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EDITORIAL BOARD Michael Lissack, Institute for the Study of Coherence and Emergence ; Max Boisot, Judge Management Institute, Cambridge, David Boje, New Mexico State University, Jerry Chandler, George Mason University, Robert Chia, University of Essex, Colin Crook, Citicorp (retired), Lynn Crawford, University of Technology, Sydney Keith Devlin, St. Mary's College, Kevin Dooley, Arizona State University, William Frederick, University of Pittsburgh, Raghu Garud, New York University, Ben Goertzel, IntelliGenesis, Jeffrey Goldstein, Adelphi University, Hugh Gunz, University of Toronto, John Hassard, Manchester School of Management, John Holland, University of Michigan, Heather Hopfl, Newcastle Business School, Stu Kauffman, BiosGroup, Ben Kutz, Ideatree, Hugo Letiche, Erasmus University, Steve Maguire, McGill University, Bill McKelvey, University of California at Los Angeles, Don Mikulecky, Virginia Commonwealth University, Eve Mitleton-Kelly, London School of Economics, John Perry, Stanford University, Stanley Peters, Stanford University, Steven Phelan, University of Texas, Dallas, Larry Prusak, IBM Consulting, Jan Rivkin, Harvard Business School, Johan Roos, International Institute for Management Development, Duska Rosenberg, Royal Holloway Institute, John Seely Brown, XEROX PARC, Haridimos Tsoukas, University of Cyprus, Willard Uncapher, University of Texas, Robin Wood, Ernst and Young, Production Editor: Benjamin T. St. Jacques, Lawrence Erlbaum Associates, Inc. Editorial Assistant: Jacco van Uden Subscriber Information: Emergence is published four times a year and is available on a calendar-year basis only. In the United States and Canada, per-volume rates are US $40 for individuals, US $125 for institutions, and US $20 for students; in other countries, per-volume rates are US $65 for individuals, US $150 for institutions, and US $40 for students. Send subscription orders, information requests, and address changes to the Journal Subscription Department, Lawrence Erlbaum Associates, Inc., 10 Industrial Avenue, Mahwah, NJ 07430-2262. Address changes should include the mailing label or a facsimile. Claims for missing issues cannot be honored beyond 4 months after mailing date. Duplicate copies cannot be sent to replace issues not delivered due to failure to notify publisher of change of address. Copyright © 1999, Lawrence Erlbaum Associates, Inc. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, microfilming, recording, or otherwise, without permission of the publisher. Send special requests for permission to the Permissions Department, Lawrence Erlbaum Associates, Inc., 10 Industrial Avenue, Mahwah, NJ 07430-2262. Printed in the United States of America. ISSN 1521-3250.
Emergence A Journal of Complexity Issues in Organizations and Management a publication of The Institute for the Study of Coherence and Emergence Volume #1, Issue #4, 1999
Editor’s Note
3
Complexity Science: a Worldview Shift Eric B. Dent
5
Piggy and the Eternal City: Science Fiction as Testing Ground for New Management Theory John F. Keane
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Strategic Management System Enhancement and Strong Influence Strings Adam J. Koch
43
Organizational Extinction and Complex Systems Russ Marion and Josh Bacon
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Why Businesses Fail: an Organizational Perspective Tom Rand
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Twenty-First-Century Management and the Complexity Paradigm Dr. Hiroshi Tasaka
115
About the Authors
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EMERGENCE, 1(4), 3–4 Copyright © 1999, Lawrence Erlbaum Associates, Inc.
Editor’s Note
T
he merger of America OnLine and Time Warner (announced as this journal went to press) suggests that complexity-oriented thinking has a bright future in managerial circles. The manifold interrelationships, networks, layers, and subtleties that pervade this linkage of old and new media are ripe for complexity-oriented perspectives. Even the popular press has echoed this theme in its reaction to the news. These perspectives are probed in the six articles in this issue. Taken together, they provide a window on the conjunctions of research and practice awaiting us in the century ahead. Eric Dent’s “Complexity Science: a Worldview Shift” differentiates two worldviews, the emerging and the traditional, and suggests a change in mental models to enhance the possibility of organizational success. Dent argues that executives typically use traditional worldview assumptions in situations where those assumptions are not appropriate, resulting in ineffectiveness. He then illustrates how strategic planning, problem solving, and performance appraisal are transformed when a manager makes emerging rather than traditional worldview assumptions. In “Piggy and the Eternal City: Science Fiction as Testing Ground for New Management Theory,” John Keane introduces a new approach to metaphorically analyzing theories of organizational management. He examines two theories, order-through-fluctuations and autopoiesis, and by revealing discontinuities and unpredictable tangents in the theory’s application within metaphorical environments, succeeds in redefining the theories at a conceptual level. Adam Koch’s “Strategic Management System Enhancement and Strong Influence Strings” introduces a new analytical tool, strong influence strings. Using this tool, Koch provides an operational definition of strategic management enhancement and seeks to answer: What is the logic of strategic management system enhancement? and What is (are) 3
EMERGENCE the correct sequence(s) of steps in strategic management enhancement? In “Organizational Extinction and Complex Systems,” Russ Marion and Josh Bacon examine how extinctions occur among formal social systems. They attempt to understand the dynamics of extinction as a function of complex interaction among multiple organizational actors, and argue that it is the breakdown of such networks that is ultimately responsible for organizational extinction. Marion and Bacon expand on the thought that “Fitness is not the result of a few, simple, localized causes, and neither is decline.” Tom Rand presents an argument for alignment in his “Why Businesses Fail: an Organizational Perspective.” He suggests that businesses fail because neither management nor employees have effective control. Aligning elements in the organizational structure will provide apertures through which management and employees alike can see conditions as they change and reallocate resources effectively. Rand argues that when management has acquired the requisite visibility (the capability to see and to understand what is going on), it will have attained the capability to make the future. Finally, Hiroshi Tasaka asks us: What is “complexity knowing”? In this thought-provoking piece, Tasaka suggests that complexity is a new paradigm of knowing or, rather, a new way of conceptualizing knowledge. Accordingly, what complexity will bring about is nothing less than a shift from old ways of thinking to new ways of thinking in all domains of knowledge. Tasaka cites seven key ideas as the foundation for this shift: 1 As something becomes more complex, it acquires new properties. 2 The spontaneous behavior of individuals produces the norm for the aggregate. 3 Coherence stimulates self-organization. 4 Fluctuations at the micro level can sway macroscopic trends. 5 The whole and its parts co-evolve. 6 The process of evolution also evolves. 7 The best way to predict the future is to invent it. With these six articles, Emergence has reached a new milestone: the conclusion of Volume 1. The year 2000 and Volume 2 will see a continued exploration of how complexity ideas continue to evolve and what that might mean for managers and researchers of management. To our readers and authors, thank you, it has been an exciting year! Michael Lissack Editor 4
EMERGENCE, 1(4), 5–19 Copyright © 1999, Lawrence Erlbaum Associates, Inc.
Complexity Science: a Worldview Shift Eric B. Dent
O
ne of the frustrations of working in the exciting area of “complexity science in organizations” is that there is no commonly accepted definition of what this term means (White et al., 1997). Definitions have been offered, such as “complexity is a watchword for a new way of thinking about the collective behavior of many basic but interacting units ... complexity is the study of the behavior of macroscopic collections of such units that are endowed with the potential to evolve in time” (Coveney and Highfield, 1995: 7). Although this definition is very descriptive, it still seems general and unfocused. The purpose of this article is to offer a simple definition for complexity science and to demonstrate the shift in worldview necessary for complexity science to become second nature to people as traditional science now is. Simply put, complexity science is an approach to research, study, and perspective that makes the philosophical assumptions of the emerging worldview (EWV)—these include holism, perspectival observation, mutual causation, relationship as unit of analysis, and others; see Table 1. Classical science, as practiced in the twentieth century, for the most part makes the philosophical assumptions that will be labeled here the traditional worldview (TWV)—which include underlying assumptions of reductionism, objective observation, linear causation, entity as unit of analysis, and others. This TWV, which has allowed people to make significant achievements in many fields, is no longer serving as a reliable guide. Several 5
EMERGENCE brief examples illustrate the dysfunctional nature of TWV assumptions applied inappropriately: ◆ Rent control laws that were intended to maintain a stock of low-cost housing have resulted in a shortage of low-cost housing. ◆ The demise of the Saturday Evening Post and the Curtis Publishing Company has been attributed to “management essentially look[ing] for short and direct cause and effect linkages” (Jacobs and Jaques, 1987: 34). Computer simulations have suggested that this company could have been saved if a strategy incorporating complex, indirect linkages had been employed. ◆ “The largest building in the world, the space vehicle preparation shed at Cape Kennedy, generates its own weather, including clouds and rains. Designed to protect space rockets from the elements, it pelts them with storms of its own” (Gall, 1977: 20). ◆ Sick people go to the hospital to be made well. Twenty percent of all patients, however, acquire illness in the hospital as a result of their diagnostic procedures and treatments prescribed (Illich, 1977: 23). The rise of complexity science has paralleled an increase in dissatisfaction with the TWV. Capra (1982: 15) labels this dissatisfaction a crisis of perception and says that it occurs when people hold to a mental model that no longer achieves their standards of accuracy. Other writers have called this same phenomenon a period of dislocation (Ackoff, 1981) or a time when we are between “stories” (Schwartz and Ogilvy, 1979). We do not yet know exactly what the new story will be. It is easier to see where we have been than where we are going. Consequently, the problems and dilemmas that have arisen are easier to critique than the specific details of a new worldview are to provide. Examples of these difficulties are TWV assumptions that work within a range of conditions, but beyond that range they no longer work. Many have written about the change in worldview (Wishard, 1995; Dooley, 1997; Slife and Williams, 1995; Smith, 1982; Ackoff, 1994; Dent, 1995). In contrast to these works, however, the focus of this article is on the change in thinking that is required for organizational members to function effectively in postmodern organizations. I will suggest that if we are to continue to grow, develop, and thrive in this world we must adjust some of our most deeply held mental models about the world and our interactions with it. At the same time, I acknowledge that there is some suggestion (Wilber, 1998) and evidence (Dent and Powley, 1999) that the 6
VOLUME #1, ISSUE #4 worldview shift may not be progressing as rapidly as some writers have claimed. The article will attempt to describe the most necessary shifts in thinking so that complexity science will be seen as “normal.” Some of the underlying assumptions of the shift in worldview are becoming clearer. A difficulty in capturing the TWV and EWV underlying assumptions, though, is that the worldviews cannot be simply stated. One can use simple metaphors like the clock and the waterfall, but these do not capture the full essence of the worldviews. Table 1 contains a list of a number of differences in underlying assumption gathered from a variety of sources. Most readers of this article will have been taught in a learning paradigm so that they will be more comfortable with the information presented in the form of Table 1 (Vaill, 1996). However, Figure 1, which still has limitations, is a more accurate visual representation of the differences in TWV and EWV underlying assumptions, for reasons discussed below. Including all of the information in Table 1 in Figure 1 would overwhelm the visual representation, so only the three constructs that best differentiate worldview (Dent, 1997) are presented. For clarity of understanding, the word “construct” is used to denote a phenomenon such as causality. The word “assumption” is used to indicate a selection within a construct. So, for the construct causality, the two assumptions labeled are mutual and linear.
TAKING
THE
TRADITIONAL WORLDVIEW “OUT OF RANGE”
It is important to note that theorists are not suggesting that the traditional underlying assumptions are wrong. In fact, many of them seem to be useful in localized settings. For example, Prigogine and Stengers (1984: xxiii) see determinism and indeterminism not as irreconcilable opposites but “each playing its role as a partner in destiny.” Between bifurcation points, determinism is operative. At a bifurcation point, however, indeterminism takes over. Consequently, indeterminism (which doesn’t dismiss localized determinism) and the other emerging assumptions seem to be more useful abstract concepts. They reflect reality more accurately in a larger number of instances. Capra (1982) nicely captures the distinction: Modern science has come to realize that all scientific theories are approximations to the true nature of reality; and that each theory is valid for a certain range of phenomenon. Beyond this range it no longer gives a
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EMERGENCE Table 1 Emerging and traditional worldview descriptors Emerging
Traditional
Holism Mutual causality Perspectival reality Observer in the observation Indeterminism Equal focus on exteriors and interiors Adaptive self-organization Adaptive self-organization Focus on relationship between entities Dialogical research methods Nonlinear relationships — Critical mass thresholds Polarity thinking Focus on feedback Quantum physics perspectives — influence occurs through iterative non-linear feedback — the world is novel and probabilistic Postmodern Dedifferentiation Focus on heterarchy (within level) Understanding/sensitivity analysis/explanation Equality Yin/yang balance Language as action (Gergen and Thatchenkery, 1996) Paradox Based on biology — structure, pattern, self-organization, lifecycle Focus on patterns Focus on variation Local control Behavior emerges from bottom up Metaphor of morphogenesis Focus on ongoing behavior Generalist Little or no transference of models Theory is narrowly applicable Irreversible time Generation of symbols Mind creates matter
Reductionism Linear causality Objective reality Observer outside the observation Determinism Primary focus on exteriors (Wilber, 1998) “Survival of the fittest” “Lead or seed” (Resnick, 1994) Focus on discrete entities Monological research methods (Wilber, 1998) Linear relationships — Marginal increases Either/or thinking (Johnson, 1992) Focus on directives Newtonian physics perspectives — influence occurs as direct result of force exerted from one person to another — expecting the world to be predictable Modern Differentiation Focus on hierarchy (between levels) Prediction Patriarchy Yang dominance (Fondas, 1997) Language as representation
8
Logic Based on nineteenth-century physics — equilibrium, stability, deterministic dynamics Focus on pace (Bailey, 1996) Focus on averages Global control Behavior specified from top down Metaphor of assembly Focus on results or outcomes Specialist Easy transference of models Theory is widely applicable Reversible time Transmission of symbols Matter creates mind (Harman, 1998)
VOLUME #1, ISSUE #4
EWV Holism Mutual causality
TWV Linear causality
Reductionism Determinism
Objective reality
Indeterminism Patriarchy
Subjective reality Equality
Figure 1 satisfactory description of nature, and new theories have to be found to replace the old one, or, rather, to extend it by improving the approximation. (Capra, 1982: 101)
A clear example is the set of equations that Newton developed for the movement of celestial bodies (Briggs and Peat, 1989: 27). Newton’s work results in precise solutions when only two bodies are involved, for example the moon and the earth. If a third body, such as the sun, is added, the equations become unsolvable. Even if the third body is extremely small, its minute gravitational pull “might cause a planet to wobble and weave drunkenly in its orbit and even fly out of the solar system altogether” (Briggs and Peat, 1989: 28). To determine accurate planetary movements, the researcher is left to develop a series of approximations using heuristic techniques. Ken Wilber (1995) uses the term “fractured worldview” to describe the part-right, part-wrong feature of the TWV: The problem was not that these early conceptions were simply wrong. Aspects of the physiosphere do indeed act in a deterministic and mechanistic-like fashion, and some of them are definitely running down. Rather it was that these conceptions were partial. They covered some of the most obvious aspects of the physiosphere, but because of the
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EMERGENCE primitive means and instruments available at the time, the subtler (and more significant) aspects of the physiosphere were overlooked. (Wilber, 1995: 10)
Wilber’s primary complaint is that the TWV ignores the internal world of prehensions, sensations, perceptions, impulses, emotions, images, symbols, and other similar phenomena that many would argue constitute as important, if not more important, a part of life. Problems also arise when people assume that the TWV is accurate in all settings. Although it is inappropriate, and potentially inaccurate, researchers frequently use linear regression on non-linear phenomena, calculus on discontinuous functions, or chi square when data points are interdependent (Dent, 1994). Priesmeyer (1992: 30) has speculated that traditional statistical methods remain useful for systems that are nearly stable. Classic problem-solving techniques make perfect sense when reductionism can be assumed. If a single problem can be solved completely independently of everything else in the system and its environment, problem solving is an ideal strategy. However, when interdependencies are present, problem solving becomes less effective. The comprehension and control model of management makes perfect sense in a relatively stable environment. However, the Relaxation Time Principle has shown that “system stability is possible only if the system’s relaxation time is shorter than the mean time between disturbances” (Clemson, 1984: 213). In other words, if an organization experiences changes more rapidly than it can comprehend and control them, then it is not possible to keep the system stable. A similar example is provided by Karl Weick (1985: 110). He describes the decision-making style of the TWV as rational. Rational decision making is effective in organizations in environments that change slowly, have few social groups, and have centralized authority that works reasonably well. Weick observes that these conditions are now relatively rare in organizations. Consequently, some aspects of the EWV are simply “enlargements” of the TWV. McKelvey (1999) notes that since the [EWV] does not require axiomatic reduction, it tolerates multiple models. Thus, “truth” is not defined in terms of reduction to a single model. ... That they also have different theoretical explanations is not considered a failure. Each is an isolated, idealized physical system representing different aspects of real-world phenomena. (McKelvey, 1999: 19)
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VOLUME #1, ISSUE #4 Perhaps the most useful mental model for thinking about the TWV and EWV is that of a polarity (Johnson, 1992). Polarities are sets of opposites that cannot function well independently. The two sides of a polarity are interdependent, so one side cannot be “right” or the “solution” at the expense of the other. Johnson contends that “many of the current trends in business and industry are polarities to manage, not problems to solve” (p. xi). An example of a polarity in worldview is that, rather than replacing yang dominance with yin dominance, the EWV includes a balance of yin and yang, not subordinating the yang. Likewise, the example provided earlier suggests that indeterminism and determinism form a polarity. The question of behavior emerging from the bottom up or being imposed from the top down form a polarity. Each side of the pole has upsides and downsides. A “figure 8” pattern often develops between the upsides and downsides of the two assumptions. People often identify the downside pole as the “problem” and therefore want to abandon it. The upside of the opposite pole is seen as the “solution.” When one pole has been emphasized for too long, the result is the downside of both poles. In terms of polarities, the shift called for in this article is from a focus on a single pole (the TWV) to a focus on both poles (the EWV). A graphical representation of a polarity is depicted in Figure 2. Although a juxtaposition listing such as Table 1 earlier may create this implication, because of instances of synthesis and polarities, these differences should not be pictured as a continuum with the TWV at one end and the EWV at the other. It is more accurate to say that there is a complementarity in the items. In some cases, one is an enlargement of the L+
R+
Uniqueness
Connectedness
Autonomy, creativity, initiative, care for the part
Equality, synergy, creativity, cohesion, care for the whole
Holism
Reductionism
Isolation
Sameness
Selfishness, neglect of whole, loss of: equality, synergy, support
Selfishness, neglect of part, excessive conformity, loss of initiative
L–
R–
Figure 2 11
EMERGENCE other, in some they are primarily distinct, and in others there is some overlap. It is also important to recognize that a breakdown in the TWV does not automatically mean the ascendance of the EWV. A manager, for example, could be totally frustrated by hierarchical structure but not know with what to replace it. And, if we give up a belief in survival of the fittest, we do not necessarily embrace adaptive self-organization. In this case, there are other alternative concepts about structure.
ORGANIZATIONAL PHENOMENA BASED ON EWV ASSUMPTIONS In The Fifth Discipline, Peter Senge (1990) includes mental modeling as one of the five disciplines. He suggests that people must be able to surface mental models by sharing the assumptions they make in a situation. This task is not trivial. Most mental models are so deeply imbedded that people do not even realize they are simply models; we believe that they are reality. Mental models are critically important. How we see things determines much of what we see. Consequently, a change in worldview from TWV to EWV would result in major changes in how organizational activity occurs. In this section we will include three examples, one for each of the underlying assumptions that best differentiate worldview: mutual causality in strategic planning, holism in mess management, and perspectival observation in performance appraisal.
MUTUAL CAUSALITY
IN
STRATEGIC PLANNING
Organizations often assume linear causality. For example, a housing organization that institutes rent control expects the direct result to be low-cost housing. Such officials have not realized the feedback from such a policy. This feedback consists of developers who will refuse to build additional housing units subject to rent control, landlords who are forced to allow properties to deteriorate because of below-market compensation, and apartment dwellers who may refuse to move to a location with better job opportunities because of the desirability of such low-cost rent. As in this example, when organizations unrealistically assume linear causality, their policies often bring about exactly the effects against which they were trying to guard (Begun, 1994: 330). An organization that fully comprehends the effects of mutual causality will engage in strategic planning in a way completely different from 12
VOLUME #1, ISSUE #4 traditional approaches. Mark Michaels (1994: 17) has pointed out that the strategic planning process as typically implemented “involves predictions about future events, predictions which the dynamic of sensitivity to initial conditions—the butterfly effect—prove unreliable.” Karl Weick advocates “real-time” (or just-in-time) strategic planning. He argues that acting should precede planning because by acting we take part in constructing the environment. The environment is not “out there,” separate from us. We can help to create the environment. Weick contends that “we create the environment through our own strong intentions” (Weick, 1995). The Spanish have a phrase which nicely captures this connotation: “Compañero, no hay camino. Se hace camino al andar.” A suitable translation is: “My friend, there is no road. You make the road as you walk.” Michaels incorporates the idea of feedback by noting that a strategic plan should be a statement of purpose, “of the company’s moral response to its broadly defined responsibilities, not an amoral plan for exploiting commercial opportunity” (1994: 17). This perspective honors the multiple sources of interconnections that develop over the lifetime of an organization. Weick and Michaels place much more of an emphasis on the present than traditional strategic planners do. Michaels even highlights the importance of the past. His three-step process of strategic planning is (1) creating a shared past; (2) defining the present; and (3) steering into the change. THE TRADITIONAL This view of strategic planning is very different from the traditional process that STRATEGIC PLANNING includes developing a vision, a mission, MODEL IS INACCURATELY identifying stakeholders, and doing a SIMPLISTIC SWOT (strengths, weaknesses, opportunities, and threats) analysis. This type of analysis assumes that the environment presents opportunities and threats, not that the organization is an active player in creating opportunities and/or threats. Priesmeyer (1992) adds that the traditional strategic planning model is inaccurately simplistic because it “suggests that one can understand the state of the system by assessing current conditions, when in fact an understanding of evolving conditions is important” (Priesmeyer, 1992: 195).
HOLISM
IN
MESS MANAGEMENT
Perhaps the most radical example of holism in practice in organizations is Ackoff ’s call for an end to problem solving. Ackoff contends that many of the problem-solving approaches used in organizations are not effective. His argument is similar to that of Senge’s designer role for leaders. Senge 13
EMERGENCE (1990) believes that problems should be prevented by proper design. Ackoff would not argue with that, but would add that when anomalies do occur, they should be managed as part of the regular course of things, rather than having a taskforce convened, or an employee assigned to work on a particular problem. According to Ackoff: this whole way of thinking encourages us to focus attention upon bits and pieces of our organizations and thereby leads us to adopt policies and carry out actions that as often as not make the original situation worse. (Clemson, 1984: 171)
It is rare in organizations that a problem can be isolated so that a fix can be implemented without also altering something else in the organization. Ackoff advocates “mess management,” his term for the continuous balancing and navigating of complex, interrelated messes, rather than problems, that most people in organizations face. Ackoff lists several problems with problem solving. For example, in many cases the complexity of the problem exceeds the problem-solving expertise of lower-level employees often assigned to “tiger” teams, taskforces, or other-named ad hoc problem-solving groups. Also, assigning a taskforce to study a problem and recommend a solution assumes that while the taskforce is spending time working on the problem, the problem is not changing (Ackoff, 1981: 4–5). Anyone who has worked in an organization has had the experience of a tiger team coming up with a recommended solution that is not ultimately implemented. Ackoff would suggest that the primary reason is that the tiger team did not take into account the whole—the complete set of interdependent relationships within a given executive’s purview. Mess management requires the executive, who has the responsibility for handling all of these interdependencies, to manage any problems that arise within his or her natural, normal processes.
