SYSTEMS THINKING... A CRITICAL MANAGEMENT COMPETENCE

The concept of systems thinking gives us yet another vital clue to what managers need to do to fulfil their role. Mangers when analysing performance problems or seeking improved productivity have traditionally been taught to break down processes and their department functions into a series of smaller mechanisms. This perspective leads to an approach that places the emphasis on the dissection of areas of control/tasks into separate elements. This way of thinking is the classical scientific method of "Reductionism" which advocates that when you are dealing with complex problems you need to break them down into manageable parts and investigate or analyse each part separately. This style of thinking has proven an inadequate way to view the realistic nature of organisations and their processes. It is also therefore an inadequate way for managers to view their role, their approach to tasks, or to handle their responsibilities. Due to the ever-increasing complexity of business and the need to build organisations that learn how to improve from ongoing experiences (learning organisations) Deming, Senge and many others espouse a way of thinking known as "systems thinking". Systems thinking provides us a way of viewing organisations from a broad perspective that includes organisational structures, process/work patterns and the effect of particular events. One company I worked for thought this issue was of such importance that they included systems thinking in their corporate values statement. From this company's point of view systems thinking is a requirement they have of all staff, not just the management.

It is not my intention here to go into a long-winded explanation of systems thinking and the tools or language that come with it. It is however important for managers to understand the concepts well enough to change their mindset on how they view their role. Systems thinking allows us take a broad view of what is happening in order to identify inadequacies or opportunities that we need to address. If we take this approach we need to consider interrelationships with other parts of, or the total processes of the organisation, rather than what is happening to us here and now. "Systems thinking views an organisation and its respective environment as a complex whole of interrelating, interdependent parts. It stresses the relationships and the processes that make up the organisational context, rather than the separate entities or the sum of the parts (Cummings, 1980)". 'A human activity system will also be a part of a systems hierarchy. It will be a subsystem within a greater system, or it will be a larger system incorporating smaller subsystems within itself (Wilson, 1984)'. This way of thinking acknowledges that feedback occurs and that activities create loops of cause and affect that recur. 'Feedback loops are given various labels, from causal loops to reinforcing or balancing loops. These loops represent cause and effect relationships among the elements in the loops. A change in one part of the loop will result in changes in the other parts (Senge 1994)'. Feedback loops compensate for changes that are imposed on the system as in the old saying 'if you push the system the system pushes back'. The US - SOVIET arms race is a great example of a recurring feedback loop (of escalation).

According to Michael Goodman, Jennifer Kemeny and Charlotte Roberts in their excellent article, The Language of Systems Thinking: "Links" and "Loops", there are basically two building blocks of all systems representations: reinforcing and balancing loops. They explain,

'Reinforcing loops generate exponential growth and collapse, in which the growth or collapse continues at an ever-increasing rate. Consider an interest-bearing bank account (where the interest is reinvested). Your money grows much faster than it would if you merely put $100 each year into a piggy bank. At first, the difference seems small; interest would generate only a few extra dollars per year. But if you left the interest in the bank, the money would grow at an ever-faster rate. After fifty years (at 7 percent interest), you'd have more than $40,000, more than eight times as much as the piggy bank would generate by growing at the same rate, year after year. If you were unprepared for it, you'd reach a moment of surprise after perhaps fifteen years, when you saw how the growth of your money was building on itself in a truly "virtuous spiral". Alternatively you'd be caught in a "vicious spiral" if, you went into debt for a long time where the interest was capitalised (added to the principal). At first it would seem as if you were paying only small extra sums of interest. Over time, the balance you owed would grow with increasing speed. In all reinforcing processes, as in the bank account, a small change builds on itself'.

A REINFORCING LOOP (see a great article at The Society for Systems Thinking with diagrams)

'A reinforcing loop, by definition, is incomplete. You never have a vicious or virtuous cycle by itself. Somewhere, sometime, it will run up against at least one balancing mechanism that limits it. The limit may not appear in our lifetime, but you can assume it will appear. Most of the time, there are multiple limits'.

'Balancing loops: pushing stability, resistance and limits. Balancing processes generate the forces of resistance, which eventually limit growth. But they are also the mechanisms, found in nature and all systems that fix problems, maintain stability, and achieve equilibrium. Balancing loops are often found in situations which seem to be self-correcting and self-regulating. "No matter what we try, we can't change the system." Balancing processes are always bound to a target, a constraint or goal that is often implicitly set by the forces of the system (or by design in organisations). Whenever current reality doesn't match the balancing loop's target, the resulting gap (between the target and the system's actual performance) generates pressure that the system cannot ignore. The greater the gap, the greater the pressure. It's as if the system itself has a single-minded awareness of "how things ought to be," and will do everything in its power to return to that state. Until you recognise the gap, and identify the goal or constraint that drives it, you won't understand the behaviour of the balancing loop.'

A BALANCING LOOP

'Delays: when things happen... eventually: Delays occur often in both reinforcing and balancing loops. These are points where an event or link, (in the chain of influence) takes a particularly long time to play out and is represented by a pair of parallel lines. Delay can have enormous influence in a system, frequently accentuating the impact of other forces. This happens because delays are subtle: usually taken for granted, often ignored altogether, always under-estimated. In reinforcing loops, delays can shake our confidence, because growth doesn't come as quickly as expected. In balancing loops, delays can dramatically change the behaviour of the system. When unacknowledged delays occur, people tend to react impatiently, usually redoubling their efforts to get what they want. This results in unnecessarily violent oscillations. One of the purposes of drawing systems diagrams is to flag the delays, which you might otherwise miss. In addition, delays are often a source of waste; removing delays is a key method for speeding up cycle time'.

Managers need to understand and think about the ramifications of their actions on the 'total' system or higher order or subsystems. They need to think of themselves (to use a car analogy), perhaps as the person managing the gearbox in the 'car system'. A decision taken to change the gearing ratio of third gear will effect the way the car runs from engine performance (production), to power delivered at the wheels (sales and service), to fuel consumption (finance) or oil consumption (purchasing). Similarly if the IT or MIS manager represents the electrical system and arbitrarily decides to change the voltage level, because they find it better for their own purposes, the functioning of the entire 'car system' is effected. Purchasing mangers that develop large slow moving bureaucracies can be likened to an unchanged oil filter full of sludge and impurities. Financial controllers that think they are the only operational decision maker who know best on how and when to distribute the money are as useful as a faulty badly tuned carburettor or dirty fuel injection system. Back to the gearbox, if the third gear ratio is changed and the car inherently overtakes at a slower rate, engine revs need be higher and more fuel will be required just to match previous performance. Additionally wear will increase, oil consumption will go up and power to the wheels will be harder and more resource hungry so achieve. The feedback will be more wear on the gearbox, more trips to purchasing and fun meetings with the financial controller... and on the cycle goes.

The second major responsibility managers have in this area is to encourage all under their control or influence to combine their collective work experience and system knowledge to build the overall knowledge of the operation. Systems thinking means all players need to view their work in terms of customer satisfaction and adding value to the organisation, understand how their work is related to the work of other people. Employees must be 'taught' to understand that how they are working is effecting others and that they how they are allowing themselves to be influenced by other people or processes is effecting their own productivity.

The next article on management is:

TOTAL QUALITY MANAGEMENT (TQM) REQUIREMENTS AND WHAT IT MEANS TO OUR SUCCESS AS A MANAGER

at: career_advice/management-lesson-twelve.html

references are at : career_advice/management-lesson-references.html