exactly where complexity is costing you margin
- Which simplification initiatives will deliver highest ROI
- What sequence of changes will build momentum without disrupting operations
- How to build the discipline to keep complexity from creeping back
The audit takes 45 minutes. The insights are yours to keep, regardless of whether we ever work together.
Schedule Your Complexity Audit →
Because the Complexity Tax compounds. And every quarter you wait costs more than the last.