PERSPECTIVAL OBSERVATION
IN
PERFORMANCE APPRAISAL
In our research, we have discovered that the English language contains a number of rich expressions that convey an appreciation of perspectival observation. These include: where you stand depends on where you sit, beauty is in the eye of the beholder, everyone looks at the world through his own glasses, the glass is half-empty or half-full, a self-fulfilling prophecy, it’s the blind man and the elephant, the Rashomon phenomenon, the umpire training school joke about “the pitch ain’t nothin’ until I 14
VOLUME #1, ISSUE #4 call it,” and that there are two sides to every story. Such a broad set of common expressions would lead one to believe that perspectival observation is a widely held assumption in society. Paradoxically, our research and experience within organizations has been the opposite. We have interviewed individuals, for example, who were perfectly willing to accept perspectival observation about what happened at an extended family Thanksgiving dinner, but who would insist that at work there is only one true story of what really happened. The prevailing view of performance appraisals in organizations is based on the assumption of objective observation. This dominant TWV is expressed in statements such as “performance measurement is typically the source of many problems in appraisal because it is seen as subjective” (Cummings and Worley, 1993: 403). Subjectivity is assumed to be problematic. An entire industry, led by the Hay Group, is devoted to instituting objective performance appraisal systems into organizations. In summary, the two forms of objective performance appraisal predominant in organizations today site the objectivity either within the manager alone, or in quantifiable metrics such as number of lines of computer code written, number of academic papers published, or projects completed on schedule and within budget. Those who assume perspectival observation contend that performance appraisal cannot be objective. For example, for only the simplest of jobs can individuals be given performance objectives that are completely within their control. If the workplace is interdependent, employees are often independently held accountable for the functioning of interdependencies that are operative in the completion of their work. Deming (1986) and the quality experts question objective performance appraisal from another perspective. They argue that it is impossible to define a subset of performance measures that can encompass the full set of behaviors that an organization wants from its employees. (For example, the 1985 and 1986 Florida Teacher of the Year recipients were both denied merit increases under the merit pay program in place at the time. The awards were given because of the teachers’ enthusiasm, dedication, involvement with students, and innovation in the classroom. The merit pay formula heavily emphasized factors such as how promptly a teacher begins and ends class.) Empirical research suggests that managers are not capable of reliably evaluating performance over time (Atwater and Yammarino, 1992). A technique for incorporating the assumption of perspectival observation into the performance appraisal process has recently come in to 15
EMERGENCE vogue. This technique has been labelled 360-degree job evaluation, multirater performance appraisal, team-based pay, and others. It is based on the assumption that no single person or collection of metrics can best reflect an employee’s performance. Many organizations are using this technique only as a way of providing feedback to an employee. The employee’s subordinates, however, do not have a say in his or her salary increase or promotion (Antonioni, 1996). Many other organizations do use subordinate appraisals to determine a manager’s raises and promotions (McEvoy, 1987). Motorola bases 20 percent of an employee’s pay on input obtained from peers. It intends to increase this percentage to 50, and contends that peer review for pay has been a major factor in a productivity boost of 126 percent over seven years (Swoboda, 1994). These multirater techniques suggest that “reality” is best articulated as a collection of a number of different viewpoints.
CONCLUSION An individual’s worldview may be a significant determinant in their success as a practicing manager. Complexity science opens up a whole new vista of perspectives, approaches, and techniques, because it is based on a set of underlying assumptions that differ from classical science. Managers need to adjust their mental models to ones that are more useful in accomplishing work. People have been operating with mental models that have not allowed them to achieve the results they have desired. We as inquirers are changing as observing systems. Just as the telescope and microscope revolutionized the way people constructed reality, the computer is having a similar effect today. These tools of intervention are our new sensory organs. Our reality changes as our ability to detect phenomena changes. While the nearly exclusive emphasis of measurement and quantification has resulted in phenomenal knowledge in the past several centuries, we may be near the peak of the mountain represented by the natural phenomena that can be explained by separate and distant inquiry. We may have passed the peak for organizational phenomena. Research is being conducted to determine whether or not worldview distinguishes between successful and less successful managers. Many management education programs need to be changed to teach more holistic, perspectival, and mutually causal mindsets. Although changing mental models is often difficult, such flexibility is necessary in the demanding, global marketplace of today. 16
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REFERENCES Ackoff, Russell L. (1981) Creating the Corporate Future: Plan or Be Planned for, New York: John Wiley. Antonioni, David (1996) “Designing an effective 360-degree appraisal feedback process”, Organizational Dynamics, Autumn: 24–38. Atwater, L. E. and Yammarino, F. J. (1992) “Does self-other agreement on leadership perceptions moderate the validity of leadership and performance predictions?”, Personnel Psychology, 45: 141–64. Begun, James W. (1994) “Chaos and complexity: frontiers of organization science”, Journal of Management Inquiry, 3 (4, Dec.): 329–35. Briggs, J. and Peat, F. David (1989) Turbulent Mirror: an Illustrated Guide to Chaos Theory and the Science of Wholeness, New York: Harper and Row. Capra, F. (1982) The Turning Point: Science, Society, and the Rising Culture, New York: Simon and Schuster. Clemson, B. (1984) Cybernetics: a New Management Tool, Tunbridge Wells: Abacus House. Coveney, P. and Highfield, R. (1995) Frontiers of Complexity: the Search for Order in a Chaotic World, New York: Fawcett Columbine. Cummings, T.G. and Worley, C.G. (1993) Organization Development and Change (5th edn), St. Paul: West. Deming, W.E. (1986) Out of the Crisis, Cambridge: MIT Center for Advanced Engineering Study. Dent, E.B. (1994). “A chaos theory analysis of a government service agency 1993 employee opinion survey data”, Proceedings of the 1994 Chaos Network Conference, Savoy, IL: The Chaos Network. Dent, E.B. (1995) Management: Perspectives, Processes, and Productivity, College Park, MD: University of Maryland Press. Dent, E.B. (1997) “The design, development and evaluation of measures of individual worldview”, dissertation, The George Washington University, The School of Business and Public Management. Dent, E.B. and Powley, E. (1999) “Paradigm Shift in Progress?”, Proceedings of the United Kingdom Systems Society 6th International Conference, Lincoln, July 1999. Dooley, Kevin J. (1997) “A complex adaptive systems model of organizational change,” Nonlinear Dynamics, Psychology, and Life Sciences, 1 (1): 69–97. Fondas, Nanette (1997). “Feminization unveiled: management qualities in contemporary writings”, Academy of Management Review, 22 (1, Jan.): 257–82. Gall, J. (1977) Systemantics, New York: New York Times Book Company. Gergen, Kenneth J. and Thatchenkery, Tojo Joseph (1996) “Organization science as social construction: postmodern potentials”, Journal of Applied Behavioral Science, 32 (4, Dec.): 356–77. 17
EMERGENCE Harman, Willis (1998) Global Mind Change: the Promise of the Last Years of the Twentieth Century, Indianapolis: Knowledge Systems. Illich, Ivan (1977) Medical Nemesis, New York: Bantam Books. Jacobs, Thomas Owen and Jaques, Elliott (1987) “Leadership in complex systems”, in J. Zeidner (ed.) Human Productivity and Enhancement: Organizations, Personnel, and Decision Making, Vol. 2, New York: Praeger. Johnson, Barry (1992) Polarity Management: Identifying and Managing Unsolvable Problems, Amherst: HRD Press. McEvoy, G.M. (1987) “Using subordinate appraisals of managers to predict performance and promotions”, Journal of Police Science and Administration, 15 (2): 118–24. McKelvey, Bill (1999) “Complexity theory in organization science: Seizing the promise or becoming a fad,” Emergence, 1 (1): 5–32. Michaels, Mark (1994) “Creating a nonlinear strategic plan”, The Chaos Network, 6 (4, Nov.): 17–19. Priesmeyer, H. Richard (1992) Organizations and Chaos: Defining the Methods of Nonlinear Management, Westport, CT: Quorum Books. Prigogine, Ilya and Stengers, Isabelle (1984) Order out of Chaos: Man’s New Dialogue with Nature, Toronto: Bantam Books. Schwartz, P. and Ogilvy, J. (1979) The Emergent Paradigm: Changing Patterns of Thought and Belief, Menlo Park, CA: SRI International. Senge, P.M. (1990) The Fifth Discipline: the Art and Practice of the Learning Organization, New York: Doubleday. Slife, Brent D. and Williams, Richard N. (1995) What’s Behind the Research: Discovering Hidden Assumptions in the Behavioral Sciences, Thousand Oaks, CA: Sage. Smith, Huston (1982) Beyond the Postmodern Mind, New York: Crossroads. Swoboda, Frank (1994). “Motorola experiments with letting workers’ peers weigh their pay”, Washington Post, May 22: H8. Vaill, P.B. (1996) Learning as a Way of Being: Strategies for Survival in a World of Permanent White Water, San Francisco: Jossey-Bass. Weick, Karl E. (1995) Sensemaking in Organizations, Thousand Oaks, CA: Sage. Weick, Karl E. (1985) “Sources of order in underorganized systems: Themes in recent organizational theory”, in Y.S. Lincoln (ed.) Organizational Theory and Inquiry, Beverly Hills, CA: Sage. White, Michael C., Marin, Daniel B., Brazeal, Deborah V. and Friedman, William H. (1997) “The evolution of organizations: suggestions from complexity theory about the interplay between natural selection and adaptation”, Human Relations, 50 (11, Nov.): 1383–401. Wilber, Ken (1995) Sex, Ecology, Spirituality: the Spirit of Evolution, Boston: Shambala.
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VOLUME #1, ISSUE #4 Wilbur, Ken (1998) The Marriage of Sense and Soul: Integrating Science and Religion, New York: Random House. Wishard, William Van Dusen (1995) “Business and the new worldview”, World Business Academy Perspectives, 9 (4): 29–40.
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EMERGENCE, 1(4), 20–42 Copyright © 1999, Lawrence Erlbaum Associates, Inc.
Piggy and the Eternal City: Science Fiction as Testing Ground for New Management Theory John F. Keane
T
he speculative nature of the genre makes social settings provided by science fiction a fertile metaphorical testing ground for new management concepts. Science fiction’s need to maintain internal consistency, or “the willing suspension of disbelief,” reinforces this claim. If the “environment” is adequately cogent, new perspectives on the relevant concept can emerge from such an approach. In certain respects, this approach has been pre-empted by management researchers who examine organizations using metaphors (Clark and Salaman, 1996; Alvesson, 1993). Broekstra has examined organizational theories derived from the “new management” as metaphorical terms that can illuminate organizational research (Broekstra, 1996). However, there are important differences between this work and the method employed in this article. Instead of merely “metaphorizing” the organization with a given theoretical approach, the present author seeks to link both organization and theory within a common metaphor. This approach “tests” the theory as a metaphor “practiced” within the wider metaphorical environment provided by the literary setting. This practical “testing” of metaphor has led
20
VOLUME #1, ISSUE #4 the present author to term this approach “praxiphorical” analysis. The presence or absence of particular conditions in the metaphorical environment allows the researcher to infer ideal conditions for applying a concept. A fantastic metaphorical environment can help to explore the paradigm underlying the concept. Discontinuities between the theory in ideal and metaphorical “practice” can question its validity. This article has pursued all these approaches. The article uses two classic science fiction novels to explore two concepts from the new management: ◆ William Golding’s Lord of the Flies—The dissipative structures model devised by Ilya Prigogine. ◆ Arthur C. Clarke’s The City and the Stars—The autopoietic concept devised by Humberto Maturana and Francisco Varela. The social landscape of each novel has sufficient internal consistency to act as a viable model in testing the concepts. Both novels also elaborate each concept. This permits comparison with the management literature and development of new perspectives.
DISSIPATIVE STRUCTURES MODEL This model is the most fully developed and respected in the physical sciences. Its creator, the Nobel Prize-winning chemist Ilya Prigogine, heads a research team based in Brussels researching self-organization in physical and chemical systems. The theory in outline is relatively simple, and uses thermodynamic principles to emphasize the role of chance in system development.
FAR-FROM-EQUILIBRIUM STATES Systems in a state of equilibrium are featureless and chaotic. They have a maximum number of possible arrangements of molecular particles. No effect-producing differences are discernible anywhere. Far-from-equilibrium systems are the opposite of this state. Living organisms and social organizations are good examples. They are not “finished” forms, but remain continually open to the outside world and dynamically active. This openness and activity allows far-fromequilibrium structures to escape from entropy and spontaneously generate new levels of order.
21
EMERGENCE
The export of internal entropy For order to emerge in far-from-equilibrium systems, energy from the exterior must compensate for energy lost through internal processes. Davies uses the example of a pendulum to show how far-fromequilibrium structures use external energy to achieve a new organizational structure (Davies, 1987: 84). If a pendulum has no friction to dissipate its energy, it will continue to describe the same path, maintaining the same form, indefinitely (Figure 1).
Figure 1 When the pendulum’s motion is subjected to friction, the pendulum loses its form and grinds to a halt. The energy of the system has been dissipated by friction, or internal entropy production (Figure 2).
Figure 2 In a system open to the exterior, the pendulum will lose its existing form via friction while assuming another driven by energy from the exterior. Energy input must always exceed entropy production for new order to 22
VOLUME #1, ISSUE #4 emerge. This is the first condition for self-organization. The system minimizes entropy production, spontaneously generating a new structural order without compromising the laws of thermodynamics (Figure 3). These structures have been called “dissipative structures” because they are defined by the dissipative flows and reactions characteristic of farfrom-equilibrium activity.
Energy
Figure 3
Non-linear interaction mechanisms Compensation of entropy produced by energy gained from the exterior is the first precondition for far-from-equilibrium systems to produce selforganization. The second is the presence of non-linear interaction mechanisms between the microscopic elements of the system. These arise naturally in far-from-equilibrium processes (Prigogine and Stengers, 1984: 140–53). Linear relationships between elements are so called because they can be described with a straight line. A good example would be the relationship between oranges and their price (Coveney and Highfield, 1995: 57–8). Five oranges cost five times more than one orange. Ten oranges cost ten times more. This directly proportionate relationship between two quantities defines linear relationships. Because the interaction between elements is consistently additive, long-term predictions of their behavior are possible. But if two oranges are free for every twelve bought, and six for every eighteen, the relationship can longer be described using a straight line. This is a simple example of a non-linear relationship. The relationship between variables is disproportionate. Feedback results from non-linear processes, as process outcomes trigger additional changes that are impossible to predict. 23
EMERGENCE Prigogine uses similar non-linear processes such as auto- or crosscatalytic reactions to explain chemical self-organization. Here, the product of a chemical reaction is involved in its own synthesis. Because of their extreme sensitivity to initial conditions, all mathematical descriptions used to predict these reactions are inadequate. An initial description of the behavior of all variables accurate to 100,000 decimal places is still inadequate to describe their interactions. Non-linear processes could theoretically be accurately described, were sufficiently accurate mathematical descriptions of initial conditions available. Since they are not, however, complex non-linear processes remain unpredictable (Davies, 1987: 23–5). They are their own best description. As Kelly (1994: 15) describes non-linearity: 2+2 = apples
The unpredictable nature of non-linear processes produces “fluctuations,” or deviations from the average values maintaining the system’s steady state. These are of central importance to the phenomena of selforganization. Because of fluctuations, the evolution of a system containing non-linear mechanisms is not uniquely determined by the equations governing the interacting variables. Chance exercises an influence on the system’s historical development. Fluctuations are also called “bifurcations” or “bifurcation points.”
ORDER-THROUGH-FLUCTUATIONS If the system’s original trajectory prior to a fluctuation was stable, the effect of the fluctuation will be damped and the system will return to it. This process is shown in Figure 4.
Bifurcation point Figure 4 The solid line shows the system’s trajectory. The dotted line shows a fluctuation, or “choice” for the system.
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VOLUME #1, ISSUE #4 But if the system’s original trajectory were unstable, the system will be driven down a new bifurcation branch toward a completely unpredicted solution. This process is shown in Figure 5.
Bifurcation point Figure 5 The solid line shows the system’s actual trajectory before and after a fluctuation. The dotted line shows the hypothetical course of the system’s initial trajectory after being driven off course by a chance fluctuation, or “choice” for the system. The “history” of the system depends on which fluctuations occur. Each system has a unique history depending on its environment and the chance decisions it follows during its development. The system has unusual adaptive potential. Far-from-equilibrium systems have high sensitivity to external conditions unthinkable in equilibrium systems. They can adapt to subtle changes in external conditions through assisted bifurcation. Any state of the system will only remain stable if it adapts to environmental conditions. The sophisticated communications of dissipative structures assist this adaptive capacity. Dissipative structures behave coherently, as though each molecule were “informed” about the state of the whole system (Prigogine and Stengers, 1984: 160–67; Davies, 1987: 86). The entire evolutionary process of such a structure over time is shown in Figure 6.
Biological order through fluctuations A dissipative structure (like all non-linear systems) can at best be statistically described, yet is so sensitive to initial starting conditions that such descriptions cannot preclude the possible emergence of chance behavior and fluctuations. It is not necessarily possible to deduce the historical development of a non-linear system from the equations governing the interacting variables. Each system will have its own unique history and potential set of outcomes. As a system develops, chance and determinism interact, the deterministic equations governing steady state conditions 25
EMERGENCE
Bifurcation points Figure 6 As the chemical system is pushed further from equilibrium, the straight lines showing the system’s steady state reach various thresholds of stability. Fluctuations then occur. The solid lines show the system’s actual trajectories. The dotted lines show potential courses ignored by the system after a series of fluctuations, or random “choices.” The birfurcation points create a unique “history” for the system as it develops over time. Both chance and environmental influences determine the “choices” made. damping or amplifying random fluctuations. Auto-catalytic feedback is the major influence on this amplification process. “Order by fluctuation” is a paradigm that can be applied equally well to the study of systems that are described in terms of basic units having themselves an internal structure and containing mechanisms governing their interaction with the environment and other elements of the system (Allen and Sanglier, 1978: 266). Biological systems frequently self-organize in a similar manner to the order-through-fluctuations model characteristic of far-from-equilibrium chemical systems. For example, termite nests begin when a single termite leaves some of its attractant hormone on the ground. This is the equivalent of a chance fluctuation. The hormone attracts other termites. These termites leave more hormone and also drop earth on to the spot. The fluctuation is amplified into a new termite mound by an accretive, non-linear process (Prigogine and Stengers, 1984). This process corresponds to one stage of a bifurcation tree, with a single fluctuation being amplified all the way into a new state. Nonetheless, it intimates how social selforganization might proceed. Perturbations, or fluctuations caused by physical stress, can also arise in biological structures. For example, the directionality of snail shells (that is, their tendency to right- or left-handedness) is thought to have originally arisen from a minute perturbation created by universal weak force at an early stage of their development (Stewart and Golubitsky, 26
VOLUME #1, ISSUE #4 1993: 176–82). This perturbation was then amplified via genetic replication. Most bifurcations at a biological level arise from the tendency of organic systems to oscillate or buckle, so losing their original single-state symmetry, when subject to stressing physical forces. Other examples include the natural tendency for animal locomotion methods to break symmetry when stressed (Stewart and Golubitsky, 1993: 214–18).
THE MANAGEMENT LITERATURE FLUCTUATIONS
ON
ORDER-THROUGH-
The management literature describes spontaneous group change in the following terms. If the environment stresses a social system, it drives it far from thermodynamic equilibrium (Smith and Gemmill, 1991, 1985). With sufficient energy from the exterior, it may then fluctuate as a whole into a new trajectory better suited to the environment (Leifer, 1989). A system can co-evolve with the environment in this manner, achieving new, adaptive order by means of spontaneous fluctuations (Takeuchi and Nonaka, 1986; Stacey, 1991).
LORD OF THE FLIES FLUCTUATIONS
AS A
MODEL
OF
ORDER-THROUGH-
William Golding’s famous novel Lord of the Flies describes group transformation in similar terms to the management literature. The following “order-through-fluctuations” concepts can be found in Golding’s novel: ◆ External pressure driving a social system far-from-equilibrium into non-linear, unpredictable behavior. ◆ A far-from-equilibrium social system temporarily fluctuating into a new trajectory better adapted to the external environment. ◆ A far-from-equilibrium social system bifurcating into a new, better adapted trajectory on a permanent basis. The novel’s plot is simple. A number of boys from a public (fee-paying) school crash land on a desert island. At first, they try to construct a democratic culture, with some success. This culture is associated with various objects and symbols such as a conch shell, a signal fire, and a pair of spectacles. However, the necessity of survival in a hostile environment makes it hard to sustain this culture. The social system developed around the conch is put under increasing pressure. This stress drives the group towards a new trajectory better suited to the environment. This is the culture of hunting, violence, and authority exemplified by Jack Merridew. As 27
EMERGENCE the pressure increases, the occasional fluctuations towards this new trajectory become more frequent. The group eventually adopts the new trajectory. Representatives of the old conch culture—Ralph and Piggy— become outcasts. Prigogine’s concept of order-through-fluctuations can largely explain this sequence of events. Prigogine argues that a system can achieve a new order—a new trajectory—if it acquires sufficient energy from the environment to compensate for the energy it naturally loses through entropy. At first, the group only assumes the new trajectory on an occasional basis. The original trajectory is still stable enough to “damp” the fluctuation. Permanent assumption of the new trajectory is associated with a heavy storm, Simon’s murder and the group’s collective encounter with the beast. This emotional and experiential input helps to create a new social order comparatively well adapted to the island environment. Figure 7 shows the sequence of events.
Distance from equilibrium
Birthmark Fire out. 1st minor boy killed Lose ship fluctuation. Acceptance of beast, Hunters dance. Damped
2nd minor fluctuation. Pilot lands dead on the fire. Damped
3rd minor Fluctuation Piggy's Hunt fluctuation. and murder. for Ralph Jack leaves bifurcation. Conch the group. Simon's broken Damped murder. Conch culture dies. New social order becomes differentiated
Figure 7 Main events in Lord of the Flies described by the orderthrough-fluctuations model The new order arising from the major fluctuation is another mode of organization, not mere chaos. Jack cleverly hunts Ralph by sweeping the island with a line of hunters. Each member passes an ululation along the line. This alerts the whole group to the fugitive’s presence. Indeed, the social order generated by the fluctuation is probably more highly developed than that of the initial trajectory. By definition, it is better adapted to the environment. It is difficult to doubt that the novel uses Prigogine’s concept to explain social change. Internal consistency allows comparison of a 28
VOLUME #1, ISSUE #4 process governed by metaphorical conditions with those that prevail in the management literature. Minor oscillations in the group’s structure take a variety of forms. One of these is the conflict between Jack and Ralph. The group’s attention focuses alternately on these two, and accepts the leadership of whoever prevails: “That’s right. Keep Piggy out of danger.” “Have some sense. What can Piggy do with only one eye?” The rest of the boys were looking from Jack to Ralph, curiously. (Golding, 1961: 97)
The management literature has overlooked the importance of leadership during transformation through fluctuations. Yet here, the group’s attention focuses on two protagonists. Whoever prevails dominates the group. Finding a unit of analysis has always been problematic in applying Prigogine’s concepts to social adaptation. “Energy” is a consistent unit in physical systems. It is not consistent in social systems. The energy that a social group requires to achieve new order has never been properly defined in the management literature. The novel infers that extreme or unusual emotional experiences such as storms can provide the energy influx for a group to achieve a new mode of organization. In the novel, physical objects are important in maintaining group cohesion. The destruction of the symbols associated with the conch culture leads to feedback, reinforcing the new trajectory. Roger smashing the conch is the most obvious example of this. However, the new group trajectory also uses physical symbols. Most obvious of these are the coloured clays that the choir use for hunting. According to Prigogine, natural manifestations of order-throughfluctuations such as the Brusselator are characterized by unified activity (Prigogine and Stengers, 1984): Remarkably, all the molecules in the Brusselator seem able to “communicate” with each other over vast distances, all knowing when to turn blue, and when to turn red. The “tick” of this chemical clock as it rolls around the limit-cycle moat is a function only of certain physical properties of the Brusselator. (Coveney and Highfield, 1995: 162)
The excitations of heart muscles or the brain have similar operating principles (Goodwin, 1994: 56–62). 29
EMERGENCE Golding similarly describes oscillations in the group’s initial trajectory. For example, the climactic dance that leads to the bifurcation point is a unified, rhythmic process, like the Brusselator: The movement became regular while the chant lost its first superficial excitement and began to beat like a steady pulse. Roger ceased to be a pig and became a hunter, so that the centre of the ring yawned emptily. Some of the littluns started a ring of their own; and the complementary circles went round and round as though repetition would achieve safety of itself. There was the throb and stamp of a single organism. (Golding, 1961: 144–5).
Piggy, Simon and Ralph are seldom included in these group fluctuations/oscillations. The new social order that finally emerges from them actively persecutes these three boys. Pressure from the environment imposes unity on the group even before the major bifurcation. After the beast has taken possession of the mountain, the boys prepare to confront it as a single organic entity: The bright morning was full of threats and the circle began to change. It faced out, rather than in, and the spears of sharpened wood were like a fence. (Golding, 1961: 96)
Prigogine claims that a physical structure will act with systemic unity to achieve adaptive order if provided with sufficient energy. The literary model links external pressure, energy influx, group unity and new organizational trajectories in an identical manner. External pressure on the group forms a continual backdrop in the novel. Natural phenomena provide an energy influx, though this also represents external stress. Under these influences, the group acts as a unity when oscillating into a new trajectory. The novel also provides psychological perspectives on the process of group fluctuation. Loss of self is synonymous with boys who follow the new trajectory. Ralph, who stands between hunting and tradition, experiences this loss as “a curtain” in his mind that obscures his ideas (Golding, 1961: 162). The face paint adopted by the hunters is “liberation into savagery” (ibid.:164). When Jack first regards his painted face, he sees “an awesome stranger” (ibid.: 61). The frenetic dances that actually lead to the new trajectory involve a loss of self (ibid.: 144–5). Freud referred to such feelings of ego loss as jouissance: an ecstatic overflow of oceanic 30
VOLUME #1, ISSUE #4 feelings (Freud, 1991: 251–2). This psychological state is synonymous with spontaneous group transformation in the novel. It is also associated with the same process in other literature (Euripedes, 1973). Although the model of order-through-fluctuations explains most of what transpires, there are important exceptions. The fact that some group members resist the bifurcation presents interesting difficulties. The management literature does not confront this possibility. The fate of those who resist the fluctuation in the novel is harsh. Such treatment might well characterize the treatment of non-conformists in conventional organizations. Further, the transformation of the group occurs via a sequence of minor fluctuations or oscillations eventually culminating in birfurcation. The process is not instantaneous but incremental. In the early stages of the process, Jack’s group is often autonomous. However, this autonomous behavior never confronts the prevailing culture. It is, indeed, subcultural. Eventually, as the social system moves far enough from equilibrium, the subculture assumes dominance. This has important implications for the study of subcultures in organizations.
