Systems Thinking: Management by Doing the Right Thing
What we have witnessed in the last 25years is a series of programmes of change failing to achieve theirintended outcomes. Customer Care, ISO 9000, TQM, ABC, BPR. All theresearch and experience show that the latest panacea does no better thanits predecessors. Over and over again improvement programmes arethwarted by commonly-known but illusive forces. The problem is labeledas ‘organization culture’, which typically leads to rationalizationslike ‘change takes time’, or ‘each programme is an element in the totalchange programme’.
Rationalizations prevent learning.Why does behavior not change as was intended? How much time shouldchange take and how do we know? How should each element of a changeprogramme impact performance and why? If we don’t ask and answer thesequestions we are unlikely to learn. If we do not learn we are morelikely to continue to waste resources on ineffective programmes ofchange. The cost of failure goes far beyond the price-tag of theprogramme. Demoralization of staff is a frequent and costly consequenceof failure.
To understand change in organizationswe must understand what influences people’s behavior within anorganization and how it does so. Behavior is conditioned by theinformation people have, their knowledge of what it is they are to doand the means provided to them to do it. It is also conditioned by theprevailing norms - people know what is expected of them, what isacceptable and what is not acceptable. Experience shows that there is amyriad of influences on people’s behavior, but it also shows that somefactors have far more influence than others.
To improve our methods of change,therefore, we need to understand more about what actually governspeople’s behavior. When no change occurs, it is the pattern of behaviorthat remains unchanged. Deming and Juran demonstrated that people’sbehavior is governed by the system they work in. It was a finding whichwent against the accepted wisdom of their time and remains outsideprevailing management thinking. Yet this is the single, common cause ofthe failure of programmes of change. When programmes fail it isgenerally because the attempt was non-systemic. Change in performancerequires a change to the system.
There is a critical differencebetween doing things right and doing the right thing. Much of the effortin programmes of change is given to doing things right: there is notmuch questioning whether these are the right things to do.
The organization as a system?
Doing the right thing means we haveto learn how to view an organization as a system and understand theimplications of that view for what it means to manage. It is what Demingtaught the Japanese in 1950.
A system is a whole made up of parts.Each part can affect the way other parts work and the way all partswork together will determine how well the system works. This is afundamental challenge to traditional management thinking. Traditionallywe have learned to manage an organization by managing its separatepieces (sales, marketing, production, logistics, service etc.). Managingin this way always causes sub-optimization: parts achieve their goalsat the expense of the whole.
The ‘compartmentalization’ logic oftraditional thinking is not limited to the design of organizationstructures. A systems view of organizations shows the fallacy ofconceptualizing performance problems as people problems (‘if only theywould do it’). They should not be considered separately from other‘task’ features. Failures in co-operation, poor morale and conflicts inour organizations are symptoms, their causes lie in the system. Trainingin teamwork or co-operation will only treat the symptoms. The causesusually remain. Managers have been encouraged to think of the ‘human’(or ‘soft’) issues as distinct from hard or ‘task’ issues when theymight be better understood if they were seen as interdependent.
Managers of ‘traditional systems’impose conditions which limit, constrain or in other ways controlpeople’s behavior in ways which result in sub-optimization. Beingprevented from doing their work as they could, people becomedemoralized. Managers then treat people as though they are the problem.Lack of empowerment, for example, is a pre-occupation of ‘traditional’management. Unwittingly, they have created systems which dis-empowerpeople. Sending people on empowerment training does not solve theproblem. It frequently produces greater cynicism. Only changing thesystem solves the problem.
A systems view of organizations leadsto a different collection of problems to address. Traditionally,managers manage with output or financial data. Their view of theorganization is thus conditioned by the data they use. Problems arethought of as variations from budget and such variations attractmanagement attention. While such a view will show up problems of cost,the causes of costs is a different question and can only be addressedfrom a different perspective. Only a systems view will illuminate theopportunities and scope for improvement.
