With a total of 300,000 employees, Ford operates in 50 countries around the world. It sells a huge array of products, and offers an equally widespread range of services — from financing to distributing and dealer support.

VENTURING INTO THE BADLANDS

When system and social complexity are high, the organization enters the realm of “the Badlands.”

Like any large organization, it’s also peopled by individuals who come from all walks of life — and who have the different outlooks to prove it. Engineers, accountants, human-resource folks — they all have unique backgrounds and view their work through unique perspectives. Add Ford’s various stakeholders to the mix, and you’ve got even more complexity. There are media stakeholders, shareholders, customers, the families of employees — all of them with different expectations and hopes for the company.

System and Social Complexity: “The Badlands”

Now let’s look even more deeply inside Ford to see what complexity really consists of. If you think about it, the complexity that Ford and other large organizations grapple with comes in two “flavors”: system complexity and social complexity. System complexity derives from the infrastructure of the company — the business model it uses, the way the company organizes its various functions and processes, the selection of products and services it offers. Social complexity comes from the different outlooks of the many people associated with Ford — workers, customers, families, and other stakeholders from every single country and culture that Ford operates in.

Why is it important to distinguish between these two kinds of complexity? The reason is that, if we put them on a basic graph, we get a disturbing picture of the kinds of problems that complexity can cause for an organization (see “Venturing into the Badlands”). We can think of these problems as falling into four categories:

“Tame” Problems. If an organization has low system and social complexity — for example, a mom-and-pop fruit market in a small Midwestern town — it experiences what we can think of as “tame” problems, such as figuring out when to order more inventory.

“Messy” Problems. If a company has low social complexity but high system complexity, it encounters “messy” problems. A good illustration might be the highly competitive network of tool-and-die shops in Michigan. These shops deal with intricate, precisely gauged devices that have to be delivered quickly. However, the workforce consists almost entirely of guys, all of whom root for the Detroit Lions football team — so there’s little social tension.

“Wicked” Problems. If a company has high social complexity but low system complexity, it suffers “wicked” problems. For instance, a newspaper publisher works in a relatively simple system, with clear goals and one product. However, the place is probably staffed with highly creative, culturally diverse employees — with all the accompanying differences in viewpoint and values.

The Winner: “Wicked messes,” or “The Badlands.” When an organization has high system and social complexity — like Ford and other large, globalized companies have — it enters “the Badlands.” Singer-songwriter Bruce Springsteen graphically captured that unique region in South Dakota characterized by dangerous temperature swings, ravenous carnivores, and uncertain survival in his song “Badlands.” But the area and the song also represent optimism and possibilities. More vegetation and wildlife inhabit the Badlands than anyplace else in the United States, and Springsteen’s voice and lyrics offer a sense of hope despite the song’s painful and angry chords.

What’s So Bad About the Badlands?

A company that’s operating in the Badlands faces a highly challenging brand of problems. The complexity is so extreme, and the number of interconnections among the various parts of the system so numerous, that the organization can barely control anything. Solutions take time, patience, and profound empathy on the part of everyone involved.

In Ford’s case, a number of especially daunting challenges have arisen recently. For one thing, the Firestone tires tragedy has left the entire Ford community reeling. Ford faces an immense struggle to make sure this kind of fiasco never happens again. The bonds of trust between company and supplier, and between company and customer, will take a long time to rebuild. In addition, Ford and other automotive manufacturers have come under fire not only for safety issues but also for environmental and human-rights concerns.

Clearly, Ford’s business environment keeps getting tougher. The company is held accountable for parts it buys from suppliers and for labor practices in the various parts of the world where it does business. It’s also accountable for resolving baffling patterns — for example, the demand for

All of these challenges come from a single error in thinking: the assumption that human beings can control a complex, living system like a large organization.

SUVs is rising, along with cries for environmentally friendly vehicles. The majority of Ford’s profits come from sales of SUVs; how will the company reconcile these conflicting demands? Ford’s newly launched initiative — to not only offer excellent products and services but to also make the world a better place through environmentally and socially responsible manufacturing — will probably be its toughest effort ever.

But here’s where the big lesson comes in. All of these challenges come from a single error in thinking: the assumption that human beings can control a complex, living system like a large organization. Systems thinker Meg Wheatley compares the complexity of large companies to that of the world. The world, she points out, existed for billions of years before we humans came along, but we have the nerve to think that it needs us to control it! Likewise, what makes us think that we can control a big, complex organization?

Yet attempt to control we do — often with disastrous results.

Our All-Too-Common Controls . . .

We human beings try to control the complexity of our work lives through lots of different means:

System Fixes. When we attempt to manage system complexity, we haul out a jumble of established tools and processes that seem to have worked for companies in the past. For example, we use something we blithely call “strategic planning.” Our assumption is simple: If we just write down the strategy we want to follow, and plan accordingly, everything will turn out the way we want. We even call in consultants to help us clarify our strategy — and pay them big bucks for it. The problem is that this approach to planning has long outlived its usefulness. The world has become a much more complicated place than it was back when organizations like General Motors and the MIT Sloan School of Management first devised this approach to strategy.

We also use financial analysis and reporting models that were probably invented as far back as the 1950s. These models don’t take into account all the real costs associated with doing business — such as social and environmental impacts. Nor do they recognize the value of “soft” assets, such as employee morale and commitment.

In addition, we all keep throwing the phrase “business case” around — “What’s the business case for that new HR program you want to launch?” “What’s the business case for that product modification?” In other words, what returns can we expect from a proposed change of any kind? Again, this focus on returns ignores the bigger picture: the long-term costs and benefits of the change.

Finally, we try to manage system complexity by making things as simple as possible through standardization — no matter how complicated the business is. Standardization is appropriate at times. For example, the Toyota Camry, Ford’s number-one competitor in that class of car, has just seven kinds of fuel pump applications. The Ford Taurus has more than 40! You can imagine how much simpler and cheaper it is to manufacture, sell, and service the Camry pump. But when we carry our fondness for standardization into areas of strategy — unthinkingly accepting methods and models that worked best during a simpler age — we run into trouble.

Social Fixes. Our attempts to manage social complexity get even more prickly. In many large companies, the human-resources department engineers all such efforts. HR of course deals with personnel planning, education and training, labor relations, and so forth. But in numerous companies, it spearheads change programs as well — whether to address work-life balance, professional development, conflict and communications management, or other social workplace issues. Yet as we’ll see, this realm of complexity is probably even more difficult to control than systemic complexity is.

. . . and Their Confounding Consequences

Each of the above “fixes” might gain us some positive results: We have a strategic plan to work with; we have some way of measuring certain aspects of our business; we manage to get a few employees thinking differently about important social issues. However, these improvements often prove only incremental. More important, these fixes also have unintended consequences — many of them profound enough to eclipse any gains they may have earned us.

The Price of System Fixes. As one cost of trying to control system complexity, we end up “micromanaging the metrics,” mainly because it’s the only thing we can do. This micromanaging in turn creates conflicts of interests. For example, when Ford decided to redesign one of its 40 fuel pumps to make it cheaper to build, it unwittingly pitted employees from different functions against each other. Engineering people felt pressured to reduce the design cost of the part, manufacturing staff felt compelled to shave off labor and overhead costs, and the purchasing department felt driven to find cheaper suppliers. Caught up in the crosscurrents of these conflicting objectives, none of these competing parties wanted to approve the change plan unless they got credit for its success. As you can imagine, the plan languished in people’s in-boxes as the various parties jockeyed for position as “the winner.”

Micromanaging the metrics can also create a “Tragedy of the Commons” situation — that archetypal dilemma in which all the parties in a system try to maximize their own gains, only to ruin things for everyone. For instance, at Ford (and probably at many other large companies), there’s only so much money available to support a new product or service idea. People know this, so when they build their annual budgets, they ask for the money they need for the new ideas — plus another 10 percent as a cushion (because they know the budget office would never give them what they originally asked for!). At the end of the year, everyone’s out of funds because they beefed up their budgets too much. And great, innovative ideas end up going unfunded.

The Price of Social Fixes. The biggest consequence of social fixes is probably a “Shifting the Burden” archetypal situation. Upper management, along with HR, tries to address a problem by applying a short-term, “bandage” solution rather than a longer-term, fundamental solution. The side effect of that bandage solution only makes the workforce dependent on management, thus preventing the organization from learning how to identify and implement a fundamental solution.

What does this look like in action? Usually, it takes the form of upper management’s decision to “roll out” a change initiative to address a problem. For instance, employees might be complaining about something — work-life tensions, conflicts over cultural differences, and so forth. Rather than letting people take responsibility for addressing their problems — that is, get involved in coming up with a shared solution — management force-feeds the company a new program (B1 in “Shifting the Burden to Management”). This might reduce complaints for a time, and managers might even capture a few hearts and minds. But these gains won’t stick. Worse, this approach makes employees passive, as they come to depend more and more on management to solve their problems and “take care of them.” The more dependent they become, the less able they are to feel a sense of responsibility and get involved in grappling with their problems (R3 in the diagram).

This “sheep-dip” approach to change — standardized for the masses — completely ignores employees’ true potential for making their own decisions and managing their own issues. For example, consider the difference between a company that legislates rigid work hours and one that trusts its employees to pull an all-nighter when the work demands it—and to head out to spend time with their kids

on a Friday afternoon because the work is in good shape. People can’t learn how to make these kinds of judgments wisely for themselves if their employer treats them like children.

“Sheep dipping” has another consequence as well: Because it makes employees passive, it discourages the fluid transfer of knowledge that occurs when people feel involved in and responsible for their work. Instead of looking to one another, anticipating needs, and collaborating as a team, employees have their eyes on management, waiting to be taken care of. Knowledge remains trapped in individuals’ minds and in separate functions in the organization, and the firm never leverages its true potential.

From Control to Soul

So, if we can’t control complexity, how do we go to work every day with some semblance of our sanity? Should we just give up hoping that our organizations can navigate skillfully enough through the Badlands to survive the competition and maybe even achieve their vision? What are we to do if we can’t control our work, our employees, and our organization? How can we take our organizations to places they’ve never been — scary, dangerous places, but places that also hold out opportunities for unimagined achievement?

The answer lies in one word: soul. “Soul” is a funny word. It means different things to different people, and for some it has a strong spiritual element. But in the context we’re discussing now — organizational health, values, and change — its meaning has to do with entirely new, radical perspectives on work and life.

To cross the Badlands successfully, all of us — from senior executives to middle managers to individual contributors — need to adopt these “soulful” perspectives:

Understand the system; don’t control it. As we saw above, we can’t manage, manipulate, or avoid problems in our organizations without spawning some unintended — and often undesirable — consequences. Understanding the organizational and social systems we live and work in makes us far more able to work within those systems in a healthy, successful way.

Know the relationships in the system. Understanding a system means grasping the nature of the relationships among its parts — whether those parts are business functions, individuals, external forces acting on the organization, etc. By knowing how the parts all influence each other, we can avoid taking actions that ripple through the system in ways that we never intended.

Strengthen human relationships. Success doesn’t come from dead-on metrics or a seemingly bulletproof business model; it comes from one thing only: strong, positive relationships among human beings. When you really think about it, nothing good in the world happens until people get together, talk, understand one another’s perspectives and assumptions, and work together toward a compelling goal or a vision. Even the most brilliant individual working alone can achieve only so much without connecting and collaborating with other people.

