Re-thinking management thinking

The organisation as a system

There is an excellent 12 minute video on You Tube entitled if “Russ Ackoff had given a TED talk” in which he waxes lyrically about systems thinking, continuous improvement and discontinuous improvement.

One of the systems thinking examples used is “people” or rather “individuals”, paraphrasing, he suggests “You are a biological “system” consisting of your heart your lungs, your stomach, your pancreas each of which can affect your behaviour”. These parts are all interconnected and we, as a “system”, cannot be divided into independent parts. A critical and often overlooked point is the fact that the properties of a system ‘as a whole’ has properties that none of the individual parts have. The most important property for you is life; none of your parts have life, but you have life. …”you write …your hand cant’ write, that’s easy to demonstrate cut it off put it on the table and watch what it does! You can see, your eye can’t see …You can think… your brain can’t think”. This has some profound implications for companies and systems thinking … when a system is taken apart it loses its essential properties!

The point he is making is that all systems are MORE than a sum of their parts and trying to optimise each individual part of the system; sales, order processing, production, operations, delivery and whatever other core processes an organisation may have, is detrimental to the optimisation of the whole system.

In a more mechanical example he suggests we get one of each currently available car on the market and then get a bunch of engineers to assess which has the “best” engine, the “best” gearbox, the “best” running gear, the “best” back axle right down to the “best” wiper blades. We then get those same engineers to assemble all the “best” bits and lo and behold (obviously?) we’ll have the “best” car won’t we?!

The car is more than the sum of its parts…even the engine, a key part required to move the car, cannot even move it self! You can see as well as I can that if we assemble all of the “best” bits we won’t even have a car!

The key point is that in organisations we need to consider the flow of work “through” the company as problems don’t usually exist with the individual people, individual teams and individual departments but where those people teams and departments interact with one another. An organisation is a system of interrelated parts and in order to optimise performance we really need to think more in terms of relationships rather than independent parts.

This can be seen from the diagram below which shows suppliers delivering products and services, the work flowing through the company and onto to customers and consumers.

As managers and leaders we are all trying, and many are managing, to run their part of the business as effectively and efficiently as possible. The problems arise when the work goes outside of our departments and our control. The problems occur at the boundaries; at the interfaces that exist with other departments.

Optimising a system

I’m not a football fan but Vassos Alexander was interviewing Peter Shilton (the legendary England goal keeper) on the Chris Evans radio show recently and Shilton was discussing how on one occasion, when playing for Notts Forrest, the team had played a game, flew to Japan, arrived in Japan played another game, flew back and then, when the team were absolutely cream crackered, played another critical game and won. He said something like …”we weren’t the best footballers … and we won, not because any one of us was brilliant but because we were a brilliant team we all looked out for each other….that’s why we won.”

Again, the point is, if you think of the team as a collection of components and you try to optimise the performance of each player perhaps by grading or incentivising them, one or two might get the best grades or most money, the majority would get middling grades and middling money and one or two would get the worst grades and the worst (still good by most mortals standards) money. Unlike Shilton’s team these simple changes would cause the players to be more concerned for their personal best rather than working together for the benefit of the team.

Any team or organisation will perform considerably better if they organise themselves to find the best fit with their teammates or work colleagues …In all organisations we need to work together to optimise the system ‘as a whole’ not to optimise the component parts.

We are currently working with a company that has a number of different divisions each selling complimentary products and services. Ideally the Group would, and could, provide all of the products and services from all divisions to all of its customers. However, each division gives its major customers preferential treatment. The downside is that those customers who are critically important to one division are relatively unimportant to other divisions. All these customer sees is massive variation in the treatment they receive, one day they are flavour of the month the next they are nothing. Each division is looking after itself to the (massive) detriment of the customer …and to the Group!

If the divisions were separate and independent suppliers the difference in the treatment would be bad enough, but this is worse; the different divisions were in effect competing (internally) to the detriment of both the Group and the customer.

It’s complicated

The relationships and interdependencies within a system are often complex and widely separated in terms of both time and space – we tend to think that one cause has one effect as per the first diagram below.

When in fact is it much more complex; it’s more like this second diagram which still understates the complexity because there are all sorts of feedback loops that, for the sake of simplicity, have been ignored.

As another example a client company making and fitting double glazed windows and conservatories thought it would be a great idea to set the manufacturing team a target and pay them a weekly bonus on hitting it. The manufacturing guys were over the moon but the (sub contract) installation guys were pulling their hair out … the quality of the work went through the floor and they had to suffer the wrath of the previously very satisfied customer base.

The bonus structure was gradually “improved” to capture and penalise the manufacturing team for their quality indiscretions. Improvements were gradually made and remade resulting in the system becoming ever more complex and (inadvertently) divisive. Eventually the system became so complicated it was unworkable and scrapped. If only all that effort had been applied to improving the flow of work through the company and the reward system had been companywide and based on how well the company as a whole had performed overall.

The emphasis in these (and most other examples) is on win-lose when it should be on the “flow” of work through the organisation and on win-win.

A system without an aim is not a system

There have been a number of organisations that we have worked with both past and present where there has been a real need to break down the barriers between departments … In order for these barriers to be broken down there needs to be a shared aim…and the aim is NOT company profitability. It might be what key people are judged and measured against, but it is not the aim. Profit is the result of the aim.

Additionally, how does it look to all the people that are not key people if profit is the aim. I fully accept, and even champion, the fact that profit is needed but if you want to mobilise the people in your organisation to pull in the same direction you really need to provide them with an aim. The aim ought to be something that inspires your people to do the right thing by the customer.

We are working with a fast growing company (4 to 70 staff in 3 years) that helps housing developers ensure utilities are connected on time and they have stated their aim as:

  • “Helping developers achieve completions so that people move into their new home on time”

In another more personal example I was looking at schools recently, one of which stated their purpose as:

  • “Finding the brilliance in your child”

How inspiring is that!...obviously it needs to deliver!

Conclusion

The normal approach to managing a business is based on:

  • Breaking the organisation into its component parts – analysis, when it really needs to be based on looking at the whole – synthesis
  • A very simplified view of cause and effect, when cause and effect needs to be accounted for on the basis of more fuzzy interactions

As a result the systems thinking perspective enables us to progress beyond simply seeing events, to seeing patterns and flows of interaction that seek to deliver value to the customer base placing us in a better position to respond in an enlightened fashion.

In the next article we’ll be looking at the opportunities involved in managing a company as a system, moving us from a situation where problems are blamed on the people to one where the people are inspired to change the system.

References

Brian L Joiner, Fourth Generation Management (McGraw-Hill Inc). Dr W. Edwards Deming, Out of the Crisis (The MIT Press). Diagram [1] reproduced from Dr W. Edwards Deming, The New Economics (The MIT Press)

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