For example a tele-marketing team wasmeasured on number of calls, contacts, and ‘sends’ (a sale subject totrial). Daily and weekly targets were set. Making target resulted in abonus. The people were demoralized. They had to experience going homehaving failed to meet their target. They knew in their hearts they haddone their best but their performance had been governed by their system.Success depended on the quality of the lists. Lists had duplications:unused parts were batched and stored for re-use. As all lists came fromthe same source this resulted in much wasted time and customers beingre-called frequently (and not being happy). Product knowledge variedbetween operators, the time taken to process orders depended on otherdepartments and the type of product, and there were frequent‘fire-fighting’ interruptions to the working day.
People learned to do whatever theyhad to do to make their target. They hid good quality lists, falsifiedactivity records, ‘bounced’ incoming customer calls to others so as notto get tied up with a customer problem, and so on. Not because they werebad people; they were working in a bad system. Having to behave thisway causes further demoralization.
Management of the tele-marketing teamwas focused on activity, not purpose. The measures they used encouragedthem to explain differences in performance as people differences andthe management job was thought of as ‘motivating’ people. Yet they haddesigned a system which robbed people of pride, the most importantsource of motivation. The managers assumed people would be motivated bytargets and bonuses. People will do, in these conditions, whatever ittakes to get the bonus, but the consequences are that the wider systemis put at risk and the task loses its intrinsic value. Pride is lost.
‘Traditionally’ minded managers seethe organizational world in parts. They put in place reporting andaccounting procedures which account for, or report on, parts of theorganization separately. The prevailing thinking would have it that ifeach part of a system performs as specified (to budget), then overallthe system will perform as expected. It is assumed that looking at theparts gives us the means to manage the whole. Nothing could be furtherfrom the truth. It may be true in many cases that the numbers add up tothe intended budget, but managing in this way guaranteessub-optimization. This is the first step in changing a manager’sthinking. It is not a step to ignore. If a manager does not know whatwas sub-optimal about the old system and why, he or she is likely torepeat the mistakes of the past (management attitudes are as stronglyheld as any others). Change in organizations begins with a change inthinking.
Change means changing the system
Change for improved performance meanschanging the system. When features of a traditional management systemare left in place, they undermine (or, minimally, compete with) qualityprinciples and practices. If change doesn’t change the system, thesystem doesn’t change.
Any intervention in a system whichdoes not change the thinking will produce no change. This is whytraining in quality techniques fails to improve performance over themedium term (and sometimes even in the short term). The principles andpractices of traditional, hierarchical, functional management, whichtoday constitute the accepted norm, are antithetical to qualityprinciples and practices. This is not just a matter of attitude andbelief. The everyday practical matters which managers work with aredifferent in a quality organization in very real ways. A systems view ofthe organization leads to different measures used in a different way.It means designing work according to different principles.
A systems view of an organizationstarts from the outside-in. How does this organization look to itscustomers? How easy are we to do business with? (One company used thisas its slogan but was very difficult to do business with,. It was thecustomers who had to manage them to get anything done). The startingplace for understanding the organization as a system, is to be able topredict what will happen next week if nothing changes.
Implications for management
It is only when people’s view of howto do work changes that their behavior changes. Changing the systemmeans taking out things which have been limiting or damaging currentperformance. For example, removing activity measures, arbitrary targetsand ceasing to manage performance through budgets; changing structureand processes to enable them to better achieve their purpose. Managerswill only take such radical action if and when they appreciate thattheir traditional means of control in fact give them less control:managing costs causes costs.
When the organization is understoodas a system, the inappropriateness of such practices becomes stark. Itis a major source of motivation for action. Action means ‘doing theright thing’, putting in place the right ‘system conditions’ to ensurethat performance is managed from a strong base of understanding.
Deming taught the Japanese to managetheir organizations as systems. In four years they out-achieved hisexpectations. When people work from theory they learn. What Deming gavethem was a theory of management which started from the premise that theorganization is a system. Organizations of the future will be learningbecause their people, the people who do the work, will be learning. Butthat will only happen as fast as we change the way we run organizations.Without doubt it is the right thing to do.