Understand others’ perspectives. This can take guts. People’s mental models — their assumptions about how the world works — derive from a complicated process of having experiences, drawing conclusions from those experiences, and then approaching their lives from those premises. Understanding where another person is “coming from” means being able to set aside our own mental models and earn enough of that other person’s trust so that he or she feels comfortable sharing those unique perspectives.

Determine what we stand for. Why do you work, really? Forget the easy answers — “I want to make money” or “I want to buy a nice house.” What lies beneath those easy answers? Around the world, people work for the same handful of profound reasons: They want their lives to have meaning, they want to create something worthwhile and wonderful, they want to see their families thrive in safe surroundings, they want to contribute to their communities, they want to leave this Earth knowing that they made it better. All these reasons define what we stand for. By clarifying what we stand for — that is, knowing in our souls why we go to work every day — we learn that we all are striving for similar and important things. That realization alone can build community and commitment a lot faster than any “rolled-out” management initiative can.

Determine our trust and our trustworthiness. Strong relationships stem from bonds of trust between people. To trust others, we have to assume the best in them — until and unless they prove themselves otherwise. But equally important, we also need to ask ourselves how trustworthy we are. We must realize that others are looking to us to prove our trustworthiness as well. By carefully and slowly building mutual trust, we create a network of robust relationships that will support us as we move forward together.

Be humble, courageous, and vulnerable. Understanding ourselves and others in ways that strengthen our relationships takes enormous courage — and a major dose of humility. It also takes a willingness to say “I don’t know” at times — something that many companies certainly don’t encourage. And finally, it takes a willingness to make ourselves vulnerable — to explain to others why we think and act the way we do, and why we value the things we value.

Find “soul heroes.” We need to keep an eye out for people whom we sense we can learn from — people who live and embody these soulful perspectives. These individuals can be colleagues, family members, friends, customers, or neighbors. If we find someone like this at work — no matter what their position — we must not be afraid to approach them, to talk with them about these questions of values, trust, and soul.

Tools for Your Badlands Backpack

So, to venture into the Badlands, we need soul — whole new ways of looking at our lives and work. But soul alone won’t get us safely through to the other side. We wouldn’t approach the real Badlands without also bringing along a backpack filled with water, food, first-aid materials, and other tools for survival and comfort. Likewise, we shouldn’t tackle the Badlands of organizational complexity without the proper tools.

These five tools are especially crucial:

Systems Thinking Tools.The field of systems thinking provides some powerful devices for understanding the systems in which we live and work, and for communicating our understanding about those systems to the other people who inhabit them. Causal loop diagrams, like the one in “Shifting the Burden to Management,” let us graphically depict our assumptions about how the system works. When we build such a diagram with others, we especially enrich that understanding, because we pull all our isolated perspectives into one shared picture. From there, we can explore possible ways to work with the system to get the results we want. These diagrams also powerfully demonstrate the folly in trying to manhandle a system: When we draw them, we can better see the long-term, undesirable consequences of our attempts to control the system.

Dialogue. The field of dialogue has grown in recent years to include specific approaches to talking with one other. For example, dialogue emphasizes patience in exploring mutual understanding and in arriving at potential solutions to problems. It also encourages us to suspend our judgments about others during verbal exchanges — that is, to temporarily hold our judgments aside in order to grasp others’ reasons for acting or thinking as they do. Dialogue lets a group tap into its collective intelligence — a powerful way of transferring and leveraging knowledge.

Ladder of Inference. This tool offers a potent way to understand why we think and respond to our world as we do. It helps us see how we construct our mental models from our life experiences — and how those mental models can ossify if we don’t keep testing them to see whether they’re still relevant. In the workplace, we all make decisions, say things, and take actions based on our mental models. By using the Ladder of Inference to examine where those models came from, we can revise them as necessary — and reap much more shared understanding with colleagues. (For information about the Ladder of Inference, see The Fifth Discipline Fieldbook published by Currency/ Doubleday).

Scenario Planning. This field has also grown in recent years. Numerous organizations, notably Royal Dutch/Shell, have used scenario planning to remarkable effect. This tool reflects the fact that we can’t control systems. Scenario planning encourages us to instead imagine a broad array of possible futures for our organization or even our entire industry — and to make the best possible arrangements we can to prepare for and benefit from those potential outcomes. This approach thus acknowledges the complexities inherent in any system; after all, there’s no way to easily determine the many different directions a system’s impact may take.

Managing by Means. New methodologies are emerging that can help us assess the true costs of running our businesses — costs to human society, to the environment, and to the business itself. And costs in the short run as well as the long run. We must grapple with these methodologies if we hope to achieve the only long-term business goal that really makes sense: business that doesn’t destroy the very means on which it depends.

Traditional change management methods build things to stick. They do not build things to last and are thus ineffective because well-intentioned people create the strategy, solution, and problem sets based on a narrow set of assumptions. To create a sustainable organization, we must work to understand the complex system dynamics of the environment and experiment with multidimensional strategies. We must also work to understand diverse social dynamics and allow multiple perspectives and behaviors to emerge. Finally, we must trust ourselves, hold true to our core convictions, and have courage, humility, and soul. In these ways, we can navigate through — and even prosper in — the most desolate and challenging of Badlands.

David Berdish is the corporate governance manager at Ford Motor Company. He is leading the development of sustainable business principles that will integrate the “triple bottom line” of economics, environmental, and societal performance and global human-rights processes. He is also supporting the organizational learning efforts at the renovation of the historic Rouge Assembly site.

The post Learning and Leading Through the Badlands appeared first on The Systems Thinker.

Right or wrong, the Seattle protests highlighted the widespread influence that corporations exert on people’s lives today. As social institutions, companies have an unprecedented impact on individuals, families, communities, nations, and the planet itself. For instance, who among us does not struggle with the challenge of balancing family and work life? Who among us may not someday benefit from biotechnology breakthroughs? Who among us is not concerned about the impact of manufacturing waste on the environment? Who among us does not take advantage of cheap and reliable telecommunications? The pure size, scope, and transnational nature of the modern corporation have given it a unique — and growing — role in our daily lives.

A Tool for Corporate “Response-ability”

With this level of influence come new demands for responsibility, as the demonstrations in Seattle showed. Simply put, the more impact that corporations have on people’s lives, the more people will insist that businesses take responsibility for their actions. Doing so requires “response-ability” — the ability to acknowledge people’s concerns and create innovations to address those concerns. It means being open to change and learning. This is not a new challenge, but the importance and complexity of the task have increased with globalization. Thus, tackling the opportunities and dangers that face today’s businesses requires an equally radical shift in the nature of change processes and strategies.

The practice and philosophy of Appreciative Inquiry (AI), while still in its nascent stage, is emerging as a revolutionary approach to this kind of change and learning. AI first arose in the early 1980s, when David Cooperrider, a graduate student at Case Western Reserve University, conducted an organizational diagnosis of the Cleveland Clinic. During his research, he was amazed by the level of cooperation, innovation, and egalitarian governance that he observed within the organization. Cooperrider and his adviser, Suresh Srivastva, analyzed the factors that contributed to the functioning of the clinic when it was at its best — its moments of exceptional performance. In the mid 1980s, they published the first widely distributed description of the research, theory, and practice of Appreciative Inquiry in the article “Appreciative Inquiry in Organizational Life” in Research in Organization Change and Development, vol. 1, edited by W. Pasmore and R. Woodman (JAI Press, 1987).

AI is based on a deceptively simple premise: that organizations grow in the direction of what they repeatedly ask questions about and focus their attention on. Why make this assumption? Research in sociology has shown that when people study problems and conflicts, the number and severity of the problems they identify actually increase. But when they study human ideals and achievements, peak experiences, and best practices, these things — not the conflicts — tend to flourish. (Did you ever notice that beginner bicyclists tend to steer toward whatever they’re looking at most — like the big rock at the side of the road? See “Watch Out for the Rock!”)

By encouraging people to ask certain kinds of questions, make shared meaning of the answers, and act on the responses, AI serves as a wellspring for transformational change. It supports organizationwide (i.e., systemic) learning through several means:

• Through widespread inquiry, it helps everyone perceive the need for change, explore new possibilities, and contribute to solutions.
• Through customized interview guides, it emphasizes questions that focus on moments of high performance in order to ignite transformative dialogue and action within the organization.
• Through alignment of the organization’s formal and informal structures with its purpose and principles, it translates shared vision into reality and belief into practice.

A Closer Look at Appreciative Inquiry

To see how this process works, imagine what would happen if you shifted the focus of inquiry (i.e., the process of gathering information for the purpose of learning and changing) from the deficits or gaps in your organization to its successes and accomplishments. Instead of asking, “What are our problems? What hasn’t worked?” you might say, “Describe a time when things were really going well around here. What conditions were present at those moments and what organizational changes would allow more of those conditions to prevail?” This simple shift in perspective constitutes a powerful intervention in its own right that can begin nudging the whole company in the direction of the inquiry.

How? Organizations are manifestations of the human imagination. That is, no organization could exist if one or several individuals hadn’t envisioned it first (even if that vision was sketchy or incomplete). The learnings that surface through the AI process begin to shift the collective image that people hold of the organization. In their daily encounters, members start to create together compelling new images of the company’s future. These images immediately initiate small “ripples” in how employees think about the work they do, their relationships, their roles, and so on. Over time, these ripples turn into waves; the more positive questions participants ask, the more they incorporate the learnings they glean from those questions in daily behaviors and, ultimately, in the organization’s infrastructure.

Unlike many behavioral-science approaches to change, AI does not focus on changing people. Instead, it invites people to engage in building the kinds of organizations and communities that they want to live in. AI thus involves collaborative discovery of what makes an organization most effective, in economic, ecological, and human terms. From there, organization members weave that new knowledge into the fabric of the firm’s formal and informal systems, such as the way they develop and implement business strategy or the way they organize themselves to accomplish tasks. This process represents true learning and change.

Finally, AI rests on another deceptively simple notion: that organizational members are competent adults capable of learning from their own experiences and from those of others. In a company that truly believes this precept, everyone feels energized by new knowledge and change. As AI becomes a regular way of working, employees at all levels and all functions identify best practices that the organization can build on in order to respond to new challenges. They then spread that knowledge and initiate action as a matter of routine.

Consultant Diana Whitney has summarized Appreciative Inquiry in the following way:

• AI is a high-participation, full voice process targeted at organizational innovation. People at all levels of an organization engage with one another to discover, dream, and design the corporation’s future.
• AI is an organizational learning process designed to identify and disseminate best practices. AI assumes that people possess high levels of competence and encourages them to discover what works within their own organization as well as in other businesses and organizations.
• AI fosters positive communication and can result in the formation of deep and meaningful relationships. Through simple interpersonal communication, people build relationships, accomplish work, and express value.
• • AI can be used to radically redesign the governance structures and processes of an organization. By applying what they learn from the inquiry, people begin to redesign the organization’s social architecture — its systems, structures, roles, and measures — in ways that better align it with their dreams and needs.

One of the most attractive aspects of AI is its flexibility. Organizations that have implemented AI have found that it engages individuals and teams while it simultaneously provides a framework for companywide innovations.