AUTOPOIESIS
IN THE
PHYSICAL SCIENCES AND SYSTEMS THEORY
This concept derives from the biological sciences. Its main characteristic is a rejection of the possibility of objectivity. Organisms inevitably perceive external threats or opportunities in self-referential terms. Varela, Maturana and Uribe devised the original model in 1974 (Varela, Maturana and Uribe, 1974). The theory created a new definition of life based on the ability of a system to reproduce its own structural network rather than merely reproduce. This led to a definition of the autopoietic system as a: network of productions of components that a) through their interactions recursively regenerate the network of productions that produced them, and b) realize this network as a unity by constituting and specifying its boundaries in the space in which they exist, is a autopoietic system. (Maturana, 1980: 52–3; see also Maturana and Varela, 1980)
The recursive relationship between the components and the whole ensures that the system develops a self-organizing response to external perturbations. The perturbed components influence all other compo31
EMERGENCE nents in the system. In response, the whole maintains its integrity by further perturbation of the components where necessary. By this recursive process, the system continually adjusts to its environment without direct engagement (Zeleny, 1980: 20). An autopoietic system is necessarily autonomous and self-referential. Having defined its own borders from within, it achieves autopoietic “take-off ” or radical autonomy, which lasts indefinitely or until external perturbations exceed the capacity of its self-organized responses.
AUTOPOIESIS
IN THE
MANAGEMENT LITERATURE
Luhmann was one of the first researchers to apply the concept to the social sciences (Luhmann, 1984, 1986: 172–92). His work stressed the self-referentiality of social systems. In Luhmann’s view, communications constitute social systems. They are recursively reproduced by the communications network itself. Language is ephemeral in this process. The maintenance of social systems requires self-referential production. In his development of an epistemology of law, Teubner referred extensively to Luhmann’s work. For Teubner, the network of legal communications refers only to itself as it develops, not to the external world of persons (Teubner, 1988, 1989: 727–59). It derives meaning from itself. External agents are redefined by the BUREAUCRACY NEVER DIES, legal communicative network as features of itself. BUT SPONTANEOUSLY Kauffman translates autopoiesis as PURSUES WHATEVER COURSES infusing organizations with a dynamic WILL REGENERATE ITS SYSTEM conservatism. The self-organizing feaOF ORGANIZATION tures of changeability and adaptiveness are used for the sole end of preserving the existence of organizations (Kauffman, 1976). Bureaucracy never dies, but spontaneously pursues whatever courses will regenerate its system of organization. Jessop applied autopoietical concepts to the study of political institutions and their interrelationships. His view of an autopoietic institution is one characterized by radical autonomy (Jessop, 1990). Such an institution continually defines its own boundaries and creates its own rules of governance. Jessop used the concept of structural coupling to describe the mutual relationship between co-evolving institutions in the same social eco-culture. The state, itself characterized by autopoietic principles, can exert only the blind, limited influence on other organizations in the same society characteristic of structural coupling. 32
VOLUME #1, ISSUE #4 Morgan uses autopoiesis as a metaphor to think of organizations as closed, self-referential, and autonomous (Morgan, 1986). Certain aspects of organizational behavior emerged as features of this metaphor. Organizations viewed the external environment as projections of themselves, reflexively protected their identity in relation to the wider world and spontaneously evolved in relation to these concepts. Morgan considered that these features of organizations were potentially nonadaptive. Kickert suggests that the concept can reverse the current view of the relationship between organizations and environments. This intriguing interpretation of the relationship has received limited attention in organizational science. Kickert also argues that institutions are inevitably highly autonomous. This is because of the reasons cited by Hayek: complete social control by a single institutional body such as government is impossible (Kickert, 1993: 276). In an era when top-down governmental control is being steadily ceded in favor of self-governance, Kickert argues that autopoiesis is an important step to understanding institutional autonomy in adaptation and co-evolution with other institutions. Nonaka and Takeuchi describe the autonomy of Japanese creative firms in autopoietical terms. Autonomous groups and individuals define their own task boundaries in the same way that autopoietic systems define their operating systems from within. Self-organizing teams governed by autopoietic, self-regulating principles are presented in this work as vital to knowledge creation (Takeuchi and Nonaka, 1995). The autopoietic concept has redefined the role of information technology in commercial enterprise. The recursive nature of autopoiesis makes it a useful theoretical model for structuring software to act as a selforganizing medium for enterprise evolution (Whitaker, 1993; Winograd and Flores, 1986).
THE CITY
OF
DIASPAR
CONSIDERED AS
AUTOPOIETIC SYSTEM
The background to Arthur C. Clarke’s The City and the Stars is Diaspar, the last city on earth. It has survived the ravages of time for a billion years. The plot concerns Alvin, a Unique who has no fear of the external world. Unlike all other Diaspar inhabitants, Alvin yearns to leave the city. The following autopoietic concepts can be found in Clarke’s novel: ◆ A closed, self-referential system evolving without reference to the external environment. 33
EMERGENCE ◆ An autonomous system that obeys its own law of motion. ◆ An autonomous system that generates the means of its own production. ◆ A recursive relationship between the system’s parts and the whole. ◆ Spontaneous self-protection of the system’s self-creating capacities. ◆ A self-model of the system that prevents it being overwhelmed by its own complexity. As Diaspar is first described, we see it conforms perfectly to Varela and Maturana’s model of an autopoietic system. This is remarkable when one considers that the novel predates autopoietic science by more than two decades. Diaspar shields itself from the outside world. Completely autonomous, it has achieved autopoietic take-off from its environment. This results in a state of radical autonomy in which the city remains unaffected by time: Men had built cities before, but never a city such as this. Some had lasted for centuries, some for millennia, before Time had swept away even their names. Diaspar alone had challenged Eternity, defending itself and all it sheltered against the slow attrition of the ages, the ravages of decay, and the corruption of rust. (Clarke, 1960: 7)
The inhabitants of Diaspar have an autopoietic consciousness. The perimeters of the autopoietic system delimit their understanding. They have no knowledge of the environment beyond: They had forgotten much, but they did not know it. They were as perfectly fitted to their environment as it was to them—for both had been designed together. What was beyond the walls of the city was no concern of theirs; it was something that had been shut out of their minds. (Clarke, 1960: 7)
All inhabitants are terrified of the external environment. Millennia of autopoietic detachment have made them incapable of functioning outside the city. Even the thought of what lies beyond incapacitates them: She could not follow him. She had realized the meaning of that remote circle of light from which the wind blew for ever into Diaspar. Behind Alystra was the known world, full of wonder yet empty of surprise, drift-
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VOLUME #1, ISSUE #4 ing like a brilliant but closed bubble down the river of time. Ahead, separated from her by no more than the span of a few footsteps, was the empty wilderness—the world of the desert—the world of the Invaders. (Clarke, 1960: 39)
Diaspar’s inhabitants have no need for the external environment. The city can sustain itself and its inhabitants indefinitely: The men who built this city, and designed the society that went with it, were lords of mind as well as of matter. They put everything that the human race would ever need inside these walls—and then made sure that we would never leave them. (Clarke, 1960: 31–2).
An autopoietic system must have a recursive relationship between the parts and the whole. This enables the system to adapt spontaneously to external perturbation: Consequently every change in any of the components must affect the interactions among all other components in such a way as to yield a new counter-balancing response of the unity as a whole towards the maintenance of its integrity. The whole responds through a structural adaptation, i.e., by further deforming the field of its components. The behavior of components is thus affected (or even determined) by such deformations, and so on. The whole and the parts reciprocally influence and determine each other. (Zeleny, 1980: 20)
The city’s operating network, the Central Computer, links the parts and the whole in a recursive relationship: The Council ruled Diaspar, but the Council itself could be overridden by a superior power—the all-but-infinite intellect of the Central Computer. It was difficult to think of the Central Computer as a living entity, localized in a single spot, though actually it was the sum total of all the machines in Diaspar. (Clarke, 1960: 71)
If any part of this structural description alters, the city spontaneously reshapes itself to accommodate: Diaspar might be held in perpetual stasis by its eternity circuits, frozen for ever according to the pattern in the memory cells. But that pattern
35
EMERGENCE could itself be altered, and the city would then change with it. It would be possible to redesign a section of the outer wall so that it contained a doorway, feed this pattern into the monitors, and let the city reshape itself to the new conception. (Clarke, 1960: 73–4)
However, Diaspar recursively informs the Central Computer of the need to change any of its parts. In autopoietic systems, the self-producing features of the structural network maintain all activities. Consequently, certain aspects of the structural whole must be inviolate to changes by components from within. The Jester Khedron, designed to provide Diaspar with a random element, can subvert the governing structure. He achieves this by manipulating the city’s self-representation. Yet, as in the literature, certain aspects of Diaspar’s overall structural network are inviolable. Without those aspects of the network that create and maintain components, the city would lose all self-definition. Autopoietic networks inevitably defend their own structure in this way. Since the relational network created Khedron, it protects itself by recursively limiting his power to alter its definitive features: Khedron must have a profound understanding of the machines and powers that ruled the city, and could make them obey his will in ways which no one else could do. Presumably there must be some overriding control which prevented any too ambitious Jester from causing permanent and irreparable damage to the complex structure of Diaspar. (Clarke, 1960: 58)
Safeguards restrain the Jester’s intrinsic nature to alter the structural network: Khedron was content with the order of things as it was. True, he might upset that order from time to time—but only by a little. He was a critic, not a revolutionary. (Clarke, 1960: 61)
Khedron was the only other person in the city who could be called eccentric—and even his eccentricity had been planned by the designers of Diaspar. Long ago it had been discovered that without some crime or disorder, Utopia soon became unbearably dull (Clarke, 1960: 55). 36
VOLUME #1, ISSUE #4 The Central Computer resembles the State in Jessop’s writings (Jessop, 1990). Jessop argues that complex autopoietic systems require a simplified self-representation to prevent their own complexities overwhelming them. The State, for example, is an autopoietic selfrepresentation of the political system that allows it to function. Without such a self-representation, the system would become lost in its own complexities. The Central Computer serves a similar function for Diaspar. It represents the system to itself, allowing recursive adaptation and development. An important distinction between Diaspar and autopoiesis in the management literature involves the separation of structural network and self-representation in the latter. In Diaspar, both functions reside in the Central Computer. The network is the representation. There are other important differences between the autopoietic system in the novel and the management literature. Most management writers on autopoiesis stress the importance of an operating code for the system. Jessop, for example, claims that a public–private code governs the State. It is difficult to detect any code in the literary model, however. Self-perpetuation is its sole reason for existing. Morgan argues that autopoietic organizations see the external environment as a feature of themselves. They supposedly overemphasize their own importance. However, Diaspar has completely turned away from the outside world. The legends of Diaspar claim that mankind made an ancient pact with its conquerors, the Invaders, after a cosmic war. This allowed humans to live unmolested so as long as they remained on Earth. The City’s self-image is one of minimal importance in the environment. The City and the Stars has most value for management scholars in describing how to maintain an autopoietic organization. Ironically, the ethos of the novel is in fact anti-autopoietic. Clarke infers that such radical autopoiesis is a less than ideal social state. Alvin, the hero, leaves Diaspar in fruitful pursuit of wider experience. For those with a more positive view of autopoietic organization, the novel raises several important questions: ◆ Does the autopoietic organization require a random element to prevent stagnation? The system must have the ability to adapt internally, even in the absence of external knowledge or interest. An autonomous law of internal motion is an obligatory feature of 37
EMERGENCE autopoietic status. A social system might require a subject to initiate this movement. ◆ What dissonant elements can the autopoietic organization allow? In the literary example, the system is reflexively intolerant of all nonassimilable elements. Allowing a subject with an imperfectly assimilated character into the system does it irreparable damage. ◆ To what extent can management abbreviate the system’s selfrepresentation, so that it retains a functional role? The success of the city as an autopoietic system depends on the perfect accuracy of its self-representation. Further, the representation can instantly shape the system. Contemporary social systems can never attain this consistency of self-representation. The Central Computer does not need to abbreviate its self-representation to itself since it is the selfrepresentation. The human actors in a social system can never match this level of social comprehension. A single consciousness can never apprehend a social totality with which it experiences a recursive relationship (Hayek, 1989: 79). Indeed, Jessop argues that some simplification is necessary for a self-representation to aid institutional system functioning. The question remains to what extent the system should undergo symbolic simplification. The literary model implies that the maximum complexity permitted is preferable. In the management literature on autopoiesis, a lively debate involves the degree to which the self-organizing capacities of social systems subsume human agents (Robb, 1989; Hejl, 1984). Diaspar’s self-representation is clearly “suprahuman.” However, its reliance on the reflexive capacity of technology to represent the whole system infers the capacity of information technology to create an adaptive self-representation on and through which human agents can act. ◆ One of the most fruitful applications of autopoiesis in enterprise studies is as a model for the configuration of information technology (Whitaker, 1993). The novel has praxiphorical value in this regard, since it describes an autopoietic system where information technology is indispensible. Whitaker has developed a hypertextual group interface enabling all members of an enterprise to access and accrete knowledge at a single IT surface. Various criteria structure this knowledge, such as level of consensus and operational context. Diaspar’s model of itself can facilitate instant recursive change and representation. As an example of an autopoietic operating system, the praxiphorical model is characterized by speed, accuracy, and ubiquity. By these means, the system’s human agents can manage and use its 38
VOLUME #1, ISSUE #4 suprahuman complexity. Experts in the autopoietic use of IT should theoretically aspire to these operating characteristics. ◆ To what extent can participants subvert the structural network? The literary example allows the core, self-reproducing features of the network to be protected while still permitting the possibility of change from within. The minimum specifications required to retain autopoiesis are presented. ◆ Is autopoietic autonomy more complete the longer a system exists? In the literary example, the city acquires total autonomy by designing parts to fit the system. It achieves this ability only after a lengthy period of autopoietic autonomy. Self-design can only occur when the operating system subsumes all subsidiary elements. ◆ Do autopoietic organizations necessarily overemphasize their importance in the environment? In the novel, the city and its inhabitants have no stake in the environment at all.
CONCLUSION The “praxiphorical” approach to examining management concepts developed in this paper has indicated that analyzing organizational concepts within a literary setting can illuminate them as practical applications. This transcends the typical use of metaphor in this context, which involves merely associating organizational processes with concepts derived from science or biology. Though this may reveal new aspects of organizational operation, it cannot intimate how the concepts might operate under extreme hypothetical conditions as part of a total “praxiphor.” This experimental capacity can only inhere to the “praxiphorical” approach developed here. Certain practical guidelines for successfully approaching this type of analysis naturally emerged from the study. Where a management paradigm is present in a literary context, systemization of analytical (praxiphorical) method needs directing towards three goals: ◆ To isolate the effect of metaphorical conditions on the management paradigm. ◆ To compare the effect of metaphorical conditions surrounding the management paradigm with typical conditions. ◆ To isolate how the effects of metaphorical conditions illuminate the management paradigm.
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EMERGENCE If the literary context is sufficiently rich to achieve these goals, then a successful analysis is more likely to result. Finding a text that contains the relevant management concept also involves ensuring that it contains sufficient depth to allow rigorous examination in terms of the three criteria outlined above.
REFERENCES Allen, P.M. and Sanglier. M. (1978) “Dynamic models of urban growth”, Journal of Social and Biological Structures, 1: 265–80. Alvesson, Mats (1993) “The play of metaphors”, in John Hassard and Martin Parker (eds) Postmodernism and Organizations, Wiltshire: Sage: 114–31. Broekstra, Gerrit (1996) “The triune brain metaphor: the evolution of the living organization”, in David Grant and Cliff Oswick (eds) Metaphor and Organizations, Guildford: Sage. Clark, T and Salaman, G. (1996) “Telling tales: management consultancy as the art of story telling”, in D. Grant, and C. Oswick, (eds) Metaphor and Organizations, Guildford, Sage: 166–84. Clarke, Arthur C. (1960) The City and the Stars, London: Transworld. Coveney, P. and Highfield, R. (1995) Frontiers of Complexity: The Search for Order in a Chaotic World, St. Ives: Faber and Faber. Golding, William (1961) The Lord of the Flies, London: Penguin. Davies, P.C.W. (1987) The Cosmic Blueprint, London: Heinemann. Euripedes (1973) The Bacchae and other Plays, ed. and trans. Philip Vellacott, Harmondsworth: Penguin. Freud, Sigmund (1991) “Civilization and its discontents”, in James Strachey (trans.) and A. Dickson (ed.), The Penguin Freud Library Volume 12, St Ives: Penguin: 233–40. Goodwin, Brian (1994) How the Leopard Changed its Spots: The Evolution of Complexity, London: Weidenfeld and Nicholson. Hayek, Friedrich A. (1989) The Fatal Conceit: The Errors of Socialism, London: Routledge. Hejl, P. (1984) “Towards a theory of social systems: self-organization and selfmaintenance, self-reference and syn-reference”, in H. Ulrich and Gilbert J.B. Probst (eds), Self-Organization and Management of Social Systems: Insights, Promises, Doubts, and Questions, Berlin: Springler-Verlag: 60–78. Jessop, B. (1990) State Theory: Putting the Capitalist State in its Place, Cambridge: Polity Press. Kauffman, H. (1976) Are Government Organizations Immortal?, Washington: Brookings Institution. Kelly, K. (1994) Out of Control: The New Biology of Machines, Social Systems and the Economic World, Reading, MA: Addison-Wesley. 40
VOLUME #1, ISSUE #4 Kickert, W.J.M. (1993) “Autopoiesis and the science of administration: essence, sense and nonsense”, Organisation Studies, 14: 261–78. Leifer, R. (1989) “Understanding organization transformation using a dissipative structure model”, Human Relations, 42 (10): 899–916. Luhmann, N. (1984) Soziale Systeme, Frankfurt: Suhrkamp. Luhmann, N. (1986) “The autopoiesis of social systems”, in F. Geyer and J. van der Zouwen (eds), Cybernetic Paradoxes, London: Sage: 172–92. Maturana, H.R. and Varela, F.J. (1980) Autopoiesis and Cognition: the Realisation of the Living, Boston: Reidel. Maturana, Humberto R. (1980) “Autopoiesis: reproduction, heredity and evolution”, in Milan Zeleny (ed.), Autopoiesis, Dissipative Structures and Spontaneous Social Orders, Colorado: Westview: 45–79. Morgan, G. (1986) Images of Organization, London: Sage. Nonaka, I. and Takeuchi, H. (1995) The Knowledge-Creating Company, New York: Oxford University Press. Prigogine, I. and Stengers, I. (1984) Order Out of Chaos: Man’s New Dialogue with Nature, New York: Random House. Robb, Fenton (1989) “The limits to human organization: the emergence of autopoietic systems”, in M.C. Jackson, P. Keys and S.A. Cropper (eds), Operational Research and the Social Sciences, London: Plenum: 247–51. Smith, C. amd Gemmill, G. (1985) “A dissipative structure model of organization transformation”, Human Relations, 38: 751–66. Smith, C. and Gemmill, G. (1991) “Change in the small group: a dissipative structure perspective”, Human Relations, 44: 497–716. Stacey, R.D. (1991) The Chaos Frontier: Creative Strategic Control for Business, Oxford: Butterworth Heinemann. Stewart, I. and Golubitsky, M. (1993) Fearful Symmetry: Is God a Geometer?, St Ives: Penguin. Takeuchi, H. and Nonaka, I. (1986) “The new new product development game”, Harvard Business Review, Jan–Feb: 137–46. Teubner, G. (1988) Autopoietic Law; a New Approach to Law and Society, Berlin: de Gruyter. Teubner, G. (1989) “How the law thinks: towards a constructivist epistemology of law”, Law and Society, 23 (5): 727–59. Varela, Francisco G., Maturana, Humberto H. and Uribe, R. (1974) “Autopoiesis: the organization of living systems, its characterization and a model”, in Bio Systems, 5. Whitaker, R. (1993) “Interactional models for collective support systems: an application of autopoietic theory”, in R. Glanville and G. de Zeeuw (eds), Interactive Interfaces and Human Networks, Amsterdam: Thesis: 119–35. Winograd, T. and Flores, F. (1986) Understanding Computers and Cognition, Norwood: Ablex.
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EMERGENCE Zeleny, Milan (1980) “Autopoiesis: a paradigm lost?”, in Milan Zeleny (ed.), Autopoiesis, Dissipative Structures and Spontaneous Social Orders, Colorado: Westview: 3–33.
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EMERGENCE, 1(4), 43–70 Copyright © 1999, Lawrence Erlbaum Associates, Inc.
Strategic Management System Enhancement and Strong Influence Strings Adam J. Koch
C
ontinuing transformation of the global business environment provides for the growth and modification of business risks and requirements for success. The increasing prevalence of ongoing change in competitive environments of various industries calls for an enhancement of strategic management systems so that they could help minimize strategic risks and meet new success requirements. The scope of strategic management enhancement is limited until companies adopt an integrated strategic management approach (Cravens et al., 1997; Koch and Hubbard, 1999). Integration of strategic management can be facilitated by: ◆ the definition and adoption of specific criteria against which to evaluate the quality of strategy management effort; ◆ further improvement of, and the development of new, tools of dynamic strategic analysis. This article has the purpose of aiding organizations in the accomplishment of both of these goals. Strategic management decisions have multifunctional and multibusiness consequences, require broad consideration of the firm’s external and internal environments, and affect the firm’s long-term prosperity 43
EMERGENCE (David, 1997; Miller and Dess, 1996; Pearce and Robinson, 1997). Three paramount responsibilities of strategic management appear to be: ◆ sustaining/increasing the organization’s capacity to respond to substantial environment change through its early anticipation, corresponding modifications of the organization’s stock of own and accessible resources, and their apt coordination; ◆ ensuring a good dynamic match between its own and accessible, current and future resources and market opportunities; ◆ bringing about a sufficiently efficient use by the organization of its own, as well as accessible, resources over a long period. The first of these focuses on signal reception and the company’s reaction capacity. The second has to do with ongoing resource development effort and the objective of ensuring sufficient strategic flexibility. Efforts undertaken in discharging the third responsibility may foster a proactive strategic orientation. All strategic management activities would appear to be conceived and undertaken with intention to discharge these three main responsibilities. The purpose of strategic management is to help formulate, implement, and evaluate cross-functional decisions in such a way as to assist the organization in achieving its long-term objectives. The strategic management process is seen as “an objective, logical and systematic approach for making major decisions in an organization” (David, 1997: 6) in which both analysis and intuition have a role to play. Another accepted perspective (Pearce and Robinson, 1997) emphasizes information flows through interrelated stages of analysis. It implies: ◆ the interconnectedness of all process components; ◆ the sequential character of strategy formulation and implementation; ◆ the necessity of ongoing feedback to assess the success of strategies as they are implemented; ◆ the need to regard strategic management as a dynamic system (components of the process are constantly evolving; formal planning must “freeze” them to achieve its aims). Strategic management is not a monomodal activity. It has three distinct activity modes: rational planning, incrementalism, and organizational learning (Miller and Dess, 1996). The greatest contribution of rational planning comes from “facilitating communication about strategic issues 44
VOLUME #1, ISSUE #4 and achieving integration across organizational levels and functional specialties” (ibid.: 26). An incrementalist perspective depicts businesses as “constantly readjusting their strategies as they are overtaken by developments that are outside management’s ability to predict or control” (ibid.: 30).1 The organizational learning perspective (Mintzberg, 1994; Quinn, 1989; Schon, 1993; Senge, 1990) suggests that managers can make incremental adjustments to rational plans with the hope of moving an organization toward its goals by way of numerous small steps of progress rather than a few major strides. The 1990s saw a dramatic growth of interest in knowledge management (Argyris, 1977; Barney, 1986; Cyert and March, 1992; Hahn, 1991; McKiernan, 1996; Senge, 1990) and competence-based strategy (Barney, 1997; Hamel and Prahalad, 1994; McKiernan, 1996; Prahalad and Hamel, 1990; Sanchez, Heene and Thomas, 1996; Stalk, 1988). Maturing theoretical and practical strategic management reflection is manifest in the calls for integration of strategic management thought and practice. Stahl and Grigsby (1997) are among those who have explored commonalities in logic and approach between total quality management and strategic management. The Cravens–Greenley–Piercy–Slater integration model (1997) lists five strategic management domains: development of market driven culture and learning process, determination of the value proposition, selection of the strategy for competing on capabilities, making relationship strategy decisions, and implementation of the necessary organizational change. Strategic management performance depends on continuous goal searching, improvement, coordination, and adaptation occurring in all these areas. This improvement and VOLATILE BUSINESS adaptation are achieved through the strategic management process. ENVIRONMENTS MAY Whenever any significant changes to ENCOURAGE CONTINUOUS company strategic intent, corporate culture, IMPROVEMENT OF THE company market definition, product mix or INDIVIDUAL STAGES OF any part of the management system are THE STRATEGIC introduced, the strategic management MANAGEMENT PROCESS process shows itself at work. Volatile and/or very competitive business environments may encourage, or indeed require, continuous improvement of the individual stages of the strategic management process: strategy formulation, implementation, and evaluation and control.2 It is essential that the relationship between the strategic management process and the strategic management system is explained here. A brief 45
EMERGENCE literature review (Barney, 1997; Bourgeois, 1996; David, 1997; Heene and Sanchez, 1997; Miller and Dess, 1996; Mintzberg et al., 1995; Pearce and Robinson, 1997; Thompson and Strickland, 1998) suggests that the strategic management process is nothing else than a dynamic framework of the strategic management system. Other strategic management system components are: ◆ the organization’s own and accessible resources (intangible assets: capabilities, knowledge, reputation, property rights, relationships, and tangible assets); ◆ behavior and decision rules; ◆ communication. Discussion in this article of strategic management as a function and as a process, and of the relationships between these and the strategic planning process, serves to build a holistic model of strategic management. The purpose of strategic management system enhancement has been to increase, in an efficient fashion, a company’s strategic response capacity (Bourgeois, 1996; Hamel and Prahalad, 1994; Hahn, 1991; Mintzberg et al., 1995; Stahl and Grigsby, 1997) and its capacity to attain, and sustain, its global competitiveness.
