Systems Thinking: How to Lead in Complex Environments

Dealing with Complexity

Organizational conditions influence the ability and discretion of leaders (particularly executives and C-suite leaders) to make decisions and drive change. Conditions can be described in two general categories:

• External conditions. These include the degree of competition, regulations, and consumer behavior. Decreased demand, tighter competition, or changing regulations can constrain leadership decisions on key areas such as direction and pricing, and other areas of change (Yukl, 2006).
• Internal conditions. External constraints are not alone on limiting discretion. In fact, when Hoag, Ritschard, and Cooper (2002) interviewed HR professionals across levels and industries, 89% of HR practitioners identified internal conditions as the greatest barrier to effective change. At the top of the list of internal conditions was organizational culture (e.g., uncertainty, coping, and internal politics).

Leaders in many growing organizations are finding it increasingly difficult to identify the outcomes of changes they’ve implemented or decisions they’ve made. To do so, they must often sort through a complex array of internal and external factors that could have supported or hindered their actions. Therefore, a particularly important competency for current and future leaders that must regularly deal with complexity is the ability to think systematically.

Systems Thinking

Dealing with complex and possibly conflicting internal and external conditions is not easy… but it’s not impossible either. Arguably the most important competency for dealing with complexity is systems thinking (Senge, 2006). Systems thinking is defined as the ability to (a) see how organizational systems (e.g., internal/external conditions, processes, people) interact and influence each other, and (b) how these systems create and contribute to specific issues (e.g., high voluntary turnover) and strengths (e.g., strong customer focus). According to Peter Senge (2006), the three characteristics of systems thinking include:

1. A consistent and strong commitment to learning
2. A willingness to challenge your own mental model – accepting your own role in problems and being open to different ways of seeing and doing
3. Always including multiple perspectives when looking at a phenomenon –“triangulating” the perspectives of customers, line-staff, experts, etc.

Case Study

While it’s great to know what systems thinking is, you might be wondering what it looks like. The case study below highlights how a systems thinker might approach the issue of high turnover. Notice that all three characteristics of systems thinking are touched on.

ACME Inc. is experiencing particularly high employee turnover (25% within one year of hire). To address this issue, the non-systems thinker may react by implementing new selection methods like an online personality questionnaire. However Sue, a Vice-President at ACME, is a systems thinker. Instead of throwing solutions at the problem, she established a cross-departmental task force. Sue and her team approached the problem with a learning orientation. That is, they were not seeking to reduce turnover but to gain an understanding of the internal and external conditions that were contributing to turnover. They looked at employee survey results, conducted exit interviews, and examined work processes in the departments that had the highest turnover. Their hard work was soon rewarded as they came to identify a number of factors that seemed to be contributing to turnover:

• A competing firm nearby had been actively recruiting their sales staff and offering higher pay.
• Work teams in two departments had become intensely siloed, making it difficult to accomplish tasks.
• It also turned out that the leadership team’s initiatives (many of which were Sue’s) were adding greater workload and leading to stress and burnout, particularly in the siloed departments.

Although Sue could not offer her staff more pay or convince the competing firm to stop recruiting her salespeople, she was able to increase intergroup collaboration by arranging the office to bring teams physically closer, creating a few shared “water-cooler” locations, and establishing an online forum for teams to request and share information. Finally, after learning about “initiative fatigue” through a conversation with her executive coach, she decided that the unintentional outcomes (stress, burnout, and revenue loss associated with turnover) were causing more harm than the boosts in productivity or morale purported by many of her initiatives. As a result, turnover dropped slowly but steadily over the next year to a respectable 10%.

Developing Systems Thinking

By starting early and building skills and experience that will help leaders account for internal and external conditions, competing forces, and complex systems, your organization will make itself more capable of catching whatever the future throws… and throwing it back! Specific skills and abilities that contribute to systems thinking include:

• Ability to see relationships between organizational systems and the external environment, and between organizational systems and themselves
• Ability to see the “big picture,” look at systems holistically, examine aggregates rather than individual activities
• Appreciating the complexity of cause-and-effect relationships – they are rarely linear and are influenced by multiple interacting factors
• Being able to bring multiple people/perspectives together – accepting that no single view has the answer
• Ability to promote a learning orientation in others and oneself
• Taking a long-term approach (5+ years)

Systems thinking skills are best developed through a combination of formal training and experiential, on-the-job development. Training is important for teaching specific tools/process for mapping out complex systems, while on-the-job experiences provide opportunities for building expertise and confidence. See A Formal Process for Using On-the-Job Learning to Develop Leadership.

Additional Resources:

• Article. Article we wrote on what it means to be a Learning Organization; an environment that promotes/supports Systems Thinking
• Report & Case Studies. Report from ECDPM on a workshop for developing Systems Thinking – includes a few great case studies towards the end
• Book. The Fifth Discipline: The Art & Practice of the Learning Organization, by Peter Senge.

References

• HOAG, B. G., RITSCHARD, H. V., & COOPER, C. L. (2002). OBSTACLES TO EFFECTIVE ORGANIZATIONAL CHANGE: THE UNDERLYING REASONS. LEADERSHIP AND ORGANIZATION DEVELOPMENT JOURNAL, 23, 6-15.
• SENGE, P. M. (2006). THE FIFTH DISCIPLINE: THE ART AND PRACTICE OF THE LEARNING ORGANIZATION. NY: RANDOM HOUSE.
• YOST, P. R., & PLUNKETT, M. M. (2009). REAL TIME LEADERSHIP DEVELOPMENT. LONDON: WILEY-BLACKWELL.
• YUKL, G. (2006). LEADERSHIP IN ORGANIZATIONS. RIVER, NJ: PEARSON PRENTICE HALL.