The Five “D’s”

Thus, AI is a way of managing and working as well as a process for organizational learning and change. From the latter perspective, it is an ongoing, iterative cycle consisting of five phases: Definition, Discovery, Dream, Design, and Delivery/Destiny (see “The Five ‘D’s’ of Appreciative Inquiry” on p. 1). In large companies, the process often begins by engaging individual units or divisions. In small companies, everyone can take part right from the start.

Definition. This phase is arguably the most important one in the AI cycle, because it establishes the initial focus and scope of the inquiry. Defining the direction of inquiry is much more than just sharpening a problem description. Because organizations move in the direction of the questions they ask, the choice of questions is vital.

In the Definition phase, the organization’s focus shifts from describing the problem to determining what its members want to achieve and what they need to know to get there. For example, when a Mexican cosmetics firm wanted to solve the problem of discrimination against women, the management team first asked consultants to help them understand the causes of this unequal treatment. Dissatisfied with the direction their conversations were taking, they decided to shift their focus — to inquire instead into the causes and conditions that contribute to excellent cross-gender relationships in the workplace.

This change led the organization to a whole new body of knowledge about the issue. The members of the firm then came up with a compelling vision that they could work toward based on the conversations that took place during the inquiry process: a business world in which everyone is treated fairly regardless of gender. Not long thereafter, the company won an award for having one of Mexico’s most supportive workplaces for women.

Discovery. In the Discovery phase, participants interview hundreds, sometimes thousands, of people from within and outside of the organization. Interviewers use a customized guide to gather information on the line of inquiry that the group identified during the Definition phase. Frequently, a small group of volunteers develops the guide. These volunteers often represent a diagonal “slice” of the organization, along with representatives from key partners outside the company’s formal boundaries (i.e., customers and suppliers). Sometimes this volunteer group conducts the interviews; other times, hundreds of people gather to interview each other. During the Discovery phase, the organization identifies “best practices,” “life-giving forces,” or “root causes of success.”

This practice represents a dramatic departure from normal statistical “sampling.” AI operates on the premise that the act of asking positive questions is as important as the data it elicits. For that reason, the more people interviewed, the stronger the organization’s movement in the direction of the inquiry.

Dream. Participants then come together to build on the new learnings developed during the Discovery phase. They also ask larger questions, such as “What is the world calling us to become? What are those things about us that, no matter how much we change, we want to continue to do in the future?” Dream meetings can range from small teams to “summits” in which hundreds of people participate.

During this phase, people throughout the business create images of what life in the organization and its relationships with key constituents would look like if the company’s very best practices became the norm rather than the exception. This approach differs greatly from other visioning processes, because these dreams are grounded in what participants know to be the system’s past or present capabilities. For example, the employees of a transnational pharmaceutical company developed the following dream:

“The Research Organization of ABC Pharmaceuticals has four significant assets: an energizing work environment that affords freedom of action at all levels; a research process that is market-focused, goal-oriented, and strategically driven; world-class science supported by state-of-the-art technologies; and multi-disciplinary collaboration that transcends internal and external boundaries.

“Our people like to work here. The work environment is creative and empowering. . . . Our collaborative culture leads to sharing across functions. . . . People leverage and learn from each other’s expertise to jointly reach our organization’s goals. ABC Pharmaceuticals is a scientific Center of Excellence!”

Design. During the Design phase, participants identify the high-leverage changes in the organization’s systems, processes, roles, measures, and structures necessary for achieving the dream. Participants craft micro-images, or design statements, for redesigning the corporation’s infrastructure. For example, a consumer products distribution company wrote the following micro-image (one of about 20) describing its ideal strategy development process:

“DIA accelerates its learning through an annual strategic planning conference that involves all 500 people in the firm as well as key partners and stakeholders. As a setting for strategic learning, teams present their benchmarking studies of the best five other organizations, deemed leaders in their class. Other teams present an annual appreciative analysis of DIA, and together these databases of success stories (internal and external) help set the stage for DIA’s strategic, future search planning” (from “A Positive Revolution in Change: Appreciative Inquiry,” by David Cooperrider and Diana Whitney in Appreciative Inquiry: Rethinking Human and Organizational Change, by Cooperrider, et al. (Stipes Publishing, 2000)).

The Design phase is more than just breaking down the dream into short-term actions; it is about “translating” the dream into the “language” of the organization’s social architecture. It is about enacting the essence of the vision in the policies, core processes and practices, and systems — all of the formal and informal structures that sustain the corporation’s essence.

Delivery/Destiny. In the Delivery/Destiny phase, the organization fleshes out, experiments with, and redesigns yet again the innovations that it identified during the Design phase. The hallmarks of this phase are creativity, innovation, and iteration — buttressed by ongoing inquiries into the progress being made and the effectiveness of the changes. Employees work to identify, highlight, and expand what is working well. They also continue to innovate where needed, so that the organization can grow and learn.

The main challenge that groups face during this stage is sustaining — and even magnifying — the inspiration that characterizes the earlier phases. We come from a “project mentality” that values clear starts and conclusions. But we are increasingly confronted with a world in which change does not occur during a separate time period, after which we get back to business as usual. Rather, change is now the very water in which we swim.

We are increasingly confronted with a world in which change does not occur during a separate time period, after which we get back to business as usual. Rather, change is now the very water in which we swim.

First Steps Toward Appreciative Inquiry

There’s no one right way to engage in Appreciative Inquiry; indeed, the process can take many different forms. The examples in the following section illustrate just a few of the many different ways that organizations have applied Appreciative Inquiry — with variations on the topic of inquiry, the process for discovering exceptional moments, the method used in dreaming new futures, and the innovations developed in the Design and Delivery/Destiny phases. But the following conditions seem to be present when Appreciative Inquiry has been most effectively incorporated into a process of organizational learning and change:

• The organization honestly acknowledges any difficulties that currently exist. After all, this kind of struggle often provides the impetus for change. AI practitioners don’t advocate denying negative emotions or problems. Rather, they encourage participants not to dwell on them.
• The organization’s formal and informal leaders have expressed a need or desire for deep inquiry, discovery, and renewal. They’ve also demonstrated an openness to grassroots innovation.
• The organizational culture supports participation of all voices, at all levels — with the understanding that, when participative processes are used, outcomes cannot be known in advance.
• People throughout the organization see change as an ongoing process, not a one-time event.
• The company’s leaders believe in the organization’s capabilities and agree that accessing this “positive core” can drive learning and change.
• The organization supplies the structures and resources needed to collect “good-news stories” and support creative action (from “Appreciative Inquiry: An Overview” by Kendi Rossi, from the AI List Serv, 1999).

These conditions can expedite the AI process, but they are not prerequisites. Unlike other approaches to intentional change, with AI, you can start anywhere, anytime, and with anyone. Most companies learn AI by doing it. The very act of inquiring into the best moments of an organization’s life begins to shift the system. As this process continues, individuals become open to wider applications of Appreciative Inquiry. They begin with some trepidation and generally end up with a strong commitment to the principles and practice.

AI in Action

AI has been used to catalyze change in a wide range of efforts: from business process excellence, diversity, and knowledge management, to customer service, mergers and acquisitions, and community development. Though it is still in its infancy, proponents of this work have scored some remarkable successes, as the examples below reveal.

In 1999, Nutrimental SA, a food manufacturing facility in Paraná, Brazil, shut down so that all 700 employees could talk together about how to beat the stiffening competition facing the company. The co-CEOs invited David Cooperrider (currently a faculty member at Case Western Reserve University) to facilitate. Cooperrider asked employees to identify “the factors and forces that gave life to the company when it was most effective, most alive, and most successful as a producer of high-quality health foods.” In an interview, Cooperrider described what happened:

“With cheers and good wishes, a smaller group of 150 stakeholders — employees from all levels, suppliers, distributors, community leaders, financiers, and customers — launched a four-day strategy session during which they articulated a new and bold corporate dream. Participants said, ‘Let’s assume that tomorrow, when we wake up, a miracle will have occurred: We’ll discover that all of Nutrimental’s best qualities have come to the fore in exactly the way we would like. What would we see when we arrived at work that would tell us that this miracle had happened? What would be different?’ Over the following days, participants clarified three new, strategic business directions.

“Six months later, Nutrimental’s profits had increased by a whopping 300 percent. The co-CEOs attributed these dramatic results to two changes: bringing the whole organization into the planning process, and realizing that organizations thrive when people see the best in one another, when they can affirm their dreams and ultimate concerns, and when their voices are heard.”

At about the same time, in Harlow, England, members of an internal organization-development (OD) group at a transnational pharmaceutical company and their clients decided to use AI in evaluating an intervention. The goal of the initiative had been to improve core business processes and, ultimately, the quality of life for their research scientists. The OD practitioners and representatives from the research community fanned out to ask questions of both the scientists who had participated in the intervention and their supervisors.

But rather than asking whether the intervention worked, they asked how it had helped people to work together more effectively and in what ways the quality of their work lives had been enhanced. As a result, the evaluators compiled a rich collection of data, in the form of stories, themes, and recommendations, that promises to yield even more powerful interventions in the future.

In a primary school in Maine, Tom Morrill, the new principal, faced a faculty struggling with the impact of a recent merging of three schools into one. After a few brief meetings with a consultant, the school’s leadership team decided to engage the faculty and staff in three two-hour meetings. During the meetings, participants identified the best aspects of the cultures they had left behind and explored ways to carry those elements forward into a shared future. Morrill described the outcome of this approach:

“People’s interactions focused on what was working well or on kernels of possibilities, as opposed to lists of what was wrong. Now, you hear teachers talking about AI frequently. We have also used AI in decision-making. I’ve purposefully moved to a more inclusive decision-making model, which reflects people’s desire for inclusion. Also, team leaders have used AI to create reporting processes and even staffing arrangements. This has built better school unity and has strengthened communication. People are getting better about working and planning together.”

Appreciative Inquiry as an approach to intentional change is still evolving. We are all in the process of learning how to use this radically different, yet breathtakingly simple approach in ways that truly energize and sustain learning organizations. But we do know that AI is best learned by doing.

In Leading the Revolution, Gary Hamel said: “The world is increasingly divided into two kinds of organizations: those that can get no further than continuous improvement, and those who’ve made the jump to radical innovation.” Companies that see the need for the latter approach to change are increasingly turning to Appreciative Inquiry as a tool for making this leap. We invite you to do the same.

Bernard Mohr (bjmSynapse@aol.com) is the founder of The Synapse Group, Inc., an international consultancy in the fields of organizational learning, design, and capability building. His focus is the collaborative innovation of new work settings that are ecologically sound and economically sustainable, and that bring out the best in human beings. He is a founding partner of Appreciative Inquiry Consulting and co-author of the forthcoming book, Appreciative Inquiry: Change at the Speed of Imagination (Jossey Bass, 2001).

Author’s Note: Many of the concepts in this article have evolved from ongoing dialogues, both verbal and written, with my colleagues in the Appreciative Inquiry Consulting founders’ group: Jim Ludema, Diana Whitney, Adrian McLean, Marsha George, Jane Watkins, David Cooperrider, Marge Schiller, Diane Robbins, Steve Cato, Frank Barrett, Joep de Jong, Mette Jacobsgaard, Jim Lord, Ada Jo Mann, Anne Radford, Judy Rodgers, Jackie Kelm, David Chandler, Ralph Kelly, and Barbara Sloan.