CONSTRUCTING A HOLISTIC MODEL OF STRATEGIC MANAGEMENT The design of strategic management systems is believed to be influenced (David, 1997; Miles et al., 1995) by a number of factors: organization size, management styles, complexity of the environment, complexity of production processes, nature of problems experienced by the organization, and the purpose of the planning system. The holistic model of the strategic management system developed in this article will have to encompass them all (Figure 3). The need for proper contextualization of strategic management theory and an increased reliance on contingency theory has been argued by many (e.g. Barney, 1997; Mintzberg, 1994). Further progress of this theory is largely contingent, believes Mintzberg (1996), on acknowledging the necessity of always making an explicit reference to a certain “organizational configuration.” Mintzberg (1989) proposes seven such configurations—entrepreneurial, machine, professional, diversified, innovative, missionary, and political—and suggests that a thorough study of all these 46
VOLUME #1, ISSUE #4 categories explains much of what a strategic management researcher may observe. The holistic model proposed in this article integrates existing strategic management perspectives with the purpose of eliminating all blind spots inherent in each one of these and improving the content and construct validity of the corresponding theory. The following will be drawn on: ◆ the currently dominant logic and structure of strategic planning; ◆ the Sanchez–Heene model of the company as an open system (Heene and Sanchez, 1996); ◆ the logic and scope of total quality management (Stahl and Grigsby, 1997); ◆ McKinsey’s 7S model (Waterman, 1982). A popular view of the structure of strategic planning is presented in Figure 1. It is based on the well-recognized commonalities of the relevant views (e.g. Assael, 1985; Bourgeois, 1996; Bowman and Asch, 1987; Ch’ng, 1993; Cohen, 1991; Cravens, 1994; David, 1997; Jain, 1990; McDonald, 1995; Mintzberg, 1994; Miller and Dess, 1996; Pearce and Robinson, 1997; Thompson and Strickland, 1998). The strategic planning model presented in Figure 1 is unidirectional and contains no information loops. In reality, multiple loops caused by inputs’ updates, verifications of assumptions, modifications of strategic alternatives, and corrections of various decisions are very much part of this process (Senge, 1990). To develop a holistic model of the strategic management system, a systems perspective on the firm is required that would integrate into a single dynamic framework several dimensions of firm behavior and business environments (Sanchez and Heene, 1996). Their model of the company as an open system is founded on that perspective. Their model joins the dimension of managerial cognition, which they consider critically important, with uncertainty, causal ambiguity, and strategic flexibility. Its dynamic character is underscored by the model’s feedback mechanisms, which are responsible for the control of some internal and external environmental conditions, change of strategic direction and adaptation to environment changes. As already mentioned, ensuring a good dynamic match between its own and accessible, current and future resources and market opportunities is of particular importance in strategic management. The McKinsey framework—shared values, structure, systems, style, staff, skills, and strategy—is often used when examining the compatibility of a company’s 47
EMERGENCE Mission statement/ corporate objectives
Comprehensive audit, incl. SWOT and strategic gap analysis
Business portfolio design
Assumptions Objectives Organizational design
Strategies
Human resource policies
Contingency plans
Corporate budget Action programs Human resource management
Implementation
Emergent strategy-making area
Control
Figure 1 Strategic planning model. Some SPM elements shown (human resource policies, human resource management, and organizational design) are not commonly considered part of strategic planning; they would be thought of more readily as part of strategic management. Further, elements outside the dashed line are thought to be more characteristic of the “deliberate” strategy-making mode.
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External environment Strategy
Performance
Internal environment
Figure 2 Basic strategy model culture, resources, strategy, organization, and management systems with changes in its competitive position and capacities it wishes to implement. Elements of that framework are included in the holistic model of strategic management proposed later in this article. When integrating partial models, appropriate integration prescripts are required. In this case, a simple strategy model will help explain the logic of integration (Figure 2). This basic strategy model serves here as a platform on which to integrate both the structural and dynamic aspects of partial models. It makes it possible to include all external and internal environment factors that could be posited to be capable of influencing a company’s strategic performance. The holistic model of strategic management developed in this article is compatible with the competence-based strategy paradigm (Hamel and Prahalad, 1994; Sanchez, Heene and Thomas, 1996), very useful in some business environment circumstances: inter-industry competition, increased penetration of new markets by outsiders or coopetition, i.e. cooperation and competition combined. (Dowling et al., 1996). By integrating two of the partial models—SPM (Figure 1) and the company as an open system—a holistic model of the strategic management system (SMS) emerges (Figure 3). It encompasses all stages and components of the strategic planning process and, at the same time, includes all main categories of factors influencing the strategic management process. The SMS does not presume any particular level of formalization of the strategic planning process. It can accommodate all three relevant activity modes of formal planning, learning, and incrementalism (Dess and Miller, 1996; Quinn, 1989) and includes all crucial behavioral aspects associated with strategic management. 49
EMERGENCE EXTERNAL Perceptions of company resources, competencies, capabilities and skills
Perceptions of business environment
Strategic orientation Strategic logic Assumptions about future Mission statement
Gatekeeper
Organizational principles Leadership styles Corporate objectives External and internal audit Evaluation of company
Shared values
Competencies, capabilities and skills Gatekeeper
Material resources
Knowledge Business-level objectives Strategy Contingency Budgets Action programs Implementation Control
Internal gate
Internal gate
Gatekeeper
Business forms Organizational configurations
ENVIRONMENT
Information gatekeepers and "owners"
Information barriers
Figure 3 Holistic model of the strategic management system Associated communication flows are represented in the SMS only symbolically, by the way of reference to the strategic planning sequence and the elements of the Sanchez–Heene model. Basic tangible (material resources, business forms, and organization configurations) and nontangible elements (competencies, capabilities and skills, perceptions of competencies, capabilities and skills, perceptions of business environment, leadership style, knowledge, and organizational principles) 50
VOLUME #1, ISSUE #4 proposed as affecting the form of strategic management forms as well as its responsiveness, efficiency, and effectiveness are included there. In constructing a strategic management enhancement framework, some borrowings from total quality management may prove quite useful. Elements of TQM logic—such as customer orientation, focus on business processes, customer and supplier partnerships, prevention-better-thancure approach, zero-defect/error objective, high employee involvement, and participation and striving for continuous improvement (Robinson and Pearce, 1997)—play prominent roles in the proposed development. The SMS covers both formal and behavioral aspects of strategic management. As its representation of the logic and structure of strategic management systems, and of the strategic management process, is fuller than that of any conventional “partial” model, its content validity can be argued to be superior.
ASPECTS OF STRATEGIC MANAGEMENT ENHANCEMENT The criteria by which strategic management enhancement should be assessed need to meet the following two basic requirements: ◆ all selected criteria taken together cover all conceivable aspects of strategic management enhancement. In other words, as a set, these criteria need to have adequate content validity (Gay and Diehl, 1992); ◆ reliable measures, or tests, can be used with regard to each proposed criterion. The three enhancement aspects of responsiveness, effectiveness, and efficiency are examined in this article. Specific operational criteria corresponding to these aspects can be developed to meet the first of the two requirements above. The spectrum of strategic management activities they cover is vast: ◆ an organization’s demonstrated capacity to react to environmental changes, including the promptness of reaction, and response frequency; ◆ its capacity to choose appropriate strategic objectives; ◆ its capacity to formulate and implement strategies effectively; ◆ its capacity to achieve its objectives and develop its resources in accordance with the changing environmental demands; 51
EMERGENCE ◆ its capacity to achieve its objectives and develop its resources in order to remain sufficiently flexible; ◆ its capacity to do all the above within reasonable cost limits. The capacity of each of the strategic management enhancement criteria to meet the second requirement (reliability) can only be assessed through a detailed analysis of likely strategic management situations. This task cannot be attempted in this article. However, a number of possible criteria can be developed on the basis of some suggestions presented later. How, then, can each of the three proposed aspects of strategic management enhancement be defined?
RESPONSIVENESS Responsiveness in strategic management is defined here as the organization’s capacity to receive and make sense of signals from its environment and subsequently to modify its strategic intent and means of achieving its strategic objectives accordingly. Responsiveness is not the same as an organization’s capacity to react promptly to new market situations. The latter includes also policy and behavioral aspects of strategic management. The promptness of an organization’s reaction to environmental change may determine whether objectives will be achieved (and strategies developed and implemented) within the time available to the company 3: as such, responsiveness is a crucial characteristic of a strategic management system. It is a wider concept than adaptability, in that it encompasses both adaptation to environmental changes generated outside the organization, and active modification of its environment by an organization seeking to improve its chances of realizing its strategic intent. While the latter phenomenon may be less common, it should by no means be marginalized. Strategic management responsiveness is influenced by the following main factors (Anderson and Paine, 1975; Porter, 1980): ◆ the organization’s capacity to receive and make sense of signals from its environment; ◆ the organization’s ability to process these signals and reach decisions within the allowable time limit (the limit itself is influenced by the volatility of the environment as well as the company’s strategic position and objectives, in other words the stretch required); 52
VOLUME #1, ISSUE #4 ◆ the intensity of both the adaptation to the environment and the environmental change induced by the company.
EFFECTIVENESS In keeping with the proposed logic, an organization’s strategic management can be regarded as effective when: ◆ it has demonstrated a superior capacity to ensure a good dynamic match between its own and accessible, current, and future resources and market opportunities; or ◆ it has shown a sustained capacity to produce successful competitive strategies. The first alternative is appropriate for periods of substantial change in the organization’s environment; the latter for environmental stability. It has been shown by a number of authors (e.g. Argyris, 1977; Lewis, 1987; Senge, 1990) that strategic management effectiveness is influenced by: ◆ quality of organizational learning; ◆ involvement, or otherwise, of multiple perspectives and employees’ strategic management participation levels; ◆ amount and reliability of information used in the strategic management process; ◆ appropriateness of usage of analytical tools throughout the process; ◆ impediments to information flow inside the organization.4 Both the deliberate realization of intended strategies and cases of strategies that were actually realized though they had not been intended (Mintzberg, 1994) lend themselves to the effectiveness measurement. Effectiveness, similarly to efficiency, can be meaningfully measured only in the strategy implementation stage. Pertinent questions to be used in this kind of investigation are: What competitive objectives/strategies have been selected? How good is the match between the resources and opportunities they produce? Are they narrowing the targeted competitive gaps or developing competitive advantages in agreement with the organization’s strategic intent?
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EFFICIENCY A company’s strategic management can be considered efficient if the resource requirements needed to achieve certain objectives have been smaller than anticipated by the organization itself, or those required by similar organizations pursuing the same objectives in similar situations. To examine the level of efficiency one needs to ask questions such as: How can this objective be achieved? At what cost? How soon? In all business environments, economical use of resources is a paramount strategic management requirement. Strategic management efficiency is strongly influenced by the following factors (Mintzberg, 1989; Senge, 1990): ◆ organizational maturity (e.g. sophistication and suitability of management systems and individual procedures employed); ◆ competence of individual employees; ◆ their levels of motivation; ◆ their prescience (in particular, employees’ general ability to anticipate accurately enough the outcomes of strategies of which they have no relevant experience). A specific category of efficiency, efficiency of the strategic change process, has a particular place in this discussion because of this article’s objectives. Quinn (1989, 1996) and Rajagopolan and Spreitzer (1996) are among those who have recently pointed out that deep systemic change involves: ◆ questioning and replacing rules and policies that have governed the strategic management activities of the company in question; ◆ revision of values and norms; ◆ questioning other common wisdom; ◆ modification of management style and practices. At times when radical change to strategic management systems is undertaken, their efficiency and effectiveness may suffer temporarily, due to the vast learning and adaptation effort involved at all organizational levels.
MODEL
OF
STRATEGIC MANAGEMENT ENHANCEMENT
A basic strategic management enhancement logic founded on the literature and business practice analysis is proposed in Figure 4. 54
VOLUME #1, ISSUE #4 Increasing learning capacity and employee motivation
More participative strategic management
Improving communication
Increasing involvement of various employee perceptions in strategic management process Fostering increased reflection-in-action
Improving organizational learning
Better business outcomes and prospects
Better business outcomes and prospects
Figure 4 Critical requirements of the strategic management enhancement model The proposed logic of the SME model can be explained by following its sequence. Forming a work environment where individuals will learn faster and their work motivation will be stronger is arguably the most natural point from which any improvement of the strategic system should start. Indeed, without improving individuals’ learning capacity and increasing their motivation, few such efforts are successful (David, 1997; Hamel and Prahalad, 1994; Senge, 1990). For employees’ knowledge, competence, and skills to be utilized as proposed, people must be properly motivated, believe in their capacity to favorably influence the future of their company, and benefit from it, materially and otherwise. When this coincides with a non-authoritarian management style, stronger motivation is likely to increase strategic management participation very considerably. Advances of computer technology have had far-reaching consequences for the ways in which strategic decisions are prepared and taken. 55
EMERGENCE A drastic reduction in the role of middle management on the one hand, and the increasing knowledge and decision-making capacity of employees in non-managerial positions on the other, more than ever stress the need to increase employee participation in strategic management (Hamel and Prahalad, 1994; Senge, 1990). Without tapping this huge potential appropriately, many companies’ medium-term performance may never raise above mediocrity and their long-term viability may be in peril. No outstanding strategic management performance is achievable without superior-quality communication (Hay and Williamson, 1997). What is the essential mechanism of communication improvement in strategic management system enhancement? Once the benefits of strategic management participation become obvious to the individuals involved, a substantial further improvement of intra-company, or internal, communication is likely to ensue. It will then be reinforced by involving employees’ perceptions of the company’s external and internal environments, which would augment the stocks of knowledge, competence, capabilities, and skills accessible to the company. The level of employee participation and the range of perceptions involved are positively correlated with the validity and reliability of prediction in strategic management (Anderson and Paine, 1975; Glaister and Thwaites, 1993; Senge, 1990). New perceptions and knowledge will challenge the existing ones and produce, in time, improved, more reliable bases on which judgments and strategic decisions can be made. Better strategic management communication within the organization reduces the chances of strategic failure. Involving multiple perceptions in the A HIGH LEVEL OF strategic management process is claimed to have a strong positive influence on the reliEMPLOYEE STRATEGIC ability of information and the quality of the MANAGEMENT strategic management decision-making PARTICIPATION IS LIKELY process (David, 1997; Heene and Sanchez, TO PRODUCE SUPERIOR 1997; Schon, 1993). In rapidly growing STRATEGIC MANAGEMENT industries undergoing substantial transforPERFORMANCE mation, such as telecommunications or computer software, companies that make best advantage of employees’ knowledge, competence, and skills are more likely to sustain superior long-term performance (Hamel and Prahalad, 1994). A high level of employee strategic management participation is likely to produce superior strategic management performance, particularly in volatile and/or very competitive business environments. 56
VOLUME #1, ISSUE #4 The extra time that may be expended by such companies on ◆ ◆ ◆ ◆
extra data collection; more thorough examination of strategic options; comprehensive internal communication; gaining employee understanding of, and support for, the strategy to be realized
is often recovered later with a vengeance, because of faster strategy implementation (Kono, 1992). Wide employee participation in the strategic management process advances reflection-in-action and improves their understanding of strategic thinking and processes. Increased strategic management participation will require employees to provide new kinds of information and assume new strategic decision-making-related roles. To meet the new systemic requirements, employees will need to reflect-in-action much more (Schon, 1993); this increased, ongoing reflection will help verify their views and upgrade their skills. It will also enrich intra-company communication, develop the organizational knowledge base and strengthen the organization’s learning capacity (D’hanis and Perneel, 1997). More reflection-in-action is a prerequisite for faster individual and organizational learning (Schon, 1993). Without interpersonal skills, individual learning is fundamentally adaptive, not generative (Senge, 1990). The pace of learning may be slowed down by such circumstances as: ◆ extremely fast change in the business (leading to paralysis by confusion); ◆ the amount of time needed to collect, and process, sufficient amounts of data on the outcomes of actions in significantly changed circumstances (after a major discontinuity); ◆ any barriers to sharing reflection-in-action. More reflection-in-action facilitates organizational learning and improves long-term business outcomes. Continuous programmed improvement of business performance helps develop a better understanding of how to design and implement systemic change and presents academics with a superior opportunity to study the factors that affect company performance. Companies seeking to achieve wide employee participation in strategic management give their employees the best chances for self-development and have a better than average chance of attracting the best people 57
EMERGENCE (Hamel and Prahalad, 1994). By encouraging their employees always to be critical of the current situation and strive for excellence, Motorola management makes it possible for its organizational learning to occur at a faster pace than in most other companies. The work attitudes and strategic management contributions induced by these systemic arrangements have been found capable of improving a company’s strategic performance very considerably. In a rapidly transforming environment, it is the companies that learn faster that adapt better (Hamel and Prahalad, 1994). Not only do they generate stronger competitive strategies, they also implement and modify their strategies more efficiently and effectively than most. On the basis of the discussion so far, it appears that the critically important means of strategic management system enhancement would be: ◆ ◆ ◆ ◆ ◆
employee information access; employee motivation levels; employee strategic management participation; intra- and inter-organizational communication; organizational learning capacity.
As with any very complex system, the sequence of steps taken in strategic management system enhancement can be expected to be of critical significance. By its very nature, improvement of complex systems is unlikely to occur except by relatively small increments (Heene and Sanchez, 1997; Senge, 1990).
MEASURES
FOR
STRATEGIC MANAGEMENT SYSTEM ENHANCEMENT
The measures with which to enhance the strategic management system should be selected with a view to ensuring their appropriate content validity and reliability. The former can be achieved by selecting measures that are capable of enhancing strategic management responsiveness, effectiveness or efficiency. The availability of suitable information to utilize in these measurements, and feasibility concerns in general, should be signaled here. The specific requirements of systemic change measurement (multiple criteria, time delay, contextualization, etc.) are another aspect to consider. Adding strategic flexibility, environment match, resource growth and access, 58
VOLUME #1, ISSUE #4 coordination, particular resource use efficiency, etc. could well extend the list of candidates for measurement. Responsiveness in strategic management could be measured by: ◆ number of strategy modifications in a particular period; ◆ number of strategy modifications in a particular period, compared to competitors; ◆ time to respond to a certain category of signal; ◆ number of environmental signals not responded to in a particular period; ◆ number of signals overlooked by the company in a particular period, compared to competitors. Strategic management effectiveness could be compared between companies by: ◆ ◆ ◆ ◆ ◆
looking into market share trends; examining market penetration; investigating customer loyalty levels and changes in these; studying perceptions of product quality; examining specific customer value-for-money ratios.
Relative, rather than absolute, measures of strategic management effectiveness are recommended to make the measurement more reliable. Strategic management efficiency can be measured in a number of ways. The following measures could be adopted in this respect: ◆ amount of particular resource(s) the organization required to achieve a strategic objective; ◆ amount of particular resource(s) the organization required to achieve a strategic objective, compared to the amount that was anticipated; ◆ decrease in the amount of resources required to achieve an objective (shows the effectiveness of organizational learning). Effective organizational learning is very likely to lead to improved strategic management responsiveness, efficiency, and effectiveness (Senge, 1990). Since aspects of the strategic management systems to be measured and constructs in use there are extremely complex, none of the measures may have sufficient diagnostic accuracy (Schwenk, 1984). To increase 59
EMERGENCE this, it would be better for any such measures to be used in conjunction, rather than separately. None should be regarded as a substitute for any other. Rather, all of them should be deemed complementary to one another.
REPRESENTATION
OF
STRATEGIC MANAGEMENT RELATIONSHIPS
To ascertain the logic of any complex system is an extremely difficult task. The immense variety of elements that make up such systems and relationships between them erect tremendous cognitive barriers and slow down, if not stop altogether, effective induction-based intellectual processes (Schwenk, 1984). Each of the existing schools of thinking on strategy formation (Mintzberg, 1994) has developed a confined spectrum of analysis that excludes many factors considered capable of influencing the strategic management process. What is required is for intuition and reason to be deployed in an integrated fashion in strategic management (Mintzberg, 1996a; Senge, 1990). Enhancement of any complex system surely necessitates holding a sufficiently comprehensive and detailed grasp of the system’s mechanism. The perceived complexity of the strategic management system has often been shown to be a truly formidable obstacle. What methods would be effective enough in reducing this complexity and thus be able to open new opportunities for investigating the various mechanisms and relationships of these systems? A review of the strategic management literature (e.g. Mintzberg et al., 1995; McKiernan, 1996) suggests that the two weakest parts of current theory are: ◆ its failure to produce operational definitions of strategic management (system) performance; ◆ its apparent failure to express all the main influences on strategic management systems in logical sequences. After the three proposed dimensions of strategic management enhancement have been briefly explored, the main influences on the strategic management system are presented in a form that would be easy to examine. The form of sequences, or strings, of such influences is chosen for this task. In formulating some of the proposed sequences, Senge’s findings and suggestions (1990) were particularly useful. Senge argues that lasting, 60
VOLUME #1, ISSUE #4 significant improvements in the performance of organizations will increasingly depend on their dogged pursuit of leverage through implementation of systems thinking, personal mastery, mental models, building shared vision, and team learning. He suggests that the interrelationships between most factors in strategic management are other than linear cause–effect chains and encourages us to look into the processes of change rather than taking snapshots. He believes that a thorough review of the literature and a suitably conceived inquiry into the relationships between all main categories of factors would produce “patterns where others see only events and forces to react to” (Senge, 1990: 126) and the much needed capacity for the strategist to see both the forest and the trees. A sequential explanation of the relationships between the main factors will: ◆ help reduce the perceived complexity of the strategic management system (Schwenk, 1984); ◆ provide a new, consistent logic for the relevant inquiry; ◆ facilitate the relevant inquiry through enabling the use of methods and tools of investigation new to the discipline of strategic management. The success of the proposed approach is ultimately contingent on the discipline’s capacity to define and verify such a set of these sequences that it could represent the entire mechanism of strategic management enhancement. Yet, we are still ignorant as to whether such universally applicable mechanisms exist. Senge (1990) believes that finding universal formulae for many relationships between strategic management factors should be possible, as not all is unique in management.
WHAT IS
A
STRONG INFLUENCE STRING?
