Insulation from success

Leaders must understand complexity to thrive in challenging new business world.

OPINION

If you speak to business leaders in any sector, they will generally use words such as agility, resilience and innovation to describe business success.

But in looking at their actions, these people often create structures and processes that actually insulate them from these elements. 

We now recognise that much of what we learn in universities, management schools and leadership programmes does not prepare us for the complexity and rate of change in modern business. There is a revolution underway in management thinking. A new paradigm of cognitive complexity is emerging.

Cognition describes the process of how humans use information to make decisions. Complexity is a feature of a system where multiple interconnected elements interact together in a non-linear way. This type of system has the ability to adapt and learn. Examples include the stock market, human communities, the human brain and ecosystems.

This revolution has actually been a slow burn. In 1948, American scientist Warren Weaver posed the following questions:

  • On what does the price of wheat depend?
  • How can currency be wisely and effectively stabilised?
  • How can one explain the behavior pattern of an organised group of persons such as a labor union?

“These problems...are just too complicated to yield to the old 19th century techniques which were so dramatically successful on two-, three-, or four-variable problems of simplicity. These new problems, moreover, cannot be handled with the statistical techniques so effective in describing average behavior in problems of disorganised complexity,” Mr Weaver suggests.

If we knew this nearly 70 years ago, then why do so many of our business leaders still rely on systems thinking and reductive, linear processes developed to manage mass production organisations? Even worse, why do leading edge business schools teach this, and supposedly “expert” consultants still apply them?

We have all experienced the failings of these approaches. Businesses create three-year strategic plans that are redundant in two weeks. Then next year repeat the process. We apply change management and HR techniques that are openly mocked by our employees. We use analysis and algorithms to crunch big data, and are caught completely off guard by sudden market shifts. We run surveys to tell us things we already know. We break our own rules to get things done.

Leaders being left behind
A number of these perverse outcomes are locked by the rigid structure of many organisations. The people at the top often act as a wise council. They read widely and understand complexity but are often frustrated by their inability to affect change.

The workers at the bottom of the pyramid understand complexity, too. They interact with real people, tackle issues and take risks. They often rely on informal networks, intuition and creativity (often creative rule-breaking) to solve problems and get things done.

Middle managers understand complexity because they have either been promoted from operational roles or constantly fight unexpected fires. This part of the organisation is generally constrained by policy, procedure and budget. Following the rules, meeting targets and ensuring compliance becomes the focus.

This systemic detachment between the coalface of operations and leaders’ strategic desires acts as an extremely effective shield against fully comprehending complexity and effecting change. Innovation and agility either tend to happen by accident or good fortune. 

Most senior business leaders were educated in a time when systems thinking was at its peak. Data, analysis and detailed planning was the focus.

There is a widening gap in the New Zealand market between those who are embracing the emerging paradigm of complexity management, and the senior people who are stuck in old approaches. A large part of the challenge is applying complexity management techniques without upsetting the sensibilities of senior managers. Success often comes with self-selected teams, and identifying leaders who are willing to embrace change.

Formal authority, knowledge and ‘expertise’ often constrain us though hubris. Those who embrace uncertainty and engage with the power of complex human networks will emerge as the truly agile leaders. 

Steve McCrone is executive director of Cornwall Strategic