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Over the last century, people such as Ford, Rockefeller, and Carnegie have been our entrepreneurial icons. Today, Gates, Bezos, and the founders of many thousands of dot.com startups fill the newspapers and our imagination. This dream of creating something new and, in the process, engendering wealth, power, and prestige has spread around the globe. New businesses are proliferating in the Pacific Rim, South America, the Middle East, and Europe — places that, not so long ago, were marked by rigid class and economic systems that discouraged entrepreneurial effort.

The entrepreneurial journey, however, is rarely straight or easy. And success, once achieved, is not always what the company’s founders anticipated. As a business grows in size and complexity, it becomes harder for them to manage in the informal, family-like ways that led to early success. Leaders face a paradox: In order to manage and continue growth, more effective control requires letting go. That is, entrepreneurs need to entrust others to manage much of the organization and to institute systems, such as budgets and quality control, that partly replace or supplement their vigilance. Then, once effective business processes have been introduced, the organization must find ways to reinfuse itself with the spontaneous, creative energies of the start-up days to avoid growing stagnant and dry. In the most successful companies, this cycle, from entrepreneurial to professional and back to entrepreneurial, may repeat many times over.

The entrepreneurial journey is rarely straight or easy. Leaders face a paradox: In order to manage and continue growth, more effective control requires letting go.

In other words, successful entrepreneurs — those who build, sustain, and continuously renew their businesses — must learn to balance risk taking, hard work, and self-reliance with forethought, delegating authority, and trusting their staff. The same is true for entrepreneurial endeavors in large, otherwise bureaucratic organizations. This uncommon balance of entrepreneurial and professional leadership is hard to achieve. No wonder so many entrepreneurs cannot complete their journey: 50 percent of start-ups are out of business after the first year; 80 percent close by their third year.

For all but the most talented (and lucky), the tricky process of integrating entrepreneurial with professional leadership requires meeting certain challenges and acquiring new practices. It means a major shift in “business as usual” for everyone in the company. Although no single approach to change can accommodate every entrepreneurial culture, most entrepreneurs — and those who work for them — will recognize their own experiences and the efficacy of many of the recommended action steps in the transition process outlined below.

The Entrepreneurial Personality

The entrepreneurs’ personality drives and shapes the organizations that they build. On the upside, people who launch start-ups generally possess high energy and enthusiasm, enjoy building things, have enormous reserves of creativity and intuition, and live for excitement and challenges. They are visionaries who rarely stay focused on the small things in life but try to change the world in some substantial way. And they are willing to assume responsibility for almost everything that happens in their organization; take frequent, calculated risks; and persevere in the face of great odds and almost constant pressure. Through their actions, drive, purposefulness, and decisiveness, entrepreneurs inspire effort and loyalty in others.

On the downside, entrepreneurs can be arrogant, impulsive, distrustful, and controlling. They often think they can do the job better than anybody else, yet they dislike doing routine tasks. Entrepreneurs prefer initiating and developing projects, not running them — but they want to be in charge of every aspect of the organization. These contrary qualities, left unchecked, eventually isolate the company’s founders, cutting them off from the information and people who have been the organization’s lifeblood.

In the early days of most startups, profit often takes a backseat to growth. Planning tends to be ad hoc.

Budgets and financial controls are almost absent. Training takes place on the job. Roles and responsibilities are defined by the tasks at hand, often shifting and overlapping one another.

In the short term, when organizations are small, they benefit from entrepreneurial qualities. For one thing, informality makes businesses agile and adaptive to market demands. For another, because the founders are clearly in charge — with power and prestige flowing directly from them and from those in close relationship with them — workers know who they’re accountable to. Plus, many employees, themselves caught up in the excitement and often given strong incentives, are willing to do whatever it takes to fulfill the entrepreneurs’ vision.

In the long term, however, problems tend to arise. The tight hierarchical structure of most start-ups inhibits the development and retention of strong managers and people’s capacity for autonomous action — especially when the entrepreneurial leaders can no longer devote time to the organization’s internal operations because they must work to position the company in the market. In addition, burnout and disillusionment run high in many employees, who sincerely try, but frequently fail, to maintain the entrepreneurs’ feverish pace and sense of unwavering commitment.

A Developmental Crisis

At some point in the life of every growing organization, ad hoc planning and determined, centralized leadership become inadequate for dealing with the complex tasks at hand. Signs of this inadequacy become evident when, for example, the company’s capacity to handle customer demands decreases, employees start missing key details such as order fulfillment, and the company burns venture capital faster than it builds products. Despite these clear warning signs, entrepreneurs and their management teams may not be ready to implement the processes that characterize professional management: careful planning; clearly defined roles and responsibilities; monitored budgets, financial performance, and product quality; and the entrusting of major responsibilities to someone other than the leadership team.

For a time chaos seems to reign. People feel confused and anxious about the company’s direction. Managers may be overwhelmed by the volume of work and the magnitude of their duties, but they feel they don’t have the time, budget, or expertise to hire the right support staff. So they fall into “fire-fighting” mode, trying to do everything themselves, partly because they don’t think their subordinates have the expertise or knowledge to do so, and partly because the company’s founders have modeled this kind of controlling behavior. This approach creates a “Limits to Success” scenario, in which the company’s incapacity to handle complexity limits its ability to grow (see “The Limits to Entrepreneurship”).

Even as they flounder, the leaders struggle to create an infrastructure that will help them meet the challenge of growth. But attempts to install processes such as information systems or budgets frequently fail: The entrepreneurs don’t yet have the skills to make them work or the habit of depending on them. Nor do they have the time — the demands of the present seem to conspire against their own long-term interests.

So just as the founders build the infrastructure, they tear it down again, relying on guts, determination, intuition, and even harder work. This method doesn’t succeed either, so they renew their efforts to institute policies and procedures. The entrepreneurs may go back and forth several times, in a maddening effort to escape their dilemma. Morale drops, and employee skepticism about the capacity of the management team to lead them through the crisis grows.

Here, then, is the fulcrum on which the developmental crisis turns: The organization must undergo fundamental change in order to survive, but few current employees are prepared or qualified to make the shift to a new operating mode — including the entrepreneurs. More often than not, only when the organization brings in a more professionally oriented leadership team does it survive — and, all too often, this move stems not from the entrepreneurs but, partly or entirely against their wishes, from a board of directors or venture capitalist.

Professional Leadership Organizations

In contrast with entrepreneurs, professional managers tend to be consistent, cautious, detail-oriented, and conservative in their personal styles. Yet, in their own way, they are far-seeing. Long-term planning, for instance, comprises a central part of their activity, as does the training and retention of able managers to guarantee the organization’s future. These leaders emphasize financial and product-quality controls that allow for course corrections when performance varies from goals. They also work to develop and maintain strong relationships with customers and suppliers. In short, professional managers create formal organizational structures, in which goals, operational processes, and roles and responsibilities are explicitly articulated, implemented, and monitored.

To begin to incorporate professional leadership into their organizations, entrepreneurial leaders must execute the following practices:

1. Delegate responsibility and authority. As organizations grow in size and complexity, the entrepreneurs must hire effective managers and trust them to do their jobs. To ensure a smooth transition, leaders should put this management team in place before launching major new initiatives.

2. Behave consistently. To some degree, entrepreneurs must curb their impulsive tendencies. Employees work better when they know what to expect in their jobs, what tasks they are responsible for, and how their performance will be evaluated. If entrepreneurs cannot limit their impulsiveness, they should hire an intermediary, such as a COO.

3. Plan and prioritize. Entrepreneurs, with input from managers and employees, need to set clear goals and priorities, even if it means letting go of some alluring tasks and opportunities. With this guidance, managers can effectively marshal organizational resources to accomplish the goals.

4. Communicate openly and effectively. Instead of keeping plans and financial data close to their vests, entrepreneurs need to share vital information with their staffs. Managers need this information to help plan and execute projects well.

5. Institute controls. Entrepreneurs must recognize the need to monitor key organizational processes, such as budgets and performance, and trust other people to do much of the oversight.

As crucial as it is for entrepreneurs to implement these professional practices in order for their companies to survive, most initially resist doing so. As we’ll see below, they and their staff are ill-equipped to handle the turbulence that arises as the company moves toward a new mode of operation.

Characteristics of Transition Periods

One of the major reasons that organizational transitions falter is that leaders do not anticipate and account for the uncertainty and difficulty that change brings to the entrepreneurial journey. Change rarely, if ever, follows a straight line, from conception to planning to realization. The process of managing change involves negotiating unexpected twists and turns, stops and starts, frustrating regressions and forward leaps of breathtaking speed and magnitude.

We can attribute this inability to navigate the change process in large part to the failure of our business culture to create an image of the journey that is both positive and realistic. So we continue to cling to the old idea that we can plan change step by step, and we become bewildered by the contradiction between this seductive myth and the tumultuous reality that we actually encounter.

The transition from entrepreneurial to professional leadership involves more than simply the development — or importation — of new skills and new processes. It also requires considerable physical, emotional, and intellectual stamina, as well as a capacity to move ahead with clear thinking and action in the face of inevitable uncertainty. Entrepreneurs who are leading their businesses to a mature level of development must be able to both fly with the waves of progress and endure stagnant times, and to let go of cherished ideas and often valued people, while promoting others who have not yet proven trustworthy.

We know that an entrepreneurial organization has completed the passage from old to new when it achieves a stable synthesis of its entrepreneurial origins and its professional future that fits its own distinctive purposes. This synthesis — merging creativity with controls — represents a new paradigm; that is, a new way for people in the organization to think, act, and feel that balances the best of the past and the promise of the future.

Developing a New Organizational Infrastructure

To integrate entrepreneurial leadership with professional management successfully, entrepreneurs and their organizations must move through four developmental stages.

1. Recognize the need for basic change. To begin the transition, the entrepreneurs, and then everyone else in the company, must perceive the need for change. Entrepreneurs generally understand why the organization must transform itself, but they often fail to act on this insight. Still believing that survival is paramount, they insist that they don’t have the time or resources to build a new infrastructure, hoping that small adjustments combined with determination and hard work — virtues that led to early success — will carry the day.

Entrepreneurs and their closest employees often cling to a culture that feels to some like family and to others like comrades waging war together against a hostile, uncomprehending world. At this stage discord may arise between the core group and formerly trusted lieutenants, who understand the risks to the organization if it doesn’t adopt a more professional infrastructure. It usually takes the financially oriented people, such as accountants and venture capitalists, to hammer home the need for implementing new systems and policies.

Once the entrepreneurs accept the inevitability of organizational transformation, the most effective way to convince other people in the company about the need for change is to create an environment where they can talk honestly about the challenges the organization is facing.

Action Items:

• Assemble a small transition management team that includes at least one employee who is not part of the entrepreneurs’ inner circle, one outsider (preferably a board member or an organizational development consultant), and the entrepreneurial leaders. Launching this process with a facilitated retreat can be helpful.
• Write a diagnosis that indicates current problems and reasons why the organization needs to change. Be sure to gather input from throughout the organization. You may want to introduce tools to support open discussion, especially if the organization’s culture has discouraged candid feedback in the past.
• • Identify areas of the company that have already changed or have been moving toward a professionally managed style and support these developments. You might want to provide workers in these areas with financial incentives, broaden their managerial roles, or publicize their accomplishments within the organization.
• Create informal dialogues at all levels of the organization about the company’s challenges and people’s fears around the change process. For example, at one company a manager instituted “Bagels with Steven,” a weekly meeting at which employees were allowed to vent frustration and confusion about the changes. Once employees felt their concerns were being taken seriously, they began to offer suggestions about the organization’s future path.
• Articulate a vision of what the organization might look like — and accomplish — in its new form.