The operational definitions of strategic management system enhancement offered earlier in this article form a basis on which to propose a related theory development: the strong influence string (SIS) construct.5 Strong influences are defined as systemic influences, which have the capacity significantly to alter the responsiveness, effectiveness, and efficiency parameters of the strategic management system. Responsiveness, effectiveness, and efficiency will be referred to as aspects of strategic system enhancement. 61
EMERGENCE Strong influence strings arrange specific influences on strategic management systems sequentially, each of them relating to some aspects and mechanisms of the systemic enhancement. Some of them might have similar, significant impacts on various structural and performance characteristics of strategic planning systems irrespective of the context. These would be universally applicable. The significance of other SIS might depend on the context. A contextualized analysis focusing on individual aspects of the significance of improvements in strategic management enhancement responsiveness and efficiency would help reveal whether this particular characteristic applies. In presenting interrelationships in a sequential form, any implication of a simple, linear cause–effect relationships between single factors should be avoided (Senge, 1990). Relationships represented by SIS are likely to be far more complex this.6 Indeed, one can anticipate: ◆ a multilevel interdependence of variables ultimately influencing an organization’s strategic management performance; ◆ a great variety of possible relationships between individual factors, as well as between any one of them and the strategic management performance there. The list of these relationships would include: causal (one or more factors required), reinforcing, attenuating, neutral, and excluding7 forms. Study of the influences of each such category on the three aspects of strategy system enhancement—responsiveness, effectiveness, and efficiency—would most certainly produce some interesting observations on which to develop both the theory and the practice of strategic management. Some elements of SIS would be outside an organization’s control, others within it. Further, some influences would require much less time to influence strategic management system performance than others. This amount of time, and the extent of feasible control, often depend on the business context and bear practical implications for strategic management system enhancement. Analysis of SIS is likely to reveal strong potential leverages between the relevant groups of factors.
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THE PROPOSED STRONG INFLUENCE STRINGS The construction of SIS requires both a holistic strategic management perspective and a capacity to recognize the particular character of relationships between various components of SIS. Any SMS enhancement involves a number of steps. The very complexity of SMS suggests that: ◆ the sequence of steps to enhance SMS is essential; ◆ only a gradual, incremental recognition of these relationships is possible. Reflection on the known SMS enhancement when coupled with intuition provides for a powerful tool of internal cognition. A conscious incremental approach (Quinn, 1989) helps management actors: ◆ cope with both the cognitive and process limits on each major decision; ◆ build the logical and analytical framework that these decisions require; and ◆ create the personal and organizational awareness, understanding, acceptance and commitment needed to implement strategies efficiently. (ibid.: 48)
Table 1 Strong influence strings in strategic management 1 External environment ➔ Strategic orientation ➔ Perceptions of external environment ➔ Evaluation of internal resources ➔ Organization configurations ➔ Corporate objectives ➔ Strategy formulation ➔ Business forms ➔ Strategy implementation ➔ Strategy control ➔ Strategic logic ➔ Organizational principles 2 Perceptions of environment ➔ Evaluation of internal resources 3 Organization configurations ➔ Perceptions of external environment and evaluation of internal resources 4 Cognitive style ➔ Decision-making behavior ➔ Strategy formulation ➔ Strategy implementation 5 Leadership style ➔ Internal communication barriers 6 Communication filters ➔ Cognitive biases 7 Information technology ➔ Information gatekeeping
63
EMERGENCE Starting with the definition of environment category, String 1 essentially reflects the core logic of the strategic management process of the “fit” type (Hamel and Prahalad, 1989). However, through attaching String 2 to two elements of String 1, the original string is converted into one that represents the “stretch” strategic management process. Multiple environmental perceptions are more likely than a single one to lead to a number of alternative deployment options for company knowledge, resources, and capabilities being contemplated, the corresponding competence gaps being examined, and appropriate “stretch” strategies being developed and implemented. The relationship between management level and function on one side, and the group and individual perceptions of both external environment and the company resources on the other, is represented by String 3. It shows that many various perceptions of environment and internal resources are the rule rather than the exception (Glaister and Thwaites, 1993). This has some very important implications for organizational and individual learning (Senge, 1990) and for strategic system performance. String 4 demonstrates the dependence of strategy selection on decision-making behavior, which in turn is influenced by the cognitive styles of the participants in strategic management processes (Barnes, 1984; Mintzberg, 1996a; Schwenk, 1984). String 5 relates to the way leadership styles can contribute to the formation of various internal communication barriers, through encouraging/inhibiting open communication and verifying/distorting information (Lewis, 1987; Stohl, 1995; Wofford et al., 1987). The role of communication filters in creating cognitive biases in company employees is addressed by String 6 (Barnes, 1984). Those filters are a particular feature of the corporate management culture and of the management styles represented by individuals. Sometimes, communication filters are by-products of: ◆ a certain strategic vision (some strategic information may be temporarily withheld due to its perceived extreme sensitivity); or ◆ the relative positions of individual management functions within the company (those keen to protect their dominant roles in company management may seek to achieve this aim by securing a privileged access to some information). Finally, String 7 represents the assumed influence of the continuing development of information technology, in particular:
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VOLUME #1, ISSUE #4 ◆ the increasing occurrence of intranet-type solutions in business communication; ◆ the introduction of very efficient information-processing software on the diminishing role and effectiveness of the gatekeeping function for internally and externally sourced information. Some strong influence strings may need to be modified to reflect an organization’s context. Definition and empirical verification of other SIS is likely to be a prolific source of ideas enhancing strategic management theory and practice. Examination of various strains of contemporary theory, and of individual experiences and perceptions, is certain to produce further hypotheses of strong influence strings in strategic management beyond those discussed in this article.
CONCLUSION Strategic management theory has been developing so far in the form of partial theories. This has made the examination of the overall influence that various factors have on the structure, forms, responsiveness, effectiveness, and efficiency of strategic management systems very difficult. Some recent contributions, such as the theory of learning organizations and the paradigm of competence-based competition, form a basis on which a holistic approach to strategic management can be developed. This article considers a new tool of strategic management inquiry, a tool that would fit the holistic logic. The holistic model of the strategic management system (SMS) proposed in this article integrates two partial models. The purpose of this integration is to encompass all stages and components of the strategic planning process and to include all main categories of factors known to influence the strategic management process. SMS covers both the formal and behavioral aspects of strategic management and thus it represents the logic and structure of strategic management systems and of the strategic management process more truly than conventional “partial” models. As such, it enables adoption of a holistic perspective on strategic management system enhancement. Three aspects of strategic management system enhancement are briefly explored in this article: responsiveness, effectiveness, and efficiency. A number of relevant operational variables by which to measure the progress of an organization along these three dimensions are suggested. 65
EMERGENCE The two weakest points of the current strategic management theory appear to be its apparent failure to express all the main influences on strategic management systems in logical sequences, and its failure to produce operational definitions of strategic management (system) performance. To address the former weakness, the strong influence string construct is introduced. The discussion of three aspects of strategic management performance and the subsequent presentation of several examples of strong influence strings have two practical purposes: to facilitate the examination of strategic management mechanisms and relationships, and to guide in the enhancement of strategic management systems. Strong influence strings provide for a different form of inquiry into the mechanisms of strategic management system improvement. They can facilitate intellectual processes leading to the formulation of hypotheses of systemic relationships and amplify researchers’, or managers’, cognitive capacity. As an analytical tool of considerable versatility, they can also help better embrace strategic management mechanisms, enhance the performance of strategic management systems, and lead to new competitive advantages for companies that avail themselves of the construct.
NOTES 1
2
3
4
66
This perspective stresses the importance of flexibility and “muddling through” without a defined and sustained sense of direction. Particular forms and proportions in which these modes appear in different companies may vary vastly. Consequently, there is a point on the continuum proposed by Miller and Dess that corresponds to the characteristics of each concrete strategic management system. Strategy formulation involves the development of a mission statement, external and internal audits, establishing long-term objectives, generating, evaluating and selecting strategies, while strategy implementation includes establishing policies and annual objectives and allocation of resources (David, 1997). This time limit is determined by the context: mainly, it would depend on the anticipated pace of change in the external environment, company financial situation, market expansion objectives, market entry mode, and competitors’ reaction time. Substantial impediments may prevent a company from achieving the necessary connectedness in action (Stohl, 1995). Improvement in this area could be achieved through, for example, removal of communication filters and blocks, legitimization and involvement of various perceptions, and fostering reflection-in-action.
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5
6
7
Strong and weak impacts in strategic management discussed by Pearce and Robinson (1997) and high leverage variables introduced by Senge (1990) are cognate constructs to the strong influence string. A simple causal relationship means that there would a single identifiable factor that would always, on its own, cause a considerable and lasting enhancement of an existing strategic management system, through affecting the state of the subsequent factor of the defined string. A reinforcing relationship would be a relationship between one or more factors and strategic management performance, where these one, or more factors are capable of affecting other elements of a strong influence string in such a way that a lasting improvement in company strategic management performance results. An attenuating relationship is a relationship between one or more factors and strategic management performance where these one or more factors are capable of affecting other elements of a strong influence string in such a way that a lasting deterioration in company strategic management performance results (neither in the case of reinforcing or inhibiting relationship do these changes need to last over very long periods). A neutral relationship is a relationship where one or more factors have no capacity to influence any part of a strong influence string. An excluding relationship is a relationship where one or more factors would preclude an enhancement of (some dimensions of) strategic management, rendering relevant strong influence strings ineffective.
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EMERGENCE, 1(4), 71–96 Copyright © 2000, Lawrence Erlbaum Associates, Inc.
Organizational Extinction and Complex Systems Russ Marion and Josh Bacon
T
he Lost World, Michael Crichton’s sequel to the dinosaur adventure Jurassic Park, is structured around complexity theory. Briefly defined, complexity theory examines emergent order in large, interactive, adaptive networks, such as neural networks or ecosystems. In The Lost World, Crichton’s characters investigate the emergent nature of complex ecosystems and seek to understand how extinctions occur in such robust networks. In this article, we ask the same questions about extinction among formal social systems. The answer that Crichton provided for the extinction question made for good adventure, but was somewhat disappointing from the perspective of a complexity theorist: prions, or mad cow disease, were wiping out the book’s genetically replicated dinosaurs. The use of complexity theory to explain the ecosystem in The Lost World was a fascinating idea that was intelligently developed throughout most of the book, but one could only wish that he had portrayed the prion as a trigger that sparked a complex interaction among a number of events rather than as the primary, indeed singular, cause of extinction. His Jurassic ecosystem emerged and functioned as a complex system, but its demise was explained by the old Newtonian assumption that outcomes are functionally related to simple causes. This notion argues that events can be isolated from the whole and that the outcome is the local and direct product of specific, identifiable variables. In The Lost World, prions were the 71
EMERGENCE simple cause, and extinction was the predictable and direct outcome. This is reductionism. Complexity theory proposes a more sophisticated and involved perspective of dynamics in interactive systems. Complex systems are robust, involving multiple, often redundant chains of interaction and causation; thus they resist simple perturbation. Further, complex systems adapt and adjust, thus can often work around simple threats to their existence. Consequently, complex systems aren’t as easily destroyed as Crichton would lead us to believe. Crichton’s original question is tantalizing, however. How do extinctions occur in robust, complex systems? We will examine this question for an “ecosystem” different from that which interested Crichton’s characters. We ask the question: “How can one explain the extinction of formal social organizations?” Interest in organizational extinction is not new to organizational theory—there are a number of articles in the social science literature that address just this issue. Our approach differs, however, in that we attempt to understand the dynamics of extinction as a function of complex interaction among multiple organizational actors. We will argue that it is the breakdown of such networks that are ultimately responsible for organizational extinction. Our arguments are supported by qualitative data collected from key actors in the decline of two nonprofit organizations: a small, county health association, and a large, regional organization devoted to elderly care issues. The dynamics in these organizations are compared to a third nonprofit organization that is strong and active. The choice of nonprofit organizations was based partially on convenience—we have ready access to all the groups studied—but largely because nonprofits are somewhat more readily at risk of decline than are other types of organizations. We argue that the dynamics observed can be generalized to governmental organizations and to nongovernmental, for-profit organizations.
BACKGROUND STUDIES In this section we examine conventional literature on the nature and dynamics of organizational extinction, then look at complexity theory literature to determine how it alters perceptions of extinction.
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TRADITIONAL THEORY Organizational extinction is typically studied from one of three perspectives. The first examines the failure of young startup organizations. Such failure is attributed to what Stinchcombe (1965) has called the liability of newness, a self-explanatory term that has been examined by Brüderl and Schüssler, 1990; Freeman, Carroll and Hannan, 1983; Hannan and Freeman, 1989; and Singh, Tucker and House, 1986, among others. The second approach examines failure attributable to significant technological shock or similar catastrophic changes, such as the shift from 8-bit microprocessor technology to 16-bit technology that occurred when IBM entered the microcomputer market in the early 1980s (see, for example, Anderson, 1995; Anderson and Tushman, 1990). The third perspective, the one we focus on here, examines the seemingly inexplicable failure of mature organizations. Theories of failure in mature organizations can likewise be divided into three general categories (Meyer and Zucker, 1989). The first set of theories assumes a direct, functional relationship between organizational structure and persistence. Organizations whose structures are properly organized to accommodate environmental restraints (degree of environmental ambiguity) and that organize to manage certain physical contingencies effectively (size, nature of production) will survive, while those that don’t will suffer decline. Contingency theory, which is the main example of this perspective, proposes that organizational persistence is a function of efficient relationships between organizational structure and certain contingencies (Blau and Schoenherr, 1971; Hage and Aiken, 1972; Lawrence and Lorsch, 1967). Increased complexity and ambiguity in organizational environments (a contingency), for example, demand increased complexity in organizational structures, and vice versa. The second perspective of organizational decline comes from the neoDarwinian organizational ecology theory. Proponents of this perspective maintain that organizational inertia, defined as stable patterns of behavior, can cause organizational failure (Hannan and Freeman, 1984; Miller and Chen, 1994; Satry, 1997). Inertial behavior emerges naturally in organizations; it is a function of the human need for stability and efficiency—standardized routines, for example, are cost efficient. Inertia, however, resists adaptation, thus placing the organization at risk when the environment changes (the differences between this theory and contingency theory are subtle but important; see Donaldson, 1996, for a review). 73
EMERGENCE Meyer and Zucker (1989) offer a third theoretical perspective: organizations may be maintained by preferences that are unrelated to the effective and efficient pursuit of goals, such as power or growth preferences. To wit, non-production factors can cause ineffective organizations to survive or effective organizations to fail. John Freeman and Michael Hannan (1983), for example, argue that some organizations are generalist in nature; that is, their relationship with the environment is rather “mushy,” and they are not tightly linked to environmental whims. These organizations sacrifice efficiency to invest in strategies such as diversification or the accumulation of slack resources (stockpiles that buffer against future environmental changes) that enhance their ability to survive changing environments. These strategies are inefficient in that they are not synchronized with environmental demands, but they do provide long-term stability and survivability. Meyer and Zucker (1989) argue that persistence may even be affected by more personal preferences of organizational actors. Managers and owners, they contend, typically prefer profits; other actors, such as workers and clients, desire continuity of service. When all actors obtain what they desire, no problems of survivability are posed for the organization; but when profits (efficiency) decline, continuity preferences may force the organization to persist despite poor productivity. Worker unions, for example, may block the closing of an unproductive plant to maintain jobs. Arguing from a similar perspective, Gimeno et al. (1997: 750) propose that, in small organizations, “organizational survival is not strictly a function of economic performance but also depends on a firm’s own threshold of performance.” Such thresholds can include the entrepreneur’s “alternative employment opportunities, psychic income from entrepreneurship, and cost of switching to other occupations.” Meyer and Zucker (1989) define organizational failure (also referred to herein as decline, lack of persistence, or extinction) as a state in which an organization fails to achieve stated goals. We will adopt their definition in this article. An organization does not have to cease to exist in order to fail. On the other hand, merger or restructured goals (equivalent to, or enhanced from, existing goals) are not considered failure. The downgrading of goals (as when goals are significantly truncated because of retrenchment) is considered failure. “Significantly truncated” requires qualitative judgment, of course, but the organizations evaluated by this analysis will clearly qualify.
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COMPLEXITY As noted earlier, our hypotheses are derived from complexity theory, a science of emergent interactive systems that is related to chaos theory. There is no commonly accepted definition of complexity, but there are characteristics of the phenomenon on which most complexity theorists, particularly those from what might be called the Santa Fe school (referring to the Santa Fe Institute for the Study of Complexity) as opposed to the European school, agree. First, complexly structured, non-additive behavior emerges out of interactive networks. That is, interactive actors unite in an ordered state of sorts, and the behavior of the resulting whole is more than the sum of individual behaviors. Ordered states are the product of what Henri Poincaré has called correlation (see Prigogine, 1997). Correlation occurs when a unit adapts its individual behaviors to accommodate the behaviors of units with which it interacts. Poincaré observed this phenomenon mathematically among colliding particles, which impart some of their resonance to each other leading to a degree of synchronized resonance. Interacting people tend similarly to adjust their behaviors and worldviews to accommodate the worldviews and behaviors of others with whom they interact. Networks of particles or people, with complex chains of interaction, allow large systems to correlate, or self-order. Second, complex systems exhibit nonlinear behavior, or behavior that is unpredictability related to input, as when someone shouts “fire” and mobilizes an entire theater of people. As we shall see, such nonlinearity may help explain organizational failure. COMPLEX BEHAVIOR IS ON Third, complex behavior is on the border between predictability and nonpreTHE BORDER BETWEEN dictability—hence complex dynamics are PREDICTABILITY AND NONsometimes referred to as edge-of-chaos PREDICTABILITY behavior (Langston, 1986). Complex systems are somewhat more stable and less active than are the dynamics of chaotic systems, such as weather patterns (Lorenz, 1964, 1993), stock markets (Gilmore, 1995; Marion, 1997), or seasonal fluctuations in the size of insect populations (May, 1976). Complex dynamics cannot be analyzed in the same manner as one would analyze the predictable motion of a pendulum, however. Complex systems possess characteristics of both stable and chaotic systems. On the one hand, they exhibit sufficiently stable behavior to allow the retention of information, to transfer information across different systems and across time, and to reproduce themselves; on the other hand, they are 75
EMERGENCE sufficiently chaotic to permit the creative use of information and to allow change. Finally, complex systems are robust, or fit. They resist perturbation or invasion by other systems. Complex systems are characterized by a variety of coupling patterns. Karl Weick (1976, 1979) has proposed that organizations are loosely coupled systems; that is, the components of certain systems affect one another weakly. Taking cues from the work of Stuart Kauffman (1993), one of the authors of this article has argued elsewhere that average organizational linkage patterns are somewhat tighter than Weick would lead us to believe, but that practically speaking, organizations possess a range of coupling patterns, from tight to loose (Marion, 1999). These different patterns help organizations survive a variety of environmental conditions. Loosely coupled structures, for example, allow the organization to adjust to environmental drift and, when environmental shocks are particularly severe, loose structures react sluggishly, thus buying the organization some time to recover. Systems that are loosely coupled to stronger meta-aggregates may even have a survival advantage: they can benefit from the larger system when it is strong but are not likely to suffer if the stronger system fails. In the failed organization evaluated below, for example, the area support groups, which were loosely coupled to the chapter office, were able to survive and thrive after the loss of the chapter. Moderate and tightly coupled structures prevent the organization from overresponding to environmental perturbation, even moderately strong perturbation. Coupling patterns, then, allow organizations to maintain relative stability in most environments and protect the system even against severe shocks. Robust systems are characterized by rich patterns of tight, moderate, and loosely coupled linkages; chains of interdependency branch in complicated patterns among actors, they fold back on themselves, and they embroil nearly every actor in a broad network of interaction. Such complex patterns of interaction protect the organization against environmental shock by providing multiple paths for action. If one pattern of interdependency in a network is disrupted, the dynamic performed by that subsystem can usually be rerouted to other areas of the network. Sometimes this can lead to unintended and unfortunate consequences; a manager who attempts to disrupt unwanted communications among employees, for example, may simply drive the discussions “underground” and give them new life to boot. But more to the point, such robustness makes it difficult to damage or destroy the complex system, for complex interaction lends it amazing resilience. 76
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NETWORK COEVOLUTION
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FITNESS
Complexity theory focuses on holistic system behavior, or the study of organizations as corporate entities, of organizational species (firms with similar technologies), of associations such as cartels, and of markets. The conventional approach to explaining aggregate behavior assumes that if one can understand the part, one can understand any aggregate created by the part. This position, which is strongly reductionist, was championed in the 1960s by noted sociologist James Coleman (1964), who argued that if one can understand the behavior of the individual one can understand the organization. His position on this issue was a reaction to arguments, particularly those of structural-functionalist Talcott Parsons, that social structures as a whole function anthropomorphically. Parsons stated, for example, that systems function to preserve their own integrity, as if systems have a life of their own (see Smith, 1997, for discussion). Complexity theory sides with Parsons, and maintains further that interacting systems not only transcend and modify the behavior of individual actors (nonadditivity), but that interdependency significantly affects individual fitness a well. That is, fitness is a product of individual organizaCOMPLEX NETWORKS tional characteristics and of the characteristics of the network of which the organization EMERGE FROM is a part. INTERACTIVE, Complex networks emerge from interacCOEVOLUTIONARY tive, coevolutionary processes, and a discusPROCESSES sion of this dynamic provides important ambiance for developing our hypotheses. Incipient networks, such as the microcomputer industry in last half of the 1970s, typically have numerous actors vying for position in the emerging market. Each actor seeks to enhance its own fitness, and in so doing, affects the fitness of others in the nascent network. Complexity theorist John Holland (1995) uses the term aggregate to refer to the collection of actors that comprise such things as individual organizations. He further has referred to collections of aggregates as meta-aggregates and metameta-aggregates. We shall adopt a similar convention: aggregates will refer to individual organizations, meta-aggregates will refer to an organization and its direct suppliers and buyers, and meta-meta-aggregates will refer to a loosely connected network of meta-aggregates and related industries. Stuart Kauffman (1993) visualized this complex evolutionary process with what physicists call a potential energy surface. This is a hypothetical surface with valleys scattered across it: some of these valleys are shallow, 77
EMERGENCE some moderately deep, and some quite deep. The depth of a valley is related to fitness, with deeper valleys being more fit than shallow ones. Fitness, or the depth of a valley, is a function of the particular survival strategy chosen by a given system. Further, the depth to which an organization has penetrated its “valley” is also a measure of its fitness. A potential energy surface has numerous valleys, or possible fitness strategies, of differing depths. The energy surface for a new industry is such that most fitness valleys on this surface are quite shallow, thus it is inevitable that an industry in a new technological field will adopt relatively low fitness strategies (technology is defined broadly as the way an organization transforms its raw material). Without competitive incentive, there is little reason for an industry to climb out of its initially chosen valley, or fitness strategy, to seek a better strategy. The system becomes trapped in a relatively weak fitness valley. If, however, there exists another, related system on yet another energy surface, and if the two surfaces are linked so that activity on one affects that of the other, then we have the mechanism needed to perturb the respective surfaces and to dislodge aggregates from shallow fitness strategies. Activities on the first surface affect the depth of valleys on the second, deepening some, making others more shallow, and completely wiping out still others. The response of the second surface in turn perturbs the first surface, and so on. Extend this energy surface metaphor to a number of surfaces, each of which is affected by one or more other surfaces to varying degrees, and one gains an appreciation of the type of issues and questions addressed by complexity theory. Computer simulations of multiple coevolving systems demonstrate that when the degree (strength or number) of linkages among systems is properly adjusted (the loose coupling issue discussed earlier), a network of surfaces eventually stabilizes as a fit meta-aggregate (Kauffman, 1993, 1995). Organizations pop in and out of fitness strategies (valleys) as the network matures. Many of the initial participants in the fitness race die or are absorbed by other participants; this is necessary because too many competing actors inhibit eventual network fitness (Kauffman, 1993). Eventually the survivors find deep valleys in which to settle—they become increasingly fit and increasingly less likely to seek new fitness strategies. Eventually, the meta-aggregate settles into a dynamic state of equilibrium. At this point, linkages among actors within the aggregate and metaaggregate are not so tight that change is prohibited, thus adaptation in the network is typically ongoing. Even so, the individual systems within a 78
VOLUME #1, ISSUE #4 meta-aggregate are about as fit as they can be given the fitness needs of all other systems. Every constituent compromises something for the good of the whole, but each gains fitness from its interaction with the whole. There is an even broader dynamic going on at the same time as all this is happening. What we might label a meta-meta-aggregate emerges around the meta-aggregate. This is a network of suppliers, consumers, and related industries, and this network is far more extensive and somewhat more loosely structured than the meta-aggregate. These industries depend in varying ways on the meta-aggregate, and conversely the metaaggregate depends on them. The automobile industry provides an illustration. This meta-meta-aggregate is composed of automobile makers, metal producers, ore mining, plastic technology, the highway industry (highway systems, traffic regulations, police, concrete production, large machinery producers, diesel fuel providers, etc.), oil refineries, gasoline stations, repair shops, financing agencies, computer chip technology, insurance companies—the list can go on for some time. Many of these constituent systems exist only because of the broader network—of what use are gas stations if there are no gasoline engines, for example?—and all derive strength because of their membership in the meta-meta-aggregate. The mature meta-meta-aggregate resists perturbation, invasion, and damage. Imagine, for example, all the changes that would have to be effected to switch from a gas-driven car to a battery-driven car. The problem is not merely a matter of improved technology: many of the aggregates associated with the gas engine would have to be dismantled or significantly changed. Further, the new industry would inevitably be far less effective than the old while it establishes its own meta-aggregate and meta-meta-aggregate. The task would be rather daunting. Organizational decline, we argue, must be understood not just in terms of the dynamics of an individual organization, but within the context of the meta-aggregate and the meta-meta-aggregate with which a system is associated. If the meta-aggregate and meta-meta-aggregate are effective at establishing fitness for their constituents, how could organizations ever experience extinction? The answer is not merely an issue of an organization’s efficiency; it clearly must be formulated within the context of aggregation.