2. Commit to and plan for change. Once the organization as a whole recognizes the need for transforming the company, everyone must commit to implementing a plan of action — even when present demands and financial risks are daunting.

Again, obstacles abound. In entrepreneurial organizations, the act of planning itself is problematic; it often violates the cultural norm. In response, leaders tend to hedge their bets: “Let’s do it, but I reserve the right to change course when I think it necessary.” Or they may languish in indecision, perhaps initiating change several times in small ways, then pulling back. Or the entrepreneurs may do an inadequate job of planning, saying “An hour or two should do the job. I know where we need to go, anyway.”

Entrepreneurs may also delegate the planning process to others and then override or limit their authority to implement the plan. This interference generally upsets the managers, who may engage in a struggle with the entrepreneurs for power. This process could have a positive outcome, by bringing the entrepreneurs’ ambivalence about the change process out in the open. Or it could cause the entrepreneurs to halt change efforts or alienate staff members.

Action Items:

• In consultation with the rest of the staff, identify any obstacles to change, including constraints on employees’ time, lack of material resources, and internal resistance to the initiative.
• Develop a plan to overcome these obstacles, and move the organization in the desired direction.
• Continue to support the people, teams, and processes in the organization that are already moving toward professional management, rather than focusing on correcting problems.
• Continue to hold dialogues, particularly with key personnel, to head off polarized situations. Bring ambivalence about change into the open by having people acknowledge their own doubts.

3. Implement the plan while tolerating instability. Once the organization is committed to the change process, everyone must execute the plan of action confidently, leaving little doubt about which direction the company is headed. For example, one key indicator of commitment is the entrepreneurs’ willingness to go outside of their circle of loyalists to hire and empower professional managers. These new leaders must possess the requisite skills to meet the organization’s needs — and may require higher levels of compensation than the existing pay scale supports.

Developing a new organizational infrastructure requires considerable time, energy, and skill. As change proceeds, anxiety in the organization will reach new heights, because key measures might get worse before they get better — customer complaints may jump, business may flag, and financial concerns may grow. These challenges will test everybody’s commitment to the plan. The leaders will probably spend many sleepless nights wondering what happened to their organization. Intense power struggles may emerge between the old and new guard of managers, or among members of each.

Initially, some employees may leave the company. Long-time workers may wonder if they will retain their jobs; others will develop a bunker mentality, determined to wait out the change “fad.” Many may feel betrayed by the entrepreneurs, who seem to have gone over to the “other side.” The professional managers, on the other hand, may feel the entrepreneurs are moving too slowly and sporadically.

In such trying times, the leaders and their close managers may be tempted to revert to old ways, once again seeking to micromanage every detail of the operation. Entrepreneurs may in fact respond to the instability by becoming dictatorial, uncertain, and indecisive, or by becoming dependent on a newly hired professional. Depending on their behavior at this time, the founders’ credibility might be seriously jeopardized.

The challenge for all is to tolerate the instability and the identity crisis — both the actual work disruptions and the mental and emotional responses to these disruptions. To do so, all employees must focus on maintaining a clear vision of what the changes can eventually do to help the company achieve it goals and appreciate the disruptions as natural “growing pains.”

Action Items:

• Develop a timeline that indicates when the company hopes to complete each aspect of the strategic plan. This timeline will help orient and reassure all the players that there is a solid plan for the future.
• Solicit the help of a coach or mentor — perhaps a board member who has successfully gone through the entrepreneurial process or a consultant—for moving through the transition.
• Provide guidance and training for loyal, long-time employees. Interview those outside the inner circle to see what they think of the changes. Reiterate and revise the change plan, making sure that each person can actually visualize their potential career path in the new structure.
• Continue to converse with employees, recognizing how change brings loss and regrets, and help make these feelings acceptable. Identify and discuss areas of instability, doubt, and tension until they are resolved or modulated.

4. Integrate the old and the new.

The final developmental challenge is to retain the entrepreneurial spirit in the new and improved organization. Often, in the name of efficiency and order, organizations kill off the sense of adventure that built them. But that energy is what allows companies to remain innovative and stay on the cutting edge of their industries. After the transition, the business must still compete in fast and constantly changing markets and technologies; if it grows sluggish, officious, and conservative — in short, bureaucratic — it will fail to remain competitive.

To that end, the new management systems need to act in the service of the entrepreneurial spirit. The organization needs to continually find ways to integrate the best of the old and the new, and to stabilize itself around this integrated way of doing business. For the leaders, the challenge is giving the management team room to exercise their skills and stabilize the organization while, at the same time, providing them with vision and support.

The organization needs to continually find ways to integrate the best of the old and the new.

The alternative to integration is both conflict — between those who represent the entrepreneurial style and those who advocate planning and controls — and fragmentation — in which various departments and people operate in contradictory, disjointed ways. Each group believes it understands more fully than others the strategy that the company needs to follow. Factions can fall into a kind of cold war, an unstable form of stability that creates constant tension and undermines performance.

Action Items:

• Identify and measure the value of what is “old” (flexibility, creativity) and what is “new” (infrastructure, controls). Outline how the company will synthesize the best of both to create something more effective than either style.
• Continue to define and redefine how the organizational plan will allow the company to move forward to meet the demands of growth, competition, quality, and so forth. In order to adapt all employees and tasks into the new organization, the plan needs to be flexible and responsive to new ideas and unintended consequences.
• Introduce methods to sustain openness, flexibility, and creativity, such as continuous learning and scenario planning. Create or maintain entrepreneurial aspects of the organization through equity and profit-sharing practices and spinning off new products into new companies or divisions.
• Create new roles for entrepreneurs who want to remain engaged with their companies in a different capacity, so they can still provide overarching vision and leadership. In order to satisfy their need for action, create opportunities for entrepreneurs to take on special projects, such as leading a major product development process.

Realizing the Dream

In summary, if entrepreneurs want to create a lasting enterprise that impacts their industries well into the future, they need to lead their organizations in making the transition from a startup to a professional culture. By integrating professional leadership (effective planning, budgets, and quality control) with the entrepreneurial spirit (openness, flexibility, and the ability to think “outside of the box”), organizations can continuously renew themselves and achieve long-term, sustained success.

Barry Dym, Ph. D., is president of WorkWise Research & Consulting. He has 30 years of experience as an entrepreneur, organizational development consultant, author, teacher and psychotherapist.

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Descending climbers were scattered along the upper reaches of the mountain when a powerful storm hit. Some people became incapacitated near the summit; others managed to get to within a few hundred yards of their tents at Camp Four (26,100 feet) before becoming lost in the whiteout conditions. Eight climbers would die over the next day and a half. Others would suffer severe frostbite and disability from their Everest summit attempts.

The 1996 Everest climbing season was the deadliest ever in the mountain’s history. The key events of the May 1996 tragedies have been analyzed thoroughly, both from a sensationalist perspective for the general public, and from a more analytical perspective by the climbing community. Now that some time for reflection has passed, we can view the The 1996 Everest climbing season was the deadliest ever in the mountain’s history. The key events of the May 1996 tragedies have been analyzed thoroughly, both from a sensationalist perspective for the general public, and from a more analytical perspective by the climbing community. Now that some time for reflection has passed, we can view the events as a rich metaphor for how organizations cope and survive, or not, under extreme conditions.

Although most of us don’t face life or death situations in the office, we do operate in a volatile environment that demands strong leadership and quick decision-making based on the best information we can gather in a short time. In this sense, we might say that our work teams scale our own Everests every day.

Because any significant undertaking requires leadership of a productive team effort, we begin by sketching out some of the factors essential to “collaborative leadership.” We then examine the case of the 1996 IMAX expedition led by David Breashears as an example of effective collaborative leadership in action. We conclude by drawing lessons from Everest for business leaders.

Collaborative Leadership

Many managers recognize the need for collaborative leadership to help them achieve their objectives in a changing business environment. They have heard that leading in new ways can enable groups to perform at higher levels. The problem is that very few managers really know what collaborative leadership entails or how to implement it. Many think they are leading collaboratively when they are really either just trying to keep everyone happy or continuing to rule with an iron fist couched in friendlier language.

Collaborative leadership is a set of skills for leading people as they work together to accomplish both individual and collective goals (see “Skillful Collaborative Leadership”). First and foremost, collaborative leaders must be excellent communicators of a passionate vision. They must maintain a keen awareness of the many variables that affect their organizations, such as the availability of resources, time constraints, and shifting markets. These leaders must balance the agendas of a group of talented but very different people and work with the team as a whole to help members achieve their highest level of capability. In short, they must be able to weave many complex factors together into a plan to accomplish an overarching goal.

Collaborative leaders do not rely on pure consensus when making decisions. Their role on the team is to stay aware of the big picture and to keep in mind all the factors that are necessary to make the goal happen. Thus, although they collect input and information from others, they must ultimately make a decision that they feel best serves the organization’s needs. This decision may go against the expressed desire of one or more team members. To keep dissenters engaged, collaborative leaders must articulate a vision so compelling that team members are willing to make their personal aspirations secondary to achieving the overall objective.

In a crisis, teams tend to fall apart as their members approach basic survival level. On Everest, survival means having enough air to breathe to keep blood circulating to the brain and staying warm enough to avoid frostbite and hypothermia. Similarly, managers of a business in a critical state must understand the organization’s core functions and find ways to sustain those activities until they can muster additional resources.

In crisis situations, people’s “fight or flight” instincts will cloud their judgment unless the leader has instilled in them a strong sense of the vision; has modeled the ability to work through the dilemma and keep moving toward the goal; can foresee possible scenarios for resolving the crisis; and can communicate the different actions needed to reach safety. A collaborative leader must master the skill of creating a complex web of relationships among team members that binds the group together and that resists the pressures that seek to separate them under stress. For when collaborative leadership is missing, personal survival and individual goals negate group goals, planning falls apart, and communication is shattered.

Collaborative Leadership on Everest

During the challenging May 1996 climbing season, the IMAX expedition led by David Breashears succeeded where others failed, in that the group achieved its goals of creating footage for the IMAX Everest movie, conducting scientific research, and putting team members on the summit safely. A measure of this success is attributable to Breashears’s collaborative leadership style.

Breashears and his group were united in their personal goals to summit Everest, and in the group goal of bringing the Everest experience back to the masses through large-format cinematography. Unlike some of the other teams on the mountain, Breashears’s IMAX expedition was fully funded by the film’s producers and by the U. S. National Science Foundation. Because of this financial backing, Breashears had the luxury of handpicking his crew, and he showed an outstanding ability to judge both physical and psychological readiness.

At base camp, Breashears’s approach to team-building centered on creating opportunities for the team to get acquainted, bond socially, and develop a sense of mutual respect and interdependence. For example, at dinner, team members contributed delicacies from their home cultures. This rich social context and intimacy was sustained beyond base camp. As the IMAX team moved up the mountain, the process of filming the movie helped to unite the team further.

On May 8, just before several other expeditions headed out for the summit, Breashears made the difficult call to postpone his team’s attempt and descend to a lower camp. His chief priority was the team’s safety. Although Breashears gathered the input of his team members, no one questioned that the final decision to make or abandon the summit attempt would be his alone.

When the other teams ran into trouble on summit day, Breashears stopped filming. His group devoted all their energies to rescuing the survivors, bringing them down the mountain, and assisting in providing medical treatment. These actions saved the lives of two climbers. Breashears and his team chose to risk their chance to summit and their film project in order to respond to the immediate needs of people who were in jeopardy. The group’s heroism further cemented their bonds. Breashears’s display of character under duress, for example, his refusal to film the injured climbers for profit, additionally bolstered the team’s spirit.

After the tragedies and rescues of the remaining members of the other teams, Breashears’s group returned to base camp to consider their options. In the end, after the memorial services and a short time to reflect, they decided to return to the mountain to make a summit attempt. Once they reached high camp, Breashears made the hard decision to cut one team member from the summit team. The climber had cracked two ribs through coughing on the way up to high camp, and Breashears judged that she would not be strong enough to safely make the summit. Again, this decision was his to make, and the team was strong enough that they accommodated the loss of one member with little loss of morale.

In preparing for the summit attempt, Breashears ran through a number of scenarios for the climb. He mused: “In my mind, I ran through all the possibilities of our summit day. When I got to the end of one scenario, I would work through another. I know that the effects of hypoxia (lack of oxygen to the brain) and sleep deprivation and the tug of Everest would cloud my decision making. I wanted to have rationalized a decision for the most likely scenarios of the day down here in the relative warmth of my sleeping bag and the security of my tent” (High Exposure, Simon & Schuster, 1999).

Despite the stress of the preceding events, the IMAX team successfully summitted Everest and captured the glory of the highest point on earth on film. Part of the success of the expedition came from the incredibly talented team. But Breashears’s ability to masterfully create both environmental and psychological support for his climbers and articulate an unwavering vision and sense of integrity bring him close to the collaborative leadership ideal.

Unconscious Collusion

Collaborative leadership alone cannot create success. When crisis strikes, team members must rely on their own inner resources — courage, conviction, and, a more elusive resource, character — to get them through the challenges at hand. Although the leader can model and instill a vision of uniting personal and team objectives, the successful resolution of crisis ultimately rests on the strength of earlier team-building efforts.

In Into Thin Air (Anchor Books, 1997), the best-selling book about the May 1996 Everest climbing season, Jon Krakauer noted that in one of the other expeditions “each client (a climber who has paid to be part of a professionally guided expedition) was in it for himself.” Such thinking precludes effective collaboration. In addition, he states that many of the clients adopted a “tourist” attitude. They expected the staff to prepare the mountain for them, so that they would only need to put one foot in front of the other to succeed.

At the same time, according to Krakauer, on the morning of the summit attempt, several clients on his team expressed concerns about the summit plan they were following, but none of them discussed their doubts with their leaders. If there had been closer collaboration within the teams, such concerns may have been discussed more openly. In reflecting on these actions and attitudes, we must consider the role of unconscious collusion. In groups, unconscious collusion occurs when no one feels either empowered or responsible for calling out red flags that could spell trouble.

In the rapidly changing conditions and troubled communications that Krakauer documents in his book, unconscious collusion played a central role in the tragic outcomes.

This kind of unconscious collusion can lead to poor decisions and potential disasters in companies as well. The ongoing pressures on businesses for results and nonstop success — comparable to “summit fever” (the desire to get the summit despite escalating risks) among a group of climbers — create overwhelming pressure for employees to go along with the crowd, to bury their doubts, and to ignore risks. In successful groups, someone always raises questions when they sense problems with a certain course of action. But unfortunately, unless the team has developed high levels of trust, personal ownership, responsibility, and open communication, no one will feel it is their duty or right to question a prior decision. To counter unconscious collusion, the collaborative leader must constantly nurture team intelligence, model and reinforce the need for open communication, encourage dissenting viewpoints, and maintain an open-door policy.

What Does This Mean for Business Collaboration?

Looking at the case of the 1996 Everest expeditions through the lens of collaborative leadership can naturally lead to the following conclusions about business collaboration under crisis:

Consistency in collaborative leadership is vitally important. One of the lessons we can glean from the success of the Breashears team is the critical role of consistent leadership, particularly in a crisis. The confusion that results when leaders vacillate between different leadership styles can undermine a group’s sense of teamwork and the ability of different members to step into leadership roles. In this context of blurred boundaries and roles, a sudden leadership vacuum can lead to paralysis and “every man for himself behavior.

In contrast, over time, predictable, consistent collaborative leadership inspires commitment, confidence, and loyalty from a team. In this atmosphere, people know what to expect from their leaders, and what their leaders expect from them. If the leader must withdraw for any reason, the team’s strength and strong vision seamlessly carry it though the temporary vacuum at the top.

The ongoing pressures on businesses for results and nonstop success — comparable to “summit fever” (the desire to get to the summit despite escalating risks) among a group of climbers — create overwhelming pressure for employees to go along with the crowd, bury their doubts, and ignore risks.

The ideal collaborative leader shares much in common with a good movie director. David Breashears’s training as a movie director likely supported his ability to motivate others and lead collaboratively. The director is the leader on a movie production, but all the members of the team are mutually dependent. On a movie production, each person’s role is clear, and each task must be executed in sequence.

The movie director’s challenge, similar that of a team leader, is to:

• find and organize the best talent,
• prepare the environment for the production,
• draw on and incorporate the team’s ideas,
• create a clear goal,
• articulate a story and vision for the production, and
• weave together the complex web of aspirations and talents in the group to create a coherent and compelling end product.

The movie production process also offers a strong element of real-time learning, in that it incorporates processes for discovering errors and correcting potential failures before the project reaches a critical stage. The director reviews “dailies” for each day of production. In collaboration with cast and crew, he or she decides which scenes work and which need to be reshot, keeping in mind time and budget constraints. This regular review process serves as an excellent way to prevent teams from falling into unconscious collusion and ignoring warning signs.

The “director” in a business setting — the leader — must ensure that team roles are clear; that members clearly understand the project’s objectives and milestones; and that the group as a whole frequently and openly assesses the progress to date against the original plan. He or she must do so in a nonthreatening setting and demonstrate flexibility in adapting the plan to changing conditions. Many businesses have adopted formal after-action review processes that occur both in the course of a project and after its completion.

Collaborative leaders develop flexibility in the team for dealing with rapidly changing conditions. Successful groups must recognize the need for flexibility in approaching rapidly changing conditions. For instance, in order to sustain collaboration in crisis and mitigate survival anxiety, Breashears and his team collectively reviewed potential scenarios, developed contingency plans, and stayed in touch with each other on summit day. When survival anxiety becomes too high in business, because of ill-defined or shifting management priorities, downsizings, competition, or loss of market value, managers must prepare for a strong wave of fight-or-flight reactions among team members and for a fall-off in collaborative efforts. The development of alternate strategic scenarios is an emerging business practice that can support the flexibility of project teams and help them respond quickly to changing conditions.

Collaborative leaders are supported by interdependent team members who take ownership for achieving common goals. As Krakauer and others have noted, many of the clients on the commercial expeditions in 1996 felt they had been led to expect that they were entitled to reach the peak of Everest; that their every need would be catered to; and that the dangers were minimal if they followed the formula laid out by the expedition leaders. This overreliance on the leaders put a tremendous burden on those individuals and led to a vicious cycle: As the clients became more and more dependent, the leaders’ ability to prepare “the mountain for the clients” decreased.

In the business arena, no organization can afford to cultivate dependence in its employees — and thereby put unnecessary stress on managers. Successful groups combine strong interdependence among members with individual responsibility and ownership for the outcomes of the project. This combination is vitally important in the harsh environment of the new economy.

When Preparedness Isn’t Enough

Leaders will be most successful in turbulent environments if they inspire team members to go beyond their limitations; coach them to make the teams’ goals their own; practice a consistent, predictable collaborative leadership style; and present an unwavering vision. In the new business climate, managers would do well to cultivate the skills that make for a great director, rather than those that make for a great supervisor. More and more, leaders must form teams made up of contractors, partners, suppliers, and subsidiary employees — none of whom directly report to one another. They will need to organize more frequent project reviews, so that team members are continually checking their assumptions, learning in real time, and correcting mistakes before they become serious. In this way, collaborative teams can avert potential disaster.

When expedition leaders initially prepare to climb Everest, they focus tremendous energy on preparedness: physical training, supplies, equipment, portage, logistics, and staffing. Teams that undertake these operations with skill and foresight greatly enhance their chances of success on the mountain. However, the 1996 season on Everest revealed that excellent preparation isn’t enough. When a team’s very survival is threatened, the quality of their interactions, relationships, and decisions become key to a successful outcome.

In business, the process of facing a new challenge is similar: Organizations devote much effort to preparedness, logistics, and resources, but they often fail to invest in promoting leadership and collaboration skills. What we learn from Everest is that it is exactly this investment in human capability that can mean the difference between success and failure. With a strong grounding in collaborative skills and effective collaborative leadership, teams can learn to pull together in times of crisis rather than fall apart.

Dori Digenti is president of Learning Mastery (www.learnmaster.com), an education and consulting firm devoted to building collaborative and learning capability in client organizations. She is facilitator of the Collaborative Learning Network, a group of leading companies working together to understand and enhance collaboration skills.

References

Bennis, Warren and Patricia Ward Biederman, Organizing Genius: The Secrets of Creative Collaboration (Perseus Books, 1997)

Breashears, David. High Exposure (Simon & Schuster, 1999)

Krakauer, Jon. Into Thin Air (Anchor Books, 1997)

The post Lessons from Everest: The Role of Collaborative Leadership in Crisis appeared first on The Systems Thinker.

knowledge and shape its future. But the process of co-creating the future through conversation is so natural we usually overlook it.

Since our early ancestors gathered in circles around the warmth of a fire, conversation has been a primary process for making sense of our world, discovering what we value, sharing knowledge, and imagining our future. Small groups exploring important questions — and connecting with other groups that are doing the same — have always played a major role in social and institutional renewal. Consider the sewing circles and “committees of correspondence” that helped birth the American Republic; the conversations in cafés and salons that spawned the French Revolution; and the Scandinavian “study circles” that stimulated an economic and social renaissance in Northern Europe. Reaching out in ever-widening circles, members of small groups spread their insights to larger constituencies, carrying the seed ideas for new conversations, creative possibilities, and collective action (see “Conversation as a Path to Large-Scale Change”).

Today, especially with the advent of the Internet, we are becoming increasingly aware of the power and potential of these dynamic networks of conversation and their systemic importance for large-scale collaboration, learning, and change. The crosspollination of ideas from group to group can lead to the emergence of surprising creativity and focus as we discover innovative ways to support a “system thinking together.”

What if we could create an intentional, simple, and effective approach for fostering greater collaborative learning and coherent thought than is often available in large group settings? Our research reveals that what we have come to call “The World Café” has a unique contribution to make when the goal is the focused use of dialogic inquiry to foster collective insight around real-life challenges and key strategic questions at increasing levels of scale.

What is The World Café? It is an innovative methodology that enhances the capacity for collaborative thinking about critical issues by linking small group and large-group conversations. In the process, knowledge grows, a sense of the whole becomes real, and new possibilities become visible. The World Café utilizes the principles of dynamic networks and living systems to access a source of deeper creativity and shared knowledge that might not be available through more traditional approaches to collaborative work.