COMPLEX FAILURE Several hypotheses about extinction can be derived from the literature on complex systems. All are based, in one way or another, on the assumption that complex systems are poised at the edge of chaos. 79
EMERGENCE The first hypothesis we present postulates that failure occurs when meta-aggregates and meta-meta-aggregates are poorly developed. In other words, the system’s network never reaches maturity, or the system is so small that it can be relatively easily deflected from its goals. A poorly developed network can offer little protection for its constituents, and we propose that leadership can best serve such systems by promoting the development of effective networks. The second hypothesis suggested by complexity theory is directly related to the edge of chaos notion and to nonlinearity. The edge of chaos is a poised state between order and disorder (Bak, 1996; Kauffman, 1993, 1995; Langston, 1990, 1992; Wolfram, 1986). This is a dynamic equilibrium state or, more colloquially, a state of uneasy stability. As we observed earlier, constituent actors in a mature network have achieved an optimal level of fitness given the fitness needs of other actors and are stable relative to one another. Actors are not so tightly locked into their roles, however, that they are incapable of self-determinism, creativity, and innovation—the system is dynamic. Bak, Tang and Wiesenfeld (1989; see also Bak, 1996) has labeled this poised state criticality. Such networks are characterized by numerous small changes—the stock market, with its hundreds of monthly fluctuations, exemplifies this. The poised and nonlinear nature of complex systems is such that larger fluctuations are entirely possible, however. Nonlinearity means simply that complex dynamics are capable of surprises, some of them quite dramatic. Cause and effect are not always directly related; small inputs can cause disproportionately large outputs, for example. Such systems— poised and nonlinear—are capable of stepping over the edge with little or no warning. Innocuous activities can launch a chain of interactive events that result in significant systemic disruption. A third hypothesis is related to the criticality phenomenon: decline occurs, and is fed by, the deterioration of supporting networks. Network deterioration can be triggered and fed by internal or external perturbations. Internal perturbations include serious inertia (in combination with environmental change), decline in product quality, deteriorated worker morale, strikes or other conflicts, and pervasive leadership errors. External perturbations include market decline, debilitating legal restraints, and negative public opinion. Many of these perturbations, interestingly, are themselves products of network dynamics; public opinion, for example, or market dynamics, is rarely attributable to simple causes. However one stacks it, organizational decline is typically associated with network changes. 80
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RESEARCH DESIGN The research for this article seeks to understand the nature of the networks that support strong, healthy nonprofit organizations and those of weak or failed organizations. It presumes that strong organizations will have strong, vibrant networks and that weak organizations will have correspondingly weak networks of interaction and interdependency. Three nonprofit organizations were examined: the first is a strong regional organization devoted to health issues among the elderly. This organization has eight employees and three offices; its annual budget is about half a million dollars. Two employees in this nonprofit were formally interviewed and incidental information was obtained from three other employees. The second focal organization was also devoted to support for the elderly. At its peak, it was similar in size, scope of operations, and budget to the fit organization described above, but it precipitously declined and died in the late 1990s. Two former directors were interviewed; incidental information was obtained from newspaper accounts of the failure, from an employee of the national organization to which this organization belonged, and from employees in other nonprofit agencies who worked with the now defunct organization. The third organization examined is a regional nonprofit devoted to health issues. It was fittest in the 1960s and 1970s when there was strong leadership from the federal government for the health issues that this nonprofit advocated, but it has since struggled to achieve its goals. Two persons with this organization, a former director and a current board member, were interviewed and incidental information was obtained from employees of other nonprofits with which the target organization has worked. All three of the nonprofit organizations are, or were, chapter affiliates of large, national movements. All three have had paid staff members and community boards of directors, and all have been responsible for raising their own funding. Interviews were structured around goals that each interviewee agreed were their organization’s goals. Interviews were conducted individually, and respondents were told generally what the research was about when the interviews began. Data was recorded and transcribed, then each statement was coded for meaning. Interviewee observations that were corroborated by two or more respondents were given particular credence in the analysis. Two general questions were asked in the analysis: (1) to what degree was each of the organization’s goals being met at different points in its history, and (2) what activities were occurring that support claims of goal success. 81
EMERGENCE
FINDINGS We found, almost uniformly, that goal attainment, as determined by the activities identified in question (2) above, is a function of interactive and interdependent networks, and that dynamics such as leadership and board activity served to promote or deter such interaction; but we’re getting ahead of the story.
THE FIT ORGANIZATION The fittest of the organizations examined had eight employees and three offices: employees included an executive director, a program director, a grant writer, a bookkeeper, two branch office coordinators, an assistant at one of the branches, and an advocacy director. The chapter is dedicated to providing support services for health-impaired elderly people and their families, to providing education for families and elder service providers in their region, to advocating the welfare of the people they serve, to soliciting funds for elder services, and to raising awareness of the problems experienced by those they serve. This organization is successful in attaining each of these goals, thus, by the definition of success offered earlier, this organization is “fit.” The organization attains these goals because of its broad interactive and interdependent network of elderly clients, family members of clients, other nonprofit organizations, policy makers, community agencies, college and university collaborators, volunteers, medical personnel, nursing home representatives, hospital professionals, media personalities, professional organizations, law enforcement officials, social clubs, students in health-related training, public schools, recreational businesses, pharmaceutical representatives, businesspeople, and legislators. Some of these agents provide raw material or use the products of the organization, thus they are directly related to this nonprofit (together with the organization itself, they comprise the meta-aggregate). Health-afflicted elderly clients, for example, directly use their services, as do the families of these elderly clients. They also constitute the raw materials that the organization processes. Other agents are crucial to a system’s fitness, agents that are less directly interdependent with the focal system. For example, the agency does not need public schools or law enforcement to satisfy its immediate survival needs, for they provide neither raw materials nor primary consumers. Its long-term fitness, however, and indeed its continued supply of raw materials and users, is intimately dependent on a rich network of 82
VOLUME #1, ISSUE #4 such systems. The interdependencies, inter-influence, inter-sharing, information exchange, and exchanges of resources that such meta-metaaggregates promote are, we argue, the real source of a system’s strength. Without these relationships, a system cannot successfully compete for resources, cannot achieve its goals, and often cannot survive. We can illustrate this by looking at the activities the respondents from this organization talked about when asked about their goals. Fundraising, for example, is dependent on a network of supportive family members, support groups in the counties it serves, sponsoring businesses, granting agencies, public school service clubs, community service clubs, recreational facilities (who provide free or reduced-cost services for fundraising events), churches (which may advertise fundraising events to their membership or provide contributions), and radio, television and newspapers, who provide space for announcements or who provide coverage for given events. The nonprofit curries such support with, among other means, a bi-monthly newsletter, a telephone hotline for family members and elderly clients, by offering free or low-cost training programs for pastors, police officers, nursing home personnel, public school students, and others, by recruiting representatives from other groups to serve on its board of directors, by sending regular announcements to mass media outlets and developing relationships with media personalities, by maintaining close contact with its support groups (helping with programs, recruiting members and leaders, and the like), by providing a wealth of free or low-cost literature on its cause, by providing speakers for church groups, civic clubs, school groups and others, and by becoming involved in professional groups (the Association of Volunteer Administrators, for example). This regular exchange with numerous other groups creates a fabric of support that helps insure its fundraising success. The goal of advocacy is achieved in like manner, and indeed many of the activities that ultimately support the fundraising initiatives are related to advocacy. Advocacy occurs when members of this organization speak to school groups (public schools and universities), when they provide inservice programs for pastors, police, nursing home employees and others, and when they support their cause in their newsletter and with their other literature. These same activities contribute to fundraising success. Not only are various groups (nonprofits, civic clubs, educational institutions) interactive and interdependent in a vibrant network, but the various activities (such as fundraising and advocacy) of a given organization are interactive and interdependent as well. 83
EMERGENCE For the most part, no two organizations in this network of interdependency are intimately dependent on one another; rather, they contribute in small ways to each other. The net effect of interdependencies across the network, however, adds up to an important source of support for every agency in the network. To paraphrase the open systems theory literature from the 1960s and 1970s, the network adds up to more than the sum of its parts. A complex network (referring to it in the complexity theory sense) is somewhat like a mob, in that the individual members feed off of one another and, in a way, constitute something of a living entity that transcends, but lends enhanced viability to, its parts.
THE FAILED ELDERCARE ORGANIZATION The second eldercare nonprofit examined, the one that failed, apparently did so because many of its interdependencies were disrupted. The disruption spread rather extensively and involved both internal (staff, board) and external disruption. The failure itself was precipitous and unexpected. The events that set the stage for failure occurred within a mere one- to two-year span of time, and it was not evident that the organization was in trouble until the last few months of its life. Like the sudden demise of the USSR in 1989 or the sudden decline of the Democratic Party in the US Congress in 1994, the failure of this nonprofit organization is a classic study in complexity dynamics. As we noted earlier, this organization once had a profile that was quite similar to the fit organization just discussed. Its budget at the time of its demise was similar to that of the benchmark organization, its staffing pattern was similar, it had similar boards of directors, its goals were the same, and the activities by which it achieved those goals were similar. The organization served eleven counties with two offices and was one of four such organizations in its state. Its board was composed of professionals from various fields (medicine, law, counseling, finances, etc.), many of whom had served for a number of years. The organization employed an executive director, a director of education, a family service director, two administrative assistants, a branch office director and assistant, and a director of its thrift store. It had a budget of more than $300,000, which it raised through fundraising events, grants, governmental allocations, contributions, conferences, and thrift store sales. Its network of support was extensive and, in many ways, similar to that of the first nonprofit discussed above. 84
VOLUME #1, ISSUE #4 In the mid-1990s, the chapter’s long-time executive director resigned for non-work-related reasons and was replaced by a person with significant experience with nonprofit administration in other parts of the nation. As he put it himself, the new administrator was charged with building the program; or as his predecessor stated, they expected him to take the organization to the “next level.” The organizational philosophy that this new director brought to the organization reflected not only this call for change by the local board of directors, it reflected changes in the philosophy of the national organization that chartered this chapter as well. This new philosophy calls for a more businesslike approach to chapter management. The national organization decided to decharter small chapters and to move their responsibilities to larger chapters in the respective states. It has released a number of the long-time employees in its national office and replaced them with younger, more business-minded workers, and it is requiring that all chapters meet a long list of newly implemented standards, most of which deal with management issues. It is evident from the new director’s comments in our interview with him, and from his actions, that he was aware of this new philosophy and was sympathetic to it. Changes became evident shortly after he took office, particularly in the area of finances. He was particularly interested in increasing the chapter’s budget, and in the interviews seemed focused on a target of a half million dollars. He initiated several new funding initiatives and had high expectations for their financial productivity. He continued previous work with other nonprofits in the state to lobby the state legislature for funding support. Interpersonal difficulties with staff began to manifest themselves within a few months of his arrival, and by about his fourteenth month with the organization, all but the director of the thrift shop had resigned or had been fired. They were replaced for a while by “temp” workers provided by a personnel agency. The former director stayed on for about a year under the new administrator as director of education and support, and disagreements between the two may have contributed to the staff difficulties. Further, the new director deliberately (by his own admission) set about to reconstitute and restructure the board of directors. By the time he left, according to one interviewee, only one board member had two years of experience with the chapter; the remaining members had served for one year or less (the scope of this change was not independently confirmed, however). About three months after he left the chapter for 85
EMERGENCE personal reasons (he served for about 18 months), there was a mass exodus from the board, and only about seven people (of the 30 members at the time the director left) remained to shut the doors of the chapter. Other parts of the story are a little unclear, simply because different people had different perspectives on the events. What we deduced about these events was claimed by at least one of the interviewees and is, at minimum, consistent with themes developed by two or more sources. Before the new director came, the chapter had, at any given time, about 100 volunteers serving in various capacities (this number includes the 30 board members). About 60 of these volunteers served the organization on a regular basis as office helpers, thrift shop workers, fundraising coordinators, support group leaders, and the like. Apparently, a number of these volunteers were disenchanted by changes and perceived problems that came with the new director and cut back on their amount of service time with the chapter. It was claimed by one interviewee that the new director was not as attentive to interactions with other organizations as he should have been. The networking activities of the director, according to this source, were initially more intense than they had been before he came, but cooperative efforts dwindled significantly as time went on. Evidence from several sources indicates that the three other chapters on this national organization in the state were somewhat divided in their support of the new director, thus reinforcing this claim. The source further claimed that other organizations that depended on, or otherwise had cooperated with, this organization in the past became disenchanted with its services. This is credible given the dramatic loss of experienced, well-connected staff suffered by the chapter. As one person put it, the temporary staff couldn’t even give callers the phone number of the national office. Apparently the chapter’s advocacy and educational activities were reasonably strong until the end. The major annual conference that the organization sponsored was planned before the education coordinator was asked to leave, so it went forward as planned. The first director said that public policy advocacy had never been particularly strong under her administration, although she had participated, along with personnel from other nonprofits, in successfully lobbying the state legislature for funding support. The new director reported only that “public policy was a big thing that was coming together very well.” The support groups were relatively unaffected and remained largely intact after the breakup of the chapter; this is probably attributable to a relatively loose connection to the chapter office. 86
VOLUME #1, ISSUE #4 All parties attributed the failure of the organization to financial losses, and indeed the chapter’s books were at least $100,000 in the red when it shut down. The question one should ask, however, is why did it get in this condition? The last director claimed that the organization was financially solvent when he left, which was four months before it closed. The organization had only about a month’s worth of working capital at that time, but several fundraisers were planned that should have carried the chapter until a new director could be hired. The fundraisers apparently came off poorly, and one, which should have raised several thousand dollars, was not even conducted. The new director argued that the failure of the board to conduct these events properly (with the resulting loss of income) was the reason for the failure. The problem ran much deeper, however. We concede, for lack of substantive contradicting evidence, that finances may well have been the proximate cause of the organization’s demise, but feel that the underlying cause was the deterioration of crucial elements of the system’s supporting network. The loss of all the original staff members in so short a period of time and the dramatic restructuring of the board of directors had a domino effect that weakened and disrupted the broader network of relationships. The resulting enfeebled state left the organization without the resources needed to ensure continued income. The staff that was left after the new director resigned was inexperienced, as was the board of directors. The staff members would not have had the level of “connectedness” with the broader service community enjoyed by the previous staff, since this takes time to develop. The reformulated board would not have had the commitment that accrues to a long-term relationship, the experience needed to provide logistical leadership, or the knowledge of broader network structure needed to mobilize that network. There was evidence that a number of volunteers, people who are crucial to the success of fundraising events, were disenchanted by the direction in which the chapter was going. All this would have inevitably limited the organization’s access to traditional elements of its meta-meta-aggregate such as businesses, community contacts, and schools. On top of that, the chapter had apparently lost some measure of influence and impact in the nonprofit community, and the inexperienced board and staff would have had difficulty regaining the momentum that gave it purpose and credibility. Under such conditions, it is not surprising that the fundraisers that had been planned were not sufficiently successful to keep the organization afloat. The organization failed because it no longer had the infrastructure needed to muster 87
EMERGENCE sufficient finances and because it didn’t have the collective and established support system sufficient to give it the drive to survive. It is tempting to attribute the failure of this organization to the actions of the new director, but that would be something of an oversimplification. Certainly, the new director’s actions contributed to the breakup of the meta-meta aggregate that had formerly supported the association. He fired most of the original staff, reorganized the board, and must take some responsibility for the alienation of volunteers. However, he was under a management mandate from the national association that chartered this organization, and many of his actions can be related to that mandate. Further, the actions of the former director, who remained with the organization under the new director, seem to have contributed to the staff problems. There was no corroborating evidence that he alone was responsible for the extensive reorganization of the board, and many of those changes may have been due to unrelated, coincidental factors. Even if we were to assume that the new director was the immediate cause of the decline, however, we cannot argue that he single-handedly engineered the failure—indeed, the closing of the doors was as much a surprise to him as to anyone. Rather, at worst he simply pushed over the first few dominos; like Per Bak’s sandpile, fairly simple events can initiate major landslides in complex systems.
THE WEAK HEALTH ASSOCIATION The third organization examined for this study was a health-related nonprofit that dealt with a different clientele than the first two. Nonetheless, its goals and organizational structure were generally the same as those of the eldercare nonprofits. This organization began in the 1960s with significant encouragement and rhetorical support from the federal government. At one point in its life it had a full-time executive director. It was run by a board of directors and depended on volunteers for support. This organization differs from the other two in that it is only weakly successful—successful in that it has persisted and has at least partially addressed some of its goals. With this organization we ask whether its relative weakness as an organization is connected with a correspondingly weak infrastructure of interdependencies and support. According to its interview representatives, this organization was strongest shortly after its inauguration, in the late 1960s and 1970s. Probing revealed, however, that the strength derived less from its activities and more from the momentum of the general movement it represented. Two events from that era, events that were told almost as if they 88
VOLUME #1, ISSUE #4 were folklore, illustrate the nature of this organization. In the first story, the local county manager decided back in the 1970s to exclude the organization from an upcoming county budget (it had been included for several years). Members of the board of directors collected 8000 signatures on a petition and got that decision reversed. In the second story, the organization found housing for two clients and was able to help them achieve a measure of independence for a while; this nonprofit was apparently one of the first such groups to do so. These are one-time events, however; neither served to establish a permanent and broadly influential presence (ongoing support groups, for example, have more lasting and wide-ranging impact). Despite our probing, the respondents provided no evidence that suggested the group had established much infrastructure in the community. There were no support groups, no newsletters or other outreach educational programs, no major fundraisers, some interaction with other organizations, a limited cadre of volunteers (primarily the 20 or so board members), and limited educational initiatives (the organization has had annual meetings with notable speakers, but little else). Its principal strength lay, at that time, in its fairly robust membership numbers; with the fees from those memberships, it was able to raise an operating budget of $2000 to $3000. In the late 1980s or early 1990s, the organization received a small state grant to hire a full-time executive director. This was seed money, and within a few years the group had to solicit money from the United Way fund to maintain the position. This formalized leadership was not particularly productive for the association, however, and may even have been detrimental. As one respondent put it, members of the group shifted its dependence from themselves to this director and largely ceased taking responsibility for the organization. The board became more of a social club than a volunteer service organization under the new director. Members would not rotate off at the end of their membership period partially because they felt an ownership for the movement, partially because there was some sense of prestige associated with board membership, and partially because they enjoyed one another’s company. The group gave periodic parties for the populations it served, and provided Christmas gifts for a group of hospitalized clients. It did continue its annual seminar and invited health professionals and teachers to attend. However, its fundraising efforts were weak (limited largely to periodic garage sales and membership fees). It sponsored no support groups or newsletter. It did relatively little collaboration with other groups (although the director was broadly visible in the 89
EMERGENCE community and at the meetings of their state organization), it did less with advocacy than it had been doing in the early 1980s, it had a weak volunteer support structure (limited largely to the board membership), and despite the relatively credible professional credentials of board members (counselors, college professors, health workers, etc.), it was doing little to engage the support of professionals and businesses in the community. The director did solicit a small contribution from a local women’s club because of her active involvement as a member of that club. The association maintained relationships with a local healthcare agency that served the population advocated by the group. It sponsored a helpline telephone service that was rather successful. The director initiated a business partnership with a local middle school and engaged in activities with youthoriented groups. Finally, the group participated in an annual screening fair at a local shopping mall. These activities failed to produce any significant infrastructure, however—not the extensive network of interdependencies and interactions that is requisite to an organization’s fitness. One interviewee stated that the organization was at its weakest during the period with a paid director, and the director herself lamented that it was difficult to get anyone engaged in substantive activities. At the peak of the executive director period, the local United Way was providing the organization with $18,000 in operating funds. The United Way, however, expected the organization to be productive with the funding, to use it to generate additional moneys from granting agencies and donors and to provide services in the community. United Way directors were dissatisfied with the group’s productivity and, in the 1990s, funding from that source began to decline. Within about four years it dried up. The full-time director became a part-time director, and in the last few months of her tenure she served without pay. After she left, the board hired another part-time director, but after a few months of lackluster productivity this person was likewise released. Since then, the association has become somewhat more productive. The group succeeded in obtaining a state and federal grant to fund a lowincome housing unit to serve the association’s target population. Respondents attribute this success to strong leadership from the board president, but interestingly the initiative was born out of contacts made by this president and the previous full-time director at a meeting of state association (part of the organization’s infrastructure, such as it was). The association continues to organize its annual speaker’s meeting, but is still 90
VOLUME #1, ISSUE #4 doing little to raise local funds or to foster interdependencies and interactions with other groups (indeed, this effort has declined with the loss of the directorship). The helpline is no longer in service, there is no association office, and the organization does little (outside of its annual meeting) to educate the public. Both interviewees pointed to the failure of leadership as the source of the organization’s weakness. This is, at least partially, an accurate assessment, but the problem has not been so much a lack of leadership effort or commitment as a matter of how the leadership role was defined. Leadership, to them, means achieving the dramatic, one-time successes. Once achieved, the success enters the group’s folklore to provide inspiration and a model against which future activity is gauged. Herein lies the problem: the association’s history is marked by sporadic, dramatic events—the petition drive to maintain county funding, providing housing for two clients, the state grant for a full-time director, and the housing grant—but none of these events has been converted into lasting infrastructure and consistent community impact. The organization is proud of these accomplishments, but they are intermittent, one-time events with little follow-up impact. Effective leadership, by contrast, builds lasting and strong infrastructures, the meta- and meta-meta-aggregates that we defined earlier. The difference between effective leadership and that of the focal organization is roughly akin to what Max Weber was alluding to when he defined charismatic authority and rational–legal authority. Charismatic authority fosters the one-time dramatic events, while rational–legal leadership fosters the institutionalization of successes (Weber, 1947). Complexity theory could relate this rational–legal notion to the extensive networks of interdependency and interaction that characterize a strong system. Weber thought in terms of stable bureaucracies and rules; complexity theory refers to customers and raw material sources, service providers and service users, related organizations, collaborators, confidants, communication flow within and across organizations, supporters, sources of new ideas, advocates, and staff. From the complexity perspective, dramatic events become the product of such infrastructure rather than the singular goal of the organization. Effective leaders focus first on building those networks and then on wringing successes from them. This association had things backwards. The mistake was in part attributable to its early history with all the hype from the federal government and its focus on form over substance. The rhetoric should have fostered the emergence of stable infrastructures, however, but for this association 91
EMERGENCE it didn’t happen. They continue to survive in part because the members are still under the sway of the original glory, but largely because of inertia. Population ecology theory attributes organizational decline to inertia, or failure to adjust and change with a changing environment. In actuality, inertia often lends an organization sufficient stability to persist. Inertia without dynamic environmental adjustment does not foster growth, but it need not follow that inertia leads to demise. Indeed, non-adaptive inertia can help organizations survive periods in which environmental resources are scarce. The board members of this association have established stable relationships with one another, and they periodically achieve successes to add to their cultural folklore; that is enough to keep them going. They are unlikely to grow and thrive, however, until they learn to develop their complex infrastructure.
CONCLUSIONS Earlier we defined the science of complexity as a study of the emergence of aggregates and meta-aggregates among adaptive, interactive systems, and we embedded extinction within the context of those aggregates. Three hypotheses of extinction were offered: extinction or decline (defined as failure to achieve stated or assumed goals) can occur when meta- and meta-meta-aggregates are poorly developed, they can occur because complex systems are, by definition, poised on the brink of disaster, and they occur when networks deteriorate. We found evidence in our investigation to support the first and third of these hypotheses; the second was neither supported nor discredited (although one might argue that the evidence was suggestive for this hypothesis). The fit organization that we investigated had built a strong meta- and meta-meta-aggregate through interaction and collaboration with, service to, and dependence on multiple, diverse organizations. The history of its development is marked by competition and interaction; it experienced the many adjustments, changes, and compromises that, as we discussed earlier, characterize the development of aggregates and meta-aggregates. The organization has established stable relationships with its network of clients, family members, businesses, schools, policy makers, and others, but that relationship is dynamic and changing. Some of the network constituents are rather tightly involved with the chapter—the support groups, clients, and family members particularly. Others, such as nursing home, and other client service businesses, board members and the organizations they represent, volunteers, and the national office of this organi92
VOLUME #1, ISSUE #4 zation, are moderately involved with, and interdependent with, the chapter. Many of its network constituents are loosely coupled with the chapter; these include policy makers, schools, recreational facilities, business supporters, other nonprofits, professional organizations, mass media, and the like. All of the constituents are important elements of the organization’s fitness, however. In many cases, their individual contributions to its wellbeing are small, but taken together they are the source of the organization’s vibrancy and fitness. This organization receives strength and support from this infrastructure, thus it can resist perturbation and decline. The second eldercare organization had a similar infrastructure in the mid-1990s, but that infrastructure suffered significant disruption starting about 1996. As the third hypothesis predicted, its failure occurred because of failures at the various aggregate levels. The board structure was disrupted, volunteers became disenchanted, inexperienced and unconnected staff members replaced experienced and connected ones, the new director was himself unconnected in the service region, and relationships with other organizations in the area deteriorated. These disruptions made it difficult for the organization to maintain its relationships with supporters, businesses, contributors, and others who constitute the loosely coupled bulk of an organization’s infrastructure. When the chapter got behind in its financing, there was insufficient infrastructure to support it and the organization became extinct. One could argue that, in this second organization, the new director’s actions launched the interactive activity that led to the ultimate failure of this association. If true, then it lends support to our “edge of disaster” hypothesis. There is evidence that the director’s actions may have been pivotal in launching the cascading events that led to failure; however other factors were involved, such as the national office’s management plan, so we lean more towards the third hypothesis on this one. The third nonprofit organization examined simply failed to develop a strong meta- and meta-meta-aggregate (the first hypothesis). It depended too heavily on leadership-inspired, sporadic successes and failed to nurture contacts with the multiple constituents that are required for a robust infrastructure. It didn’t so much lack leadership, as interviewees charged, as it lacked an effective leadership focus. As we argued at the beginning of this article, complexity theory is holistic rather than reductionistic. Fitness is not the result of a few, simple, localized causes, and neither is decline. The failures observed in this chapter resulted from multiple interactive events and involved multiple 93
EMERGENCE chains of interaction. Success and failure are a function of the dynamics of complex, interactive wholes.
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VOLUME #1, ISSUE #4 Kauffman, S.A. (1995) At Home in the Universe: the Search for the Laws of Selforganization and Complexity, New York: Oxford University Press. Kauffman, S.A. (1993) The Origins of Order, New York: Oxford University Press. Langston, C.G. (1986) “Studying artificial life with cellular automata”, Physica, 22D: 120–49. Langston, C.G. (1990) “Computation to the edge of chaos: phase transitions and emergent computation”, Physica, 42D: 12–37. Langston, C.G. (1992) “Life at the edge of chaos”, in C.G. Langston, J.D. Farmer, S. Rasmussen and C. Taylor (eds), Artificial Life II: Sante Fe Institute Studies in the Sciences of Complexity, 10, Reading, MA: Addison-Wesley. Lawrence, P.R. and Lorsch, J.W. (1967) Organization and Environment, Cambridge, MA: Harvard University Press. Lorenz, E. (1964) “The problem of deducing the climate from the governing equations”, Tellus, 16: 1–11. Lorenz, E. (1993) The Essence of Chaos, Seattle: University of Washington Press. Marion, R. and Weaver, K. (1997) “Modified Poincaré maps and return maps: tools for analyzing social chaos”, presented to the annual conference, Special Interest Group for Chaos and Complexity, American Educational Research Association, Chicago, Ill. Marion, R. (1999) The Edge of Organization: Chaos and Complexity Theories of Formal Social Organization, Newbury Park, CA: Sage. May, R.M. (1976) “Simple mathematical models with very complicated dynamics”, Nature, 261: 459–67. Meyer, M.W. and Zucker, L.G. (1989) Permanently Failing Organizations, Newbury Park, CA: Sage. Miller, D. and Chen, M. (1994) “Sources and consequences of competitive inertia: a study of the U.S. airline industry”, Administrative Science Quarterly, 39: 1–23. Prigogine, I. (1997) The End of Certainty, New York: Free Press. Satry, M.A. (1997) “Problems and paradoxes in a model of punctuated organizational change”, Administrative Science Quarterly, 42: 237–75. Singh, J.V., Tucker, D.J. and House, R.J. (1986) “Organizational legitimacy and the liability of newness”, Administrative Science Quarterly, 31: 171–93. Smith, T.S. (1997) “Nonlinear dynamics and the micro-macro bridge”, in R.A. Eve, S. Horsfall and M.E. Lee (eds), Chaos, Complexity, and Sociology, Thousand Oaks, CA: Sage: 52–63. Stinchcombe, A.L. (1965) “Social structure and organizations”, in J.G. March (ed.), Handbook of Organizations, Chicago: Rand McNally: 142–93. Weber, M. (1947) The Theory of Social and Economic Organization (A.H. Henderson and Talcott Parsons, trans.), Glencoe, IL: Free Press. Weick, K. (1976) “Educational organizations as loosely coupled systems”, Administrative Science Quarterly, 21 (Mar.): 1–19.
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Why Businesses Fail: an Organizational Perspective Tom Rand
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usinesses fail because management does not have effective control of the business. To believe otherwise is to believe that the chief executive officers of five major computer manufacturing corporations engineered their own terminations earlier this decade.1 No doubt there were many other managers with far less marketable products forced to resign in the interim. Management is too far removed from revenue-producing processes. The interval between the time a revenue plan is launched and the time the actual revenue is collected is, to all intents and purposes, a black hole into which human resources are poured with no mechanism to measure their effectiveness. Visibility is nonexistent or, at best, extremely limited. Visibility is the capability to see and understand what is going on within the business. Stated another way, visibility is the capability to see and to understand the condition of the revenue-producing process as the revenue plan unfolds. The condition of the process is determined by the product’s position in the supply chain relative to the actual demand, i.e., the process is in good condition if the product and all of its components can be moved from their location in the process through the balance of the process in time to meet the date the product is scheduled to be shipped. Visibility is also the capability to see and understand how effective employees are when they position products in the supply chain relative to demand. In other words, visibility is the capability to see the impact on decisions and activities that employees are having on the revenue-producing process at the time that decisions are made and the activities occur. 97
EMERGENCE Information comprehensive enough to provide, daily, a composite view of the production process and a view of the employees’ decisions and their activity does not exist. Information that could be made to measure effectiveness has instead been broken up into meaningless bits of unrelated data and distributed among dozens of people and departments. Information broken into bits of disassociated data limits visibility to information conveyed by bits of data from which it is not possible to make well-informed decisions or to take timely action. Information broken into unrelated bits of data breaks up what would otherwise be a coherent communication pattern from which the organization could learn the characteristics of the process and, over time, by accumulating information and forming mental histograms, learn the characteristics that are unique to the organization and to the business. Fragmented information limits the acquisition and accumulation of knowledge necessary to understand, manage, and control the business. In addition to the information process, the revenue-producing process is also fragmented, which further limits visibility.
THE
REVENUE-PRODUCING PROCESS
The revenue-producing process extends from the time a customer’s order is received to the time the order is shipped. The product should flow from one end of the process to the other in a coherent, continuous flow. The process is, instead, broken up into dissociated operations. Responsibility for these operations is allocated to several people who work in different departments. An organizational chart typical of many manufacturing companies is shown in Figure 1. Each box indicates a department. The drop-shadowed departments indicate the areas where material is physically located in the factory. In Figure 1, the inventory control department is responsible for managing materials located in the stockroom. The stockroom is where the products’ parts are stored and prepared for assembly. Preparation of the parts for assembly consists of pulling parts from their location in the stockroom and putting them into a “kit.” The production department is responsible for assembly of the product. This department assembles the parts issued in the kit and transfers the assembled product to the shipping department. The production control department is responsible for scheduling material out of the stockroom, through the production department, and through the shipping department. Thus, responsibility for three of the steps in the production process—namely kitting, assembly, and 98
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Marketing Dept
Design Engr Dept
Sales Dept
Research & Devt
Hardware Software
Order Entry Dept
Mfg Operations
Materials Dept
Master Prodn Schedg Dept
Purchasing Dept
MIS Dept
Finance Dept
Accounts Payable
Payroll Dept
Quality Control
Prod Control Dept
Inventory Control Dept
Shipping Dept
Stock Room Dept
Mfg Dept
Mfg Engr Dept
Production Dept
Figure 1 shipping—are divided among several people who work in three different departments. There are additional steps in the revenue-producing process that are shown in Figure 2. In Figure 2, the row labeled “functional departments” describes what function each department performs. The dots linking the departments to the horizontal lines describe the impact that the decisions and activity that occur in each department have on the production process. This arrangement of departments and operations disperses responsibility for Materials Dept
Functional departments
Engr Dept
Sales Dept
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Purchase parts
Material location on factory floor
Purchasing Dept
Inventory Ctrl Dept
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Figure 2 Revenue-producing process 99
EMERGENCE the use of resources and the effectiveness of the production process throughout the manufacturing operations department. There are other departments outside of the manufacturing operations department, such as marketing, finance, quality, design engineering, and sales, the latter two of which are shown in Figure 2, whose decisions and activity, directly or indirectly, also affect the production process. Thus, responsibility for the effectiveness of the production process is distributed throughout the corporation. Overlapping departmental responsibility for pieces of a fragmented production process and uncontrolled interdepartmental activity mean that, as they say, “if everybody is responsible, nobody is responsible.” The horizontal lines extending from each department to the steps in the production process not only indicate overlapping responsibility, they can be thought of as lines of communication that make up a communication pattern. With few exceptions, such as formal engineering design changes, communication between and among people and departments is unmanaged. In no case are communication patterns, i.e., information processes, documented in a manner that reflects the impact of decisions and activity and the resultant condition of the production process. The origin, destination, and integrity of information are largely unknown. Different departments act on different pieces of information obtained at different times and no one has a composite picture of the condition of the global production process. Overlapping responsibilities are like overlapping shingles. They obstruct visibility down into the interior of a structure and out to its exterior. In companies so structured, management cannot see into the interior of the organizational structure to see who is accountable for the effectiveness, or the lack thereof, of the revenue-producing processes. Just as rain on a roof readily flows to adjacent shingles, accountability within the organizational structure readily flows to adjacent departments. Organizations so structured are breeding grounds for incompetence. Where incompetence exists, the lack of accountability and successful efforts to sustain revenue flow will keep it hidden form management’s view. The lack of visibility due to fragmented information processes, production processes, and functional departments is designed into the organizational structures of virtually every company in every supply chain. Thus, visibility between and among companies in the supply chain is also severely limited.
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SPECIALIZATION The structure of the organization is designed with departments who depend on, and are dependent on, each other. Departments equipped with only the knowledge required to perform their specialized functions do not contain the global knowledge required to improve conditions for the whole organization. Even if they did, no single department has the autonomy or the authority to impose change on the others. A condition of limited visibility, shared responsibility, and minimal accountability is literally designed into the organization. In the absence of visibility, no one can see, nor does anyone have the incentive to see or to curtail, the unproductive use of human and material resources that occurs in many businesses every day. Ineffective performance is an integral part of the organization. Virtually everyone acknowledges the need to change unproductive conditions and there is no shortSPECIALIZATION REQUIRES age of intelligent people to implement change. Yet somehow conditions never THAT MANY PEOPLE IN MANY change for the better. There is a mechaDISCIPLINES WORK nism working to prevent change. A clue TOGETHER IN WHAT WE CALL to the nature of this mechanism lies in the AN “ORGANIZATION” nature of specialization. Specialization requires that many people in many disciplines work together in what we call an “organization.” We adopt our place in the organization and take responsibility for the job we are hired to do, but nobody takes responsibility to insure that the revenue-producing process is working effectively. There is no mechanism put in place by management to insure that the revenue plan is executed in an effective manner. In other words, there is no mechanism to insure that the labor of employees is directed effectively. However, there is a mechanism that does direct employee activity. During the planning interval, the revenue plan is changed countless times for countless reasons, such as an incorrect forecast or changes made by customers, to name just a couple. These changes are unplanned and occur as circumstances dictate. There is, as a result, a mechanism that consists of the interrelationships between and among all of the personnel in the supply chain that extends from, but is not bounded by, all of the corporation’s suppliers, the people and departments within the corporation itself, and all of its customers. All of these entities make up the industrial machine. Left as they are to their own propensities, these interrelationships and the resultant activity are driven by unplanned, uncontrolled circumstance rather than by 101
EMERGENCE any well-reasoned, manageable plan. It is this mechanism of circumstance that directs employee activity and preempts control of the corporation’s human and material resources. In other words, management’s failure to develop and implement a mechanism to direct employee activity in an effective manner is to cede responsibility and control of the employees’ activity to a mechanism of circumstance. Thus, a mechanism of circumstance assumes control of the company’s human and material resources. As a result, much of what employees do in organizations so structured—insofar as management does not have the visibility to direct labor to the best advantage—is labor unconsciously directed by circumstance. Instead of management running the business, the business begins to run management. It is only the redundant efforts of experienced, knowledgeable employees and the valiant efforts of recruits naïve enough to believe that they can make a difference that mean that the outcome is anywhere near favorable. Specialization has left a void in our capability to think in terms of global systems required to manage constantly changing conditions. It also plays a role in the maintenance of this mechanism. The evolution of specialization has honed our minds and focused our vision on the detailed, tangible, technical problems of immediate concern. While specialization is a key component of productivity, the sum of the knowledge required to perform all of the detailed activities does not add up to the wisdom required to perceive the uncontrolled global condition that is a result of that activity. Specialization has limited our ability to perceive the impact, adverse or otherwise, on the performance of the organization. Opportunities to improve conditions are hidden beyond the bounds of our technical intellect and myopic vision. One could forcefully argue that wisdom has long since been bred out of our species. In any event, it is this mechanism of uncontrolled circumstance generated by the sum of uncontrolled activity that directs much of the day-to-day activity in our corporations, not management. Management, made up of specialists, is not equipped with the range of knowledge or understanding required to manage changing circumstances, much less to predict and adapt to those changes that are pending. In effect, specialization has painted us into an intellectual corner. Management can only react to circumstances as circumstances materialize. As such, much of management could be dispensed with and the business would still thrive. Oligopoly or deep pockets will carry the day until the machine forces a change of management, owners, or, in severe cases, bankruptcy. 102
VOLUME #1, ISSUE #4 In addition to oligopoly and deep pockets, the machine thrives on the enthusiasm, initiative, and energy of naïve recruits, which it dissipates over time by its regimen of compliance, conformity, and consensus. Recruits with visions of a prestigious career in manufacturing provide a source of renewed vitality, but consigned to a life of menial labor are soon burned out and learn what their more experienced predecessors have learned. They learn that they can do no more than do their jobs and eventually resign to do no more than their jobs. We all become the proverbial cogs in the machine. Employee burnout, high turnover, unqualified employees, inefficiencies, excessive costs, and mandatory overtime are all debilitating conditions that contribute to a surreptitious state of decline, the rate of which is determined in part by the degree to which indifference and ineffectual activity prevail. This is not to say that all companies are disagreeable places to work; quite the contrary. Professional managers can maintain a pleasant working environment even with a traditional organizational structure. We may enjoy our work, feel productive and, perhaps, even feel appreciated. However, these vicarious comforts only serve to obscure further the presence of an ineffective mechanism with the illusion of security in an alien environment until the economic performance of the company deteriorates. The economic reality of ineffectual labor is that after a decade or two of practice, many people will be forced into a market with ordinary skills whose equilibrium is readily satisfied by recruits with smaller pecuniary appetites. Thus, experienced knowledgeable specialists enabled by genuine camaraderie, mutual trust, and their acquired understanding of the mechanism are gradually displaced and replaced with less experienced, less knowledgeable, less expensive employees. Age-nic cleansing is only one of many forces behind the decline of the company’s intellectual capital. Specialization, the explosive growth of technology, competition, shorter product life, and diminishing margins have placed a heavy demand on inexperienced specialists who over time have come to rely on emulation, habit, and tradition rather than intellect. The demand for people to supply the insatiable demands of uncontrolled activity and growth has moved inexperienced, myopic specialists up in the managerial ranks with the rising tides of technology into positions of responsibility far above and beyond the scope of their specialties and comprehension. Inexperienced specialists in turn hire generations of less experienced, less knowledgeable specialists, all of whom become blameless casualties of this declining intellectual stratum. Our collective intellect, perception, and insight have been gradually diminished by the 103
EMERGENCE myopic requirements of our environment. Today, the activity required to run our production processes no longer demands much in the way of wisdom and contemplation. Primitive systems require only rudimentary labor to sustain them. The daily activity typical of many manufacturing organizations will bear this out.
ANALYSIS The typical manufacturing organization finds itself on the verge of failure virtually every day. Missing parts or parts that are out of position in the process are identified by stockroom or assembly employees when they discover that the parts are not located where they were supposed to be. As stated earlier, visibility is limited. That is, the condition of the process is not visible to management or employees ostensibly responsible for the performance of the process. The cause of the stockout, which may be attributable to one or all of the reasons described below, and the potential delay of revenue are also invisible. Further, the cause is irrelevant. Action is focused only on activity that will sustain the flow of revenue. It is this circumstance that dictates activity, not management. Personnel in the purchasing, materials, production control, and production departments must determine the status of parts required to meet the revenue plan, i.e., they must look up the quantities and the locations in the process, a myriad of parts, for a myriad of products, in a myriad of database files to determine the condition of the revenueproducing process, all of which is done by all concerned in a redundant manner. What employees who work throughout the supply chain are doing is extracting bits of data about each part of each product from a database so that they can piece together a composite picture of the condition of the revenue-producing process at the eleventh hour to prepare for a daily production meeting. The effect of this preparation is to make it appear that the condition of the revenue-production process is known to those ostensibly responsible for the effectiveness of the production process. In the process of composing this composite picture of the process, other problems attributed to an inadequate supply of parts may be uncovered. These problems will be presented to management at the daily production meeting as “challenges” that will be overcome during the course of the day’s activity. Management, satisfied that the day’s revenue goals will be met, remains content with the illusion of process knowledge and control, while the underlying cause of these challenges remains invisible. Thus, 104
VOLUME #1, ISSUE #4 the redundant “analysis” of the revenue-producing process and the subsequent redundant activity will be repeated the following day and every day thereafter. The word “analysis” is routinely used to sum up this act of preparation for the daily production meeting. It, as does this brief article, falls far short of describing the servile work and the debilitating organizational psyche it produces. Analysis implies a type of intellectual logic applied to acquire a deeper understanding of some system or mechanism. The level of understanding achieved by this act of preparation for the production meeting is limited to an understanding of what parts and their priorities in terms of revenue to focus activity on today. No understanding of the mechanism that caused the shortage of parts occurs. A deeper understanding of the mechanism would facilitate a solution to the cause of the part shortage and thus eliminate the reason for such ineffectual labor. The word analysis also implies a contemplative act of inquiry to facilitate some improvement. This act of preparation is dictated by circumstance, not management. It must be performed as circumstance dictates, immediately. There is neither the time nor any requirement for contemplation and, in fact, preparation for a daily production meeting requires little more than the capability to endure the daily tedium of mindless, repetitive drudge work. Confined to the limits of this work, the genetic code of this specialty evolved and generations of blameless bureaucrats are bred to achieve only this minimum level of understanding and competence. One can see by this example how activity can limit the development of the intellect. The result of this evolution and perpetual act of preparation in no way improves the dysfunctional system. It only serves to obscure, sustain, and institutionalize it. The epidemic of this mindless ineffectual labor so described does not end with the end of the production meeting. There are still challenges to be overcome. After the meeting, the participants scurry off to interrupt and enlist the aid of what would otherwise be thoughtful productive employees to help do more mindless, ineffectual work expediting parts, who in turn interrupt still other employees to coordinate their activity in an effort to appropriately reposition parts in the supply chain to insure that the challenges are overcome so that the revenue for the day will be forthcoming. I am using the example of a parts shortage to illustrate how one seemingly small element in the process triggers a large amount of ineffectual activity in the manufacturing operations department. Similar labor is expended to rectify aberrations in work orders, sales orders, engineering 105
EMERGENCE change orders, and every other element and in every department in the process that requires control. Aberrations in all of these seemingly dissociated elements and departments cause employees to react in concert and severally to readjust these elements to make the global process work. The fact that these elements are largely uncontrolled, as is the resultant activity, keeps employees in a constant of reaction to circumstance which, to the degree that they are successful, provides the illusion of control. Add to these daily charades mangement’s incompetence and the resulting sabotage of the revenue-producing process in the form of poor product designs, inaccurate product documentation, inadequate production tools, defective parts, defective production processes, purposeless paperwork, and the passive acceptance of adverse supplier decisions at the front end of every process, as well as the imposition of contrary customer demands at the end of every process for every company in the supply chain, and the resultant waste of human resources reaches colossal proportions. The problems caused by these conditions are routinely relieved by the successful efforts of employees to sustain revenues, while the underlying causes and costs of these problems remain hidden from view. Profits are a crude measure of effectiveness.
EFFECTIVE
LABOR
The effectiveness of labor in a well-managed company may be as high as the proportion of effective labor to total labor, where ineffective labor consisting of benign placeholders is a benign expense. In companies where incompetent management prevails, the proportion of what would otherwise be effective labor is substantially reduced by the extent to which incompetence facilitates ineffective labor in sabotaging the revenue-producing process. That is to say, the effectiveness of what would otherwise be effective labor is reduced by the extent to which ineffective labor is allowed to become a physical and psychological burden upon effective revenue-producing labor. Consider that the global supply chain is much longer than the supplier and the customer adjacent to the subject company described above. Consider further that the supply chain consists of dozens of companies, some of which have thousands or tens of thousands of employees. Consider still further that there are hundreds of thousands of products, each of which has a supply chain of various lengths linked at various junctures along the chain by specialized relationships. Now consider that all 106
VOLUME #1, ISSUE #4 of these companies have more or less the same dysfunctional organizational structure, and you have a machine that literally wastes tens of thousands of people’s lives and their intellectual potential. Management constrained within the functional bounds of a specialized box in the functional hierarchy does not have the visibility, the knowledge, or the authority to change these conditions. The art and science of manufacturing and management have not and cannot—with existing organizational structures driven by externally prescribed circumstance and uncontrolled activity—progress beyond this primitive level.
NOBODY
HAS CONTROL OF THE MACHINE
Management, by ceding control of its resources to a mechanism of circumstance, consign employees to a life of reaction to the circumstance of uncontrolled activity and growth, which precludes the possibility of learning, which in turn adds a decline of the company’s intellectual capital to its list of handicaps. There is, except within the specialty of new product development, little or no premium placed on the ability to think. Organizations on the verge of failure avoid it by habitual effort that maintains the conditions that brought them to the verge. The course of action has been set by circumstance. What needs to be done has been preordained. It is easier and wiser to go along and do things that can be immediately done, albeit with a large tolerance for frustration, rather than to propose improvements that cannot. Such proposals raise questions of competence, and there is little incentive to risk political repercussions that will add the discomfort of disfavor to the discomfort of frustration. Only action that will overcome the challenge of the moment is appropriate. Dissent, doubt, even indifference is forbidden by the machine’s regimen of consensus and conformity. We can do little more than go along to get along. Thus, the surreptitious decline of the business is concealed by feigned felicity and the laudatory posture of sycophants and fervent, albeit naïve, team players alike. Meanwhile, employees continue to react to circumstance caused by the unplanned, uncontrolled activity of other people in the supply chain over whom they have no control. Perpetual reaction to current events perpetually limits the sphere of our thinking and our activity to the present. The day, the days that follow, and the future are preordained. There is neither the time nor the opportunity to understand how the mechanism works. Any mechanism that cannot be understood cannot be controlled. Few people have control of their future and fewer 107
EMERGENCE still have control of their jobs. Nobody has control of the machine. We are all its unconscious subjects and its complex, all-pervasive mechanism can be neither seen nor understood. The machine has grown beyond the control of the engineers responsible for its evolution. The engineers,2 over the course of time FEW PEOPLE HAVE and evolving technologies, have implemented dysfunctional organizational strucCONTROL OF THEIR tures in the undirected piecemeal fashion FUTURE AND FEWER of specialization. That is, they have impleSTILL HAVE CONTROL OF mented structures consisting of fragTHEIR JOBS mented, specialized functionaries, all of whom are driven in the same general direction but as individual functionaries have no conscious sense of direction. Financiers, professors, consultants, and other like-minded thinkers are, for all their visionary acumen, unable to see through the mists of time and tradition, much less through the ever-increasing size and complexity of dysfunctional organizational structures. This lack of visibility not only obscures the lessons of the past, it obscures the possibilities for the future, which, if realized, would open new frontiers and opportunities for learning and real security for all concerned. We are in effect suspended in time by habit and tradition. Management, unconscious of the absence of any mechanism to reveal the presence of the machine, is rendered powerless to effect change. Under these conditions, there is no hope of improvement for the better. Thus, there has been the evolution and surreptitious growth of a machine that, in the absence of visibility, has captured control of the business and of our lives. We readily adapt to its benevolent cadence and march down the road to mediocrity and failure in spite of innumerable lessons from the past. Existing organizational structures are anachronistic machines that will gradually wear down and eventually bring down even the most powerful corporations and their leaders. No one has effective control of our corporations. Herein lies one reason that businesses fail.