The World Café is also an evocative metaphor that enables us to pay attention to aspects of organizational life that are often invisible, hidden by formal structures and policies. It highlights the naturally occurring networks of conversation and social learning through which we access collective intelligence, create new knowledge, and bring forth desired futures. Using The World Café as an organizing image allows leaders to intentionally design processes that take advantage of the natural dynamics that are already at play in order to create sustainable business and social value.

How The World Café Was Born

Several years ago, we serendipitously discovered the unique power of Café style conversations. One rainy morning, we wanted to provide a comfortable setting for participants in a global dialogue on intellectual capital to enjoy their coffee while waiting for the session to begin. We set up small tables in our living room and covered them with paper tablecloths. We added flowers and set out colored crayons, like in many neighborhood cafés.

People were delighted and amused. They got their coffee and gathered in small, informal groups around the tables. Soon, everyone was deeply engaged in conversation. As they talked, people scribbled ideas on the tablecloths. After a while, someone expressed curiosity about what was happening in other conversations. One person agreed to stay at each table as a host while others traveled to other tables to discover what interesting ideas were pollinating there.

People buzzed with excitement. At a certain point, they decided to leave a new host at each table. The other members traveled to new tables, connecting ideas, testing assumptions, and adding to each other’s diagrams and pictures on the tablecloths.

As lunchtime drew near, we took a “tour” of all the tablecloths, seeing what new connections and questions had emerged. Our interactive graphics specialist captured collective insights from the morning on a large piece of newsprint in the middle of the room. We suddenly realized that we had tapped into something very simple but potentially very powerful. Through the Café conversations, a shared knowledge base, larger than any individual or group in the room, had become accessible to us. Our unique contributions had combined and recombined into rich new patterns of living knowledge and innovative thought that had not been visible when we started.

The World Café As Methodology

What makes such a seemingly simple practice — that of talking together about things we care about and intentionally linking the essence of our conversations with others in ever widening circles — so useful? We think it’s because Café conversations offer us the opportunity to notice the possibilities for mutual insight, innovation, and action that are already present in any group, if we only knew how to access them. We are discovering that this process offers a unique mixture of freedom and focus, of coherence without control. Depending on an organization’s needs, Café events can be designed around particular themes or topics. The Café format is flexible and adapts to different circumstances, based on a few simple practices and principles (see “Café Hosting Tips”).

Groups as small as 12 and as large as 1,200 from around the world have engaged in Café learning conversations in a wide range of settings. In a global consumer products company, executives from over 30 nations used Café principles to integrate a new worldwide marketing strategy. In New Zealand, Maori leaders combined The World Café with indigenous meeting formats during regional treaty negotiations. Mexican government and corporate leaders applied The World Café to scenario planning. A Fortune 100 company is using “Creative Cafés” to explore corporate responsibility with stakeholders. And faculty members in the U. S. and Europe are creating virtual online “Knowledge Cafés” to conduct distance-learning programs.

After participating in Café conversations, members share comments such as, “I developed productive relationships and learned more from others than I ever expected. You can actually see the knowledge growing.” Participants often develop an increased sense of responsibility for making use of the practical insights they gain and for staying connected as they expand the conversation to larger constituencies.

The practice of The World Café is based on a set of working assumptions that we continue to explore:

• The future is born in webs of human conversation.
• Compelling questions encourage collective learning.
• Networks are the underlying pattern of living systems.
• Human systems — organizations, families, communities — are living systems.
• Intelligence emerges as the system connects to itself in diverse and creative ways.
• We collectively have all the wisdom and resources we need.

Five Key Operating Principles

We are discovering that the unique contribution of Café learning seems to come from translating these working assumptions into the following five operating principles that, when used in combination, increase the likelihood of generating breakthrough thinking.

Create Hospitable Space. Café hosts around the world emphasize the power and importance of creating a welcoming environment to enliven collaborative conversation. We thrive and are better able to confront difficult questions, explore underlying assumptions, and create what we care about in surroundings that evoke warmth, friendliness, and authenticity than in those that are less hospitable to the human spirit. Most meeting places are sterile, cold, and impersonal. Consider choosing environments with natural light. Create comfortable seating. Honor our traditions of human hospitality by offering refreshments. Play soft music as people enter. Decorate the walls with art. Hospitable space means “safe” space — where everyone feels free to offer their best thinking.

Hosts can create hospitable space even in large, impersonal venues. For instance, at a conference for 1,000 people, we asked the hotel staff to set up small, round cocktail tables instead of rows of chairs in the cavernous ballroom. We then decked out each table with a red-checked tablecloth and a vase of red and white carnations. Volunteers placed sheets of white paper over the tablecloths and left small containers of colored markers for doodling. We also brought in palm trees and other greenery. When people entered the room, they were greeted by soft jazz music. The buzz of conversation almost instantly filled the space.

Knowledge emerges in response to compelling questions that “travel well” as they attract collective engagement and exploration throughout a system.

Explore Questions That Matter. One of our most important learnings in working with The World Café is that discovering and exploring “questions that matter” opens the door to catalytic conversation, insight, and innovation. Knowledge emerges in response to compelling questions that “travel well” as they attract collective engagement and exploration throughout a system. Powerful questions provide focus and coherence to networks of conversation that might otherwise spin off in random directions. Well-crafted strategic questions define intention, focus energy, and direct attention toward what really counts.

Hone the skill of shaping open-ended questions that are relevant to the group’s real-life concerns. These questions need not imply immediate action steps or problem solving. Allow the questions to invite inquiry and exploration. At one Café in Denmark focused on improving a school system, the hosts framed the central question as “What could a good school also be?” rather than as “How can we fix the problems in this school?” In doing so, they opened up the conversation to appreciating what might be possible in the future, rather than limiting the focus to what is wrong in the present.

Connect Diverse People and Perspectives. “Intelligence emerges as the system connects to itself in diverse and creative ways,” according to Margaret Wheatley, author of Leadership and the New Science (Berrett-Koehler, 1992). By cross-pollinating ideas among tables in several rounds of conversation, we intentionally invite a more accelerated and richer network of dialogic interactions on a larger scale than is common in most dialogue circles.

One technique for enriching the ways in which the system connects to itself is to vary the different rounds of conversation. Hosts stay at each table to welcome guests while the other members travel to new tables to share as well as gather insights. Travelers might then return to their home Cafés or continue to move from table to table for several iterations. Sometimes the hosts change, with the first host becoming a traveler during the second cycle. Or several members might stay at the table while the others go out for brief visits as “ambassadors” to other tables, collecting new seed ideas that bring diverse perspectives to the home table.

Additionally, all living systems — including human systems — benefit from diversity. In her book The Quantum Society: Human Nature and Consciousness Defined by the New Physics (William Morrow and Company, 1994), Danah Zohar states: “Social evolution requires that different points of view, different ideas, different ways of life, and different traditions recombine into larger, more complex emergent wholes.” Breakthrough thinking is more likely to emerge when diverse viewpoints and perspectives contribute to the exploration. For example, “Strategy Cafés” that engage multiple stakeholders, including employees from all levels as well as customers and suppliers, can offer richer opportunities for innovation than traditional strategic planning activities among senior executives alone.

Listen Together for Patterns, Insights, and Deeper Questions.

Through Café conversations, participants often discover coherent patterns of meaning in what may appear, at first glance, to be a chaotic and messy self-organizing exchange of ideas and perspectives. The emphasis is on shared listening — listening for the wisdom or insight that no individual member of the group might have access to by themselves. To that end, invite members to offer their unique perspectives and listen for new connections in the “space in-between.” Allow for silence and reflection. Ask members to notice what’s evolving in the middle of the table. By focusing on these special qualities of collective attention, we have a greater opportunity to experience what our Danish colleague Finn Voldtofte calls “the magic in the middle.”

For example, in Sweden, hosts of a multi-stakeholder forum used Café conversations to clarify areas of inquiry that could influence the future of both the information/communications industry and the environment. They began the first round of conversation by giving each table of participants a “talking stone.” Each member took the talking stone in turn and presented his or her key insights, thoughts, or deeper questions about the query “How can information technology contribute to a sustainable future?”

The three other participants at each table were to listen carefully and draw any connections they noticed between ideas in the middle of the tablecloth. In the second and third rounds, the Café hosts asked everyone to begin listening as a group for the deeper assumptions underlying their perspectives and to write them on the tablecloth as well. When the final round was over, the group pooled the collective insights and “ahas” that had emerged from linking the small-group dialogues from Café tables and creating a “conversation of the whole.” Through this intentional process of discovering and connecting underlying assumptions and insights, participants who might have opposed each other in a different setting came to a mutual appreciation of the deeper questions they faced together in contributing to a sustainable future.

Make Collective Knowledge Visible to the Group. We’ve come to realize that the simple act of scribbling ideas and pictures on a paper napkin or tablecloth so that the others at the Café table can literally “see what you mean” is integral to knowledge creation and innovation. As Michael Schrage says in Shared Minds: The New Technologies of Collaboration (Random House, 1990), “The images, maps, and perceptions bouncing around in people’s brains must be given a form that other people’s images, maps, or perceptions can shape, alter, or otherwise add value to. . . . It takes shared space to create shared understanding.” By providing paper and markers, we encourage the use of “shared space” where people can build on each other’s ideas, weave together their thoughts, and engage in deeper collective listening.

Many Café events include an interactive graphics specialist, who creates large visual maps that synthesize key insights and ideas. Commented Nancy Margulies, who has hosted many Cafés, “It’s like having a big ‘tablecloth’ in the middle of the whole group. Participants can quite literally see that they are creating something new together.” Other possibilities for making collective knowledge visible include having a “gallery walk,” with participants taking a tour of the tablecloths created by the different groups; publishing a Café newspaper on the spot; and creating theater presentations that reflect group discoveries. Each of these techniques allows participants to capture and build on the momentum and ideas that emerge. In addition, creating “storybooks” from the session allows participants to take the results of their work to larger audiences after the event.

The five operating principles seem quite simple, but embodying them as an integrated practice demands creativity, thoughtfulness, artistry, and care. The creativity of the host can make the difference between an interesting conversation and the magic of experiencing what our colleague Tom Atlee calls co-intelligence in action.

Conversation As Action

But is all of this talk just that, talk? What about the urgent need for action in our organizations today? We have found that, by its nature, The World Café challenges the ways most of us think about creating desired results in organizational and community life. Many leaders still preach that we should “stop talking and get to work” — as if talk and work were two separate things. Humberto Maturana, a pioneering evolutionary biologist, has helped us see that human beings think together and coordinate action in and through language. Conversation is “real work.” Through conversation people discover who cares about what and who will be accountable for next steps. We are finding that when people come to a new level of shared understanding around real-life issues, they want to make a difference. When participants return from Café conversations, they often see additional action choices that they didn’t know existed before.

Café As Metaphor

As reported by members of Café events, The World Café is a powerful methodology for collaborative learning and knowledge evolution. We are also finding that it is a provocative metaphor that can help us see organizational and societal change in a new light. How might the metaphor of “The World as Café” invite us to think differently about ways to catalyze system-wide innovation and action?