ACHIEVING
EFFECTIVE CONTROL
What can be done to achieve effective control of the business? An organizational structure with its structural elements properly aligned is shown in Figure 3. The production process consists of three discrete steps or operations; namely, “kitting,” “assembly,” and “shipping.” These operations and their 108
VOLUME #1, ISSUE #4 Manager Sales 5.50 BOP 0 Inv Add 20 EOP 15 Cogm 5 Income 0.50
Information Process
Sched Kitted Totals Balance
Inv BOP Recv EOP
100 5 15 85
Inv Kitted 5 5 5 5
Sched Asmbld Totals Balance
100 5 10 90
Inv Asmbld 5 5 5 5
Sched Shipped Totals Balance
100 5 5 95
Inv Shipped 5 5 5 5
Functional Departments
Manager Kitting Operation
Manager Assembly Operation
Manager Shipping Operation
Production Process
Kitting Procedures
Assembly Procedures
Shipping Procedures
Product
Product Specifications
Figure 3 An organizational structure with its elements properly aligned sequence are dictated by the need for a physical location in which to position material next to each other to facilitate an efficient production sequence or “flow.” The purpose of the first step is to temporarily store and prepare the parts for assembly. This is called a “kitting” operation. The purpose of the second step, “assembly,” is to assemble the parts to make the product suitable for sale. The purpose of the third step, “shipping,” is to make the product suitable for transport to the customer. The operating details within each operation have as their origin the products’ specifications, i.e., the quantity and the cost of materials, labor costs, tools, and the factory’s capacity are documented in the process procedures. The other five operations shown in Figure 2 will be assimilated by the employees responsible for the kitting, assembly, and shipping operations, as described below. 109
EMERGENCE One key feature of this organizational structure is that the purpose of each element and the relationship between and among the elements are visible. There is a one-to-one correspondence between the elements in the organization, which consist of the information process, the functional departments, and the production process. This one-to-one correspondence eliminates the fragmentation and misalignment of information, departments, and processes described earlier. Every element in the organization has a value-added purpose. Every element produces a product for which there is a customer. That is, the value of each element is such that if it were removed, the process, when optimized, would cease to function. The purpose of the procedures is threefold: to document how the process and the other elements in the structure work, to provide planning criteria for all the employees, and to provide them with a knowledge of the product and the process required to control and manage the process effectively. The purpose of the production process is self-evident: to produce a product suitable for sale to a customer. The purpose of the functional departments is to produce a product for which there is a “customer,” the customer being the subsequent department in the supply chain. This is a change in the contemporary mindset that views people as capable of nothing more than pushing parts through a process that they can neither understand nor control. The purpose of the information process is to provide management with an aperture through which to see the condition of the revenue-production process. Management and employees will see, daily, a composite picture of the revenue-producing process in terms of the revenues, products, parts, costs, and the precise position of products and parts in the process. In short, the purpose of the information process is to provide management with the visibility required to get effective control of the business. Learning is a second key feature of this organizational structure. Three elements in the process of learning are planning, execution, and measuring results. The mechanism of specialization has dissected these elements of learning and allocated them to different departments in the organization; namely, the materials, production, and accounting departments. Dissecting the elements of learning into three separate functions prevents people from learning anything beyond the limited sphere of their mental and physical activity. The fragmented learning process is the origin of organizational psychoses. Neither the people nor the organization can achieve an effective sense of an organized, coherent purpose. 110
VOLUME #1, ISSUE #4 In the new structure, these functions have been decentralized and made an integral part of each of the revenue-producing departments. Each department is now an autonomous business unit equipped with the elements of learning that enable it to learn how to effectively produce a product for which there is a customer. Each of these three departments is equipped with the resources required to manage its own customer backlog, the planning resources required to meet the backlog, the information resources required to execute the plan effectively, and the accounting resources required to measure its own results. It is the capability to plan, execute, and measure results that makes each department an autonomous, self-sustaining business unit. Decentralization also provides each department with the autonomy that is necessary to make improvements. Making improvements will require employees to think and learn how to become successful businesspeople. As autonomous managers, they can learn how their internal mechanisms work and further concentrate the elements of learning—planning, execution, and measurement—into the sphere of each individual’s mental and physical activity, thus reducing to one job what it currently takes two or three people to do. In this way, employees responsible for the effective performance of the revenue-producing process can assimilate responsibility for the other five operations shown in Figure 3. In managerial terms this is called “job enrichment.” This new mindset treats employees as if they are capable of thinking and creative problem solving. Companies that adopt this mindset will have employees who are capable of thinking and creative problem solving.3 The increase in the proportion of effective labor will be substantially more than the reduction in the proportion of ineffective labor, as will be shown below. Another key feature of this organizational structure is that the communication pattern is visible to all concerned. The origin, the content, and the destination of the information necessary to keep everyone appraised of the condition of the process are clearly documented and visible to all concerned. The numerical relationships between and among all of the elements in the organization are clearly visible. Relational information flows up the organization. The capstone of the information process is the income statement, whose content, because it is visible to all, flows down the organization. The income statement is also management’s “home page.” The performance of each manager is visible to upper management via the documented visible links. The links extend down into each operation 111
EMERGENCE to the product’s component level, where quantities, costs, and their precise position in the process are visible. For example, there is a one-to-one relationship between the numerical content of the information and the physical product. That is, for each quantity of “five” shown in the “end of period” row (EOP) in Figure 3, there will be a quantity of five products physically located in a designated location in the process. The designated locations of the parts for the product and a description of the parts have been omitted to keep the model as easy to understand as possible. These documented visible links keep management and employees alike informed as to the daily condition of the revenue-producing process as the revenue plan unfolds. Thus management, hitherto running blind, now has very acute visibility. Information presented in this comprehensive format will provide management, employees, suppliers, and customers, in concert and severally, with the prescient visibility required to see what needs to be done, and what can and cannot be done, and thus to control and effectively direct resources to keep revenue plans on track during the planning interval. Thus, ineffectual labor and the millions of dollars of superfluous overhead normally required to bring derailed revenue plans back on course will no longer be necessary. Multiple products can be managed with a similar comprehensive information format, with links from the “home page” to different products and their respective income statements and revenue-producing processes. New markets, new products, and new production processes will require the development of new lower-level, component-level information and product structures. Thinking, creativity, and decisions will have to occur in a timely manner at the lowest levels in the organization. A new genus of organizational architects will evolve. Generalists, free of the myopic nature of specialization, will out of necessity learn to develop the mechanisms required to direct, integrate, and measure the results of organizational behavior at all levels in the organization. The need to think both globally and in terms of the details that make up the global landscape will develop individual and collective intellects, which in turn will increase the intellectual capital of the company. People, given the environment and this opportunity for self-improvement, will strive on their own volition to achieve self actualization.4 That is, they will seek to do what they are best fitted to do and thus perform at their highest possible potential. Management will be free to lead a selfdirected organization, as opposed to pushing an immovable bureaucracy. 112
VOLUME #1, ISSUE #4 Under conditions so described, effective labor will increase by an absolute minimum to an increasing portion of the total labor as the proportion of ineffective labor decreases. This increase in effective labor only accounts for the physical capability of the human resources. The large number of human minds largely confined to mindless tasks is an immense source of untapped productive potential. Releasing this latent innate intellectual capability will enable labor to generate value of incalculable proportions in the spirit and fashion of entrepreneurs.
CONCLUSION In order to gain effective control of the business, management must implement a mechanism to control it. Information processes, production processes, and functional departments must be aligned to make the relationship between and among these elements in the organizational structure clearly visible. The relational organizational structure will provide managers at all levels with the visibility required to see the condition of their revenue-producing processes. The pulse of the process, universally observable, will insure its economic health. When control of the business has been achieved, the same techniques must be adapted to the organizations of its suppliers and customers. In this way management can extend its now acute visibility beyond the immediate bounds of the company throughout the industrial supply chain. The sphere of its communication pattern, knowledge, and intellectual capital will expand accordingly. The communication pattern, while it appears to be static by virtue of its format fixed on paper, is in reality a dynamic management tool. The content of the information changes as conditions vary. Patterns will emerge when these changes are viewed consistently over a period of time. These patterns are a reflection of the decisions and activities of suppliers, company employees, and customers that occur as conditions vary. Information patterns are reflections of behavior patterns. When these patterns have been assimilated, behavior can be anticipated and resources can be allocated to the best advantage. By developing an acute sense of prescience, the intellectual capital of the organization is further developed. Higher levels of understanding will provide management with the visibility to bring the mechanism of circumstance into even sharper focus and attain greater control of the business. When other companies in the supply chain change their organizational structures to the new model, visibility between and among 113
EMERGENCE companies in the supply chain will become increasingly more acute. Thus businesses working jointly and severally will make up a coordinated enterprise throughout the supply chain and over time acquire an everincreasing amount of control over the industrial machine. When we have visibility—that is, the capability to see and to understand how the mechanism works—we will have mastered the machine. We will have regained sufficient control of our jobs to make our day, and the days that follow, and, eventually, the wisdom to see beyond the horizon and open up new frontiers in which to make our future. Then and only then will we have effective control of the business. Then and only then will we have identified, isolated, and removed one of the reasons that businesses fail.
NOTES 1
San Jose Mercury, June 19, 1993: 10D. The subject computer companies are Apple, IBM, Digital Equipment, Hewlett-Packard, and Compaq.
2
For detailed information on the role of the engineer in industry, see Veblin and Thorstein (1947) The Engineers and the Price System, New York: Viking Press.
3
The Golden Book of Management (AMACOM, 1984: 462–3) provides an overview of Douglas McGregor’s two theories of the universe, Theory X and Theory Y.
4
See Abraham H. Maslow (1970) Motivation and Personality, New York, Harper & Row: 46.
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EMERGENCE, 1(4), 115–123 Copyright © 1999, Lawrence Erlbaum Associates, Inc.
Twenty-first-century Management and the Complexity Paradigm Dr. Hiroshi Tasaka
WHAT
IS “COMPLEXITY KNOWING”?
“Complexity” is becoming a keyword at the cutting edge of modern thought. In the vanguard of this movement are the Brussels school led by Ilya Prigogine, a Nobel laureate in chemistry, and the Santa Fe Institute in New Mexico. The latter, in particular, has attracted in recent years scores of researchers, from all over the world and from the natural sciences, social sciences, and humanities alike, who are passionately engaged in the study of chaos theory, self-organization, artificial life, and many other leading-edge topics with a view to breaking ground in these new realms of knowledge for the twenty-first century. Their enthusiasm has made its way across the Pacific and spread to Japan, where it has given rise to the current “complexity” boom. As this boom heats up in Japan, however, serious misapprehensions and illusions are being generated about the nature of complexity—that it is some kind of “new theory,” the use of which will make it possible to analyze the properties of even complex phenomena and predict their behavior. Complexity, however, is not a new theory in that sense. It is a new paradigm of knowing, or, rather, a new way of conceptualizing knowledge. 115
EMERGENCE Accordingly, what the keyword “complexity” will bring about is nothing less than a shift from old ways of thinking to new ways of thinking in all domains of knowledge. Without understanding this fact, no matter how much managers may learn about such specialized topics as chaos theory or artificial life, this fragmentary knowledge will never be useful in actual management situations. The author’s aim is to define this new paradigm as “complexity knowing” and to discuss the resulting paradigm shift so that managers can put the “seven types of knowing” to practical use. In consideration of space limitations, I will attempt to describe the essence of these seven types of knowing and explain the paradigm shift that managers will be looking for in the twenty-first century.
KNOWING THE WHOLE: AS SOMETHING BECOMES MORE COMPLEX, IT ACQUIRES NEW PROPERTIES Why are such timeworn words as “complex” attracting attention once again? Because our traditional ways of thinking have come up against a huge wall. Up until now, whenever we encountered a complex object, in order to understand it we would first break it down into simple components of a readily analyzable size. We would then analyze each component minutely, and finally we would synthesize the results. It is, of course, precisely analysis of this sort that has supported the present advances in science and technology. But as science and technology have developed, the limitations of the analytical method have become apparent—i.e., the fact that something important is lost when an object is reduced to its component parts. Why is this the case? Because it is a characteristic of the world we live in that, as something becomes more complex, it acquires new properties. This means that, as the world increases in complexity, it begins to display new properties that had never existed before. When molecules of water are brought together, for example, they assume one of three forms: water, ice, or steam; when cells are brought together, they function as tissue, organs, and intestines. Likewise, when large numbers of consumers are brought together, they create hit products or fads, and when people are brought together, they exhibit crowd psychology. Thus, the world intrinsically is a living system that cannot be reduced to a collection of its components, because the instant it is broken down into parts it loses its life force. In this sense, it resembles a fish, which, after being cut up, dissected and studied minutely, can be sewn back 116
VOLUME #1, ISSUE #4 together and restored to its original shape, but it can never regain its essential form as a living, breathing fish. It is precisely because the methods of analysis and synthesis have come up against these limitations that the search is on for a way of “knowing the whole,” one that does not break down a complex object into its component parts but that comprehends it as a whole in all its complexity. This is the expectation behind all the attention that the keyword “complexity” is attracting. What, then, is the method by which we know the whole? “Knowing the whole” is shining a new light once again on the classic technique of old-fashioned intuition. Methods such as “intuition,” “hunches,” and “taking the broad view,” which were previously stigmatized as unscientific and denied “citizenship” in modern management studies, are now being revived and given new life. For that reason, managers must study deeply the following paradigm shift that knowing the whole teaches: Don’t analyze, intuit the whole.
KNOWING EMERGENCE: THE SPONTANEOUS BEHAVIOR OF INDIVIDUALS PRODUCES THE NORM FOR THE AGGREGATE What, then, is the best way for us to approach the living world in its totality? The method that teaches us this is “knowing emergence.” What do these words mean? Bird simulation, for example, is an extremely interesting study in the field of artificial life. Merely by installing in each bird the simple property of preserving a certain distance between itself and the next bird, the property automatically becomes the norm that a flock of birds exhibits and part of their group behavior. The aggregate’s ability to form systems or create structures automatically as the result of the spontaneous behavior of its individual members is called “emergence.” And the ability to generate advanced systems and complex structures automatically from within rather than being acted on from without is called “selforganization.” For that reason, approaches to the world that make use of emergence and self-organization are called self-organized or emergent methods. These methods, however, are completely different from the ones 117
EMERGENCE we normally use to plan structures or manage systems. Up until now we have benefited from the machine culture that science and technology have created. Thus, we tend to forget that the world we live in is also alive; unconsciously, we tend to regard it as though it were a mechanical device. We are, therefore, under the illusion that other entities that also have the qualities of life, such as corporations, markets, and societies, are somehow like machines. We sketch out ideal conditions in the form of plans and imagine that we can control or manage events to attain these conditions. In contrast, “knowing emergence,” as an approach to the world, teaches us the importance of not trying to plan or manage things artificially, but emphasizes instead ways to stimulate the process of selforganization. For that reason, managers must study deeply the following paradigm shift that knowing emergence teaches us: Don’t plan or manage, stimulate self-organization.
KNOWING COHERENT ENVIRONMENTS: COHERENCE STIMULATES SELF-ORGANIZATION What, then, is the best way for us to act that will stimulate the processes of self-organization and emergence in the living world? The method that teaches us this is “knowing coherent environments.” What do these words mean? Ilya Prigogine, an international authority on research into selforganization, has made clear the three conditions under which selforganization is generated in systems in the natural world. The first condition is that a system be open and allow exchanges of energy, matter, and information with the outside world. The second condition is that it be dynamic, far removed from a state of equilibrium. The third condition is that within the system there is feedback that enables special processes to make rapid progress. Prigogine has pointed out that, in order for the third condition, in particular, to come about, it is important that information sharing develops within the system and that the system as a whole produces coherence so that a coherent environment can be generated. These three conditions, which are prerequisites for self-organization in natural phenomena, provide valuable hints for thinking about self118
VOLUME #1, ISSUE #4 organization in social phenomena. Companies too, for example, definitely fulfill these three conditions. A self-organized corporation is one in which (1) employees show a high degree of spontaneity; (2) plans and projects are generated from the bottom up; (3) new goods and services are developed; and (4) marketing activities can be adopted that respond to a rapidly changing market. First, this sort of company is an open company that actively engages in exchanges of personnel and information with the markets and with other companies. Second, it is a dynamic company with a corporate culture that is always seeking innovation and change. Third, it is a coherent company, whose corporate vision, strategy and other valuable information are shared with all employees, thereby creating coherence between one employee and another and expanding the sphere of its activities. During the current information boom, the importance of information sharing has been pointed out. What is truly important, however, is that the information being shared generates coherence among employees and creates a coherent environment in which information coherence can develop. For that reason, managers must study deeply the following paradigm shift that knowing coherent environments teaches: Generate information coherence not information sharing.
KNOWING THE ABILITY TO PRODUCE COHERENCE: FLUCTUATIONS AT THE MICRO LEVEL CAN SWAY MACROSCOPIC TRENDS What, then, is important for generating self-organization from a coherent environment? The method that teaches us this is “knowing the ability to produce coherence.” These words are explained by Prigogine in his research on selforganization. Translated freely into the language of corporate management, they mean that the most important entity for generating self-organization from a coherent environment in a corporation (macro level) is the individual (micro level). In other words, it is precisely those individuals who can articulate an attractive vision and act with passion to make that dream come true who will draw in many other people around them through their ability to 119
EMERGENCE produce coherence. And it is precisely this process of involvement at the micro level that such individuals generate that stimulates selforganization and emergence in a company and determines the macroscopic trends of the corporation as a whole. In corporate behavior, entrepreneurship is essentially nothing more than the process by which the ability to produce coherence, and the process of involvement that such an individual generates, determines overall trends in a corporation, market, or society. And what determines trends in today’s rapidly changing and evolving corporations, markets, and societies is increasingly becoming the individual’s ability to produce coherence. The age in which a company could rest secure in being a “big business” or an “all-round company” is already over; the curtain has come down on the era in which an organization’s collective strength swayed the marketplace. For that reason, managers must study deeply the following paradigm shift that knowing the ability to produce coherence teaches: It is not an organization’s collective strength but the individual’s ability to produce coherence.
KNOWING CO-EVOLUTION:
WHOLE AND ITS PARTS CO-EVOLVE
THE
What sort of strategic thinking is thus needed for individuals to change a corporation, market or society? The method that teaches us this is “knowing co-evolution.” What do these words mean? When a corporation, a market, or a society evolves, this evolution becomes a process of co-evolution. To put it another way, a process develops in which each part interacts with and influences the other parts, thereby stimulating their mutual development. What is even more important is that this process of co-evolution also develops between the parts and the whole. This means that when an individual acts on a corporation, market, or society, the following two types of strategic thinking are important. The first is to act simultaneously on the complex parts that make up co-evolution. Imagine, for example, that we are trying to develop a process of information sharing in a company. We would have to change at least three parts—the information system, the management process, and the corporate culture—all at once. We call this kind of strategic 120
VOLUME #1, ISSUE #4 thinking a “horizontal integration strategy.” The second is to act while simultaneously taking into consideration the co-evolution of the superior whole and its subordinate parts. Such things as corporate vision, strategy, tactics, or action plans, for example, co-evolve as the upper and lower levels interact with and mutually influence once another. What is important, however, is to think about and make decisions about the whole and its parts in a way that integrates them vertically. We call this type of strategic thinking a “vertical integration strategy.” Up to now most strategic thinking has either been from the bottom up or from the top down. Knowing co-evolution, however, teaches us the importance of a horizontal integration strategy and a vertical integration strategy. For that reason, managers must study deeply the following paradigm shift that knowing co-evolution teaches: Neither top down nor bottom up.
KNOWING HYPER-EVOLUTION: THE PROCESS OF EVOLUTION ALSO EVOLVES How, then, should we think about rules in these types of strategic thinking? The method that teaches us this is “knowing hyper-evolution.” What do these words mean? They mean that in evolution, the process, i.e., the rules themselves, is also evolving. Thus, the rules formed in a corporation, market, or society evolve. Bill Gates and most of the world’s outstanding entrepreneurs did not only take up the challenge of the existing market where the rules are already established, they have also actively generated new rules by ambitiously creating new markets. The age in which it is possible to win by learning the rules, following them, and using them to advantage is over. We are now entering an age in which we must recognize that the rules are changing and that we must seek success by actively changing them. For that reason, managers must study deeply the following paradigm shift that knowing hyper-evolution teaches us: The rules are changing, and so they can be changed. 121
EMERGENCE
KNOWING SINGULARITY: THE FUTURE OF EVOLUTION CANNOT BE PREDICTED How, then, should we think about predictions in these types of strategic thinking? The method that teaches us this is “knowing singularity.” What do these words mean? Prigogine’s dissipative structure theory demonstrates that it is impossible to predict beforehand what systems or structures will be produced as a result of evolution. In addition, chaos theory shows that, in nonlinear systems, the smallest differences in the initial state can lead to very large differences in the final outcome. In short, in these two senses, it is impossible to predict the future in a complex world. What principle of behavior should we then adopt for an evolving world—i.e., a corporation, market, or society—in which no absolute rules exist and in which it is impossible to make any certain predictions about the future? This principle is clearly stated in the word of Alan Kay: The best way to predict the future is to invent it.
These words tell us how we ought to go about making decisions and acting when confronted with a one-time-only situation that cannot be predicted because the rules do not repeat themselves. They teach us the profound lesson that knowing is an art, not a technique. For that reason, managers must study deeply the following paradigm shift that knowing singularity teaches: Do not predict the future, create the future.
MANAGEMENT
AS THE MOST EVOLVED FORM OF COMPLEXITY
Experienced managers, however, already have a profound understanding of these seven types of complexity knowing in the form of “gut feeling” or “tacit understanding.” Why? Because management is the most highly evolved form of complexity and because managers continually grapple with complexity in their day-to-day operations and continue to acquire the wisdom, in the form of experience, that allows it to evolve even further. 122
VOLUME #1, ISSUE #4 In retrospect, one of the serious diseases of the twentieth century was the disjunction between thought and action. If we thoroughly understand this fact, we must remedy this illness and bring about a new synthesis of thought and action in the twenty-first century. In order to do so, managers, who are in the position to “act,” must now take an interest in cutting edge “thought,” study it deeply, and put it into practice. Moreover, in their efforts to put it into practice, they must embody it and talk about what they know in words that are full of vitality. Now is the time that managers ought to be talking about “knowing.”
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About the Authors Josh Bacon is a Judicial Hearing Officer at James Madison University. His research interests include institutionalization theory, organizational theory, and complexity theory. Eric B. Dent, Ph.D., is Assistant Professor, The George Washington University. Recent publications include papers in Cybernetics and Systems, Journal of Applied Behavioral Science and OD Practitioner as well as two books, Management: Perspectives, Process, and Productivity and Organization Development (both University of Maryland Press). John F. Keane is a doctoral researcher at the Bradford School of Management. He holds an MA in Design Management and his research interests include complexity and self-organization, autopoiesis, secondary emergence, the role of metaphor, management of creativity, organizational learning, neural nets, and recursive communication. Dr. Adam J. Koch is lecturer in marketing at the School of Business, Swinburne University of Technology, Melbourne, Victoria, Australia. Dr Adam Koch is a lecturer in marketing. His research interests include determining and developing competences, capabilities and skills; decision making and competence-based business strategies. Russ Marion is Associate Professor, Educational Leadership, Clemson University. His current research interests include nonlinear social dynamics, organizational theory, and school finances and student achievement. He is author of The Edge of Organization: Chaos and Complexity Theories of Formal Social Systems (Sage, 1999). Tom Rand has 20 years of management experience building products that span the electromagnetic spectrum from DC through light. He has designed responsive manufacturing organizations that are unique in the industry. He acquired his organizational design and resource management experience in several high-technology companies such as Silicon Graphics and National Semiconductor. He is a graduate of San Jose State University with a Bachelor of Science Degree in Industrial Technologies. He is also a graduate of Santa Clara University with a Master’s Degree in Business.
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EMERGENCE Dr. Hiroshi Tasaka is Director of the Center for the Strategy of Emergence, The Japan Research Institute, Ltd, and is the Japan Liaison Officer for the New England Complex Systems Institute. Dr. Tasaka has actively promoted the vision of new industry incubation by consortium strategy. He has established 18 consortia with more than 667 leading-edge companies and is an opinion leader in the area of complexity and management in Japan.
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