We are learning that Café conversations are based on a larger natural process of mutual inquiry and discovery that does not depend on small, round tables and red-checked tablecloths. By experiencing the power of focused networks of conversation on a small scale, members see how they might utilize this strategic insight in the larger systems they are part of. What if conversation were as much a core business process as marketing, distribution, or product development? What if it were already the core process — the source of organizational intelligence that allows all of the others to generate positive results?

For example, imagine your organization as a series of Café tables, with employees moving between functions inside the organization as well as connecting with multiple “tables” of customers, suppliers, distributors, and other conversation partners. What difference would it make to your own action choices if you viewed your workplace as a dynamic, living network of conversations and knowledge creation rather than as a traditional hierarchy (see “What We View Determines What We Do”)?

Based on an understanding of The World Café, leaders can take greater responsibility for designing infrastructures that bring coherence and focus to organizational conversations. For example, they come to recognize the key role they play in discovering “the big questions” and hosting strategic conversations with multiple stakeholders. This shift of lens also has practical implications for how leaders work with strategy formation, organizational learning, information technology, the design of physical space, and leadership development.

In one Café session, senior leaders from major corporations were mapping the implications of taking this view. The director of global operations for a company with more than 50,000 employees suddenly jumped up from his seat and exclaimed, “Do you know what I’ve gone and done? I’ve just reorganized my entire global operation. I’ve broken up the informal knowledge networks and relationships that have developed over the years. If I had looked at my reorganization through these glasses, I would have done it a lot differently. It’s going to take us a long

time to recover!” His heartfelt comments stimulated a lively conversation about the role of leaders in developing organizational strategies that honor these less visible but critical conversational and learning processes.

We’re seeing many practical examples of how people are intentionally using the metaphor of The World Café to guide strategic work in larger systems. Executives in a high-tech corporation helped to decrease the injury rate dramatically by using Café principles to engage existing networks of conversation and introduce questions about safety risks. The World Café has led intellectual capital expert Leif Edvinsson of Sweden to observe that the office design of the past is inadequate to support effective knowledge work. In response, he has engaged leading-edge architects in alternative space design.

World Café principles are also being used to redesign a Museum of Science and Industry in Florida to highlight not only formal exhibits but also learning conversations as doorways to discovery. And the initiative From the Four Directions: People Everywhere Leading the Way is intentionally weaving a global network of conversations among leaders of all ages on several continents. Using the Internet and other information technologies, local conversation circles feed insights back into the network, catalyzing these worldwide leadership dialogues into a growing force for societal innovation.

Creating Sustainable Value

The World Café is one path for stimulating courageous conversation about questions that matter to our lives and work—especially in large group settings. We are now seeing the systemic ways in which focused networks of conversation, especially with the support of collaborative technologies, can help organizations and communities evolve. Using The World Café as a methodology and as a metaphor offers a practical yet innovative way to cultivate both the knowledge required to thrive today and the wisdom needed to create the futures we want, rather than being forced to live with the futures we get.

Juanita Brown and David Isaacs serve as strategists and thinking partners with senior leaders, applying living systems principles to the evolution of knowledge-based organizations and large-scale change initiatives. They have hosted Café conversations and strategic dialogues internationally in a wide variety of business and community settings. (Contact info@theworldcafe.com or call 415-381-3368). The World Café Community is comprised of a growing global group of leaders and others committed to courageous conversations and positive futures. We thank Anne Dosher, Ken Homer, Susan Kelly, Janice Molloy, Nancy Margulies, Karen Speerstra, and Sue Wetzler for their special contributions to this article.

The post The World Cafe: Living Knowledge Through Conversations That Matter appeared first on The Systems Thinker.

This kind of “trust walk” is one example of what we might call experiential learning, but other examples abound. Facilitators use energizers, brief activities to get participants’ blood and creative juices flowing at the outset of meetings. Managers practice techniques derived from Aikido to better understand physically and metaphorically their patterns of interaction with others. Workshop participants walk ancient labyrinths as a meditative way of seeking solutions to vexing problems. Marketing and distribution specialists play games designed to help them understand the consequences of various decision-making strategies. Long-range planners use powerful software programs to play out different scenarios in cyber-space before they try them in the real world. And, leadership teams practice working with risk and fear by rappelling from rocky cliffs. All these experiences were designed to capitalize on the human brain’s remarkable capacity to learn in tandem with the body.

Experiential learning engages the entire physiology, by design.

What is experiential learning? With such a wide variety of activities that fall under a common heading, the definition can be elusive. After years of talking about the difference between process and content and relating elaborate tales about the power of learning by doing, I have come to rely on this simple and straightforward response: Experiential learning engages the entire physiology, by design.

The significant elements of this definition lie in the qualifier, entire, and in the phrase, by design. In other words, experiential learning involves questions of degree and intent. So, it follows that instructors who use an experiential approach should intentionally engage as much of the physiology as possible in the learning process. Indeed, some exciting new discoveries about the mind/body connection suggest that we should attempt to infuse all learning with experience.

A Sedentary Lifestyle

In the future, we will come to rely more and more upon experiential learning because of the double-edged sword of technological advances. Technology has eliminated large portions of the physical work that daily living used to require, such as chopping wood and carrying water. The upside to this change is that we now have more time to pursue other kinds of work and leisure. The downside is that it has also lopped off a fair amount of the activity that grounds us in the natural world and, in the long run, keeps us healthy.

We are an active species, just a few twists of DNA away from the rest of the mammals. And unless the family dogs have become addicted to reruns of Lassie, you will not find any other animals that sit stone-faced in front of CRTs. Nor will you find them staring at each other all day across tables made of plastic laminate. Rather, they spend their waking hours playing, stretching, exploring, and learning. They engage the world continuously with their entire beings. We, on the other hand, have conditioned ourselves to suppress the urge to move around and experience things, instead confining our existence to small boxes surrounded by profoundly uninteresting scenery and sensation-deadening appliances.

The information age has converted us into a sedentary culture that has forgotten the powerful synergy of mind and body working together. We have relegated physical activity to the role of stress and health-management techniques that serve the sole function of enabling us to remain productive workers and consumers. As a culture, we have not yet found the appropriate blending of action and contemplation that will lead to the next curve of our evolution. This leap to the next curve will require a robust society whose individuals have reestablished the connection between mind and body in their working lives.

If we are to pay attention to an entire system, be it organizational, national, or global, we must begin with the system that lies within each of us. This step will require a rich infusion of experience to recapture the capacities of our natural learning systems. Let’s look at some of the scientific underpinnings for experiential learning and think about ways we can increase the amount of day-to-day experience in our organizational lives.

The Corporal Self in Cognition

A Sea of Hormones. Recent research on consciousness, most notably by Antonio Damasio, suggests that our attention and arousal systems emerge from complex interactions between the central nervous system and chemical activators that surge continually throughout the body. Even the title of his book on this topic, The Feeling of What Happens: Body and Emotion in the Making of Consciousness (Harcourt Brace, 1999), hints at a revolutionary perspective on the role of the corporal self in cognition. Sure, we still need the cognitive and language areas of the brain to recall facts and manipulate variables as we solve problems. But the emotions are essential players in the attention system and, by direct consequence, in the learning system. Without emotions, we would not engage ourselves in, or for that matter even recognize, the problems at hand.

Here is an example: If you narrowly miss striking a child on a bicycle who has veered in front of your car, for 20 minutes after the event, your heart pounds, your muscles shake, and your anxiety levels remain high. You are so distracted, you might miss your turn into the office’s parking lot. This disturbance to your equilibrium results from your adrenal gland’s releasing a tiny amount of epinephrine into your system. This hormone produces a state of mind and a level of physical readiness that enable you to take evasive action, but it leaves you with a bit of a hangover.

Mercifully, these attention-getting chemical alarms do not activate often. The real news is that powerful but very subtle chemical states influence virtually all of our cognitive functioning! Below the level of our recognition, human consciousness floats on an ever-changing sea of hormones and peptides. Here is a case in point: Low-level stress, the kind that is our near-constant companion in Western civilization, produces cortisol, a hormone that stays with us for hours. Cortisol interferes with learning and memory, ultimately causing the axons and dendrites in a part of the brain associated with long-term memory to atrophy and, in extreme cases, to die. Stress breaks down the neural networks that keep us in touch with ourselves. As we lose touch with ourselves, we lose touch with those around us – something that should be of great concern to managers.

Try not to let this information drag you down (remember, all that cortisol is not good for you). Better to ask how we can create working environments that support rather than inhibit learning. Our internal chemical environment determines not only what we learn, but also how well we learn it. Thus, our first task should be to attend to the physical/emotional status of learners. By acknowledging the primacy of biology, good experiential design works toward this end.

Mirror Neurons. On another research front, scientists have opened up an entirely new field of investigation that may have extensive ramifications for learning and teaching. Cutting-edge imaging technology affords researchers the ability to study brains at work. It should come as no surprise that certain areas of the brain become active when we make different motions. What is very surprising is that Giacomo Rizzolatti and his partners at the University of Parma have discovered a collection of neurons in higher primates that light up when an action is merely observed. Shortly after this announcement in the late 1990s, another Italian team confirmed the existence of a similar structure in humans.

Dubbed mirror neurons, these cells fire when we watch someone else perform an action, say picking up an apple. For example, if a dozen people are in a room with a single apple, only one person can pick up and taste the fruit, but 12 brains will mimic the action and activate salivary glands to begin digestion. Mirror neurons could account for a whole host of behaviors related to the power of suggestion, including the contagious nature of yawns, and are most likely linked to things such as the learning of tasks, intuition, empathy, and language acquisition.

In humans, mirror neurons are associated with the portion of the brain most directly connected to speech production. Rizzolatti and others speculate that the physical mirroring capacity in this area allows sophisticated human communication to develop and evolve. In other words, one’s abilities to perform an action and then to talk about that action may develop in tandem. This mutual emergence of experience and language holds great importance for us in that it suggests we are biologically programmed to employ thought and action simultaneously.

The speculation that talking and doing are inextricably entwined in our brains has mind-boggling implications for educators and facilitators. If true, then role playing, drama, energizers, and other experiential activities should take a central role, equal with lectures and written material, in any learning endeavor. An ancient proverb reminds us that a picture is worth 10,000 words. By extension, might an experience be worth 10,000 pictures?

Furthermore, imaging technologies are showing researchers that seemingly unrelated functions of the mind interact with and influence one another. In other words, an action can influence a mood, and a change in mood can affect your perspective on an issue. Laughter may truly be the best medicine. Of course, the subtle interplay of various portions of the body and mind is much more complex than we may ever understand. But the current research suggests that if we are serious about tapping all our learning capacities, we will seek physiologically engaged learning. In short, get out of your seat and act!

The Learning Continuum

At one end of the learning continuum, the subject is passive; the emotions lie dormant; few senses are engaged; and the ideas are abstract. At the other end, the learner is physically active; is emotionally involved; is sensorially alive; and is grappling with tangible things. Any learning event may be placed along this continuum. I believe that our current understanding of learning suggests that, to the extent possible, we should be striving toward the experiential end of the spectrum.

When I mention the learning environment in an organization, I’m referring to much more than typical training settings. I include all those events where two or more come together for collaborative work. In any organization really trying to be a learning organization, every daily encounter should create the conditions in which learning best occurs. These conditions include a high challenge/low threat environment, a minimum of distractions, sufficient time for quiet reflection, and physical activity.

As we begin to appreciate the complexity of the learning process, the challenge of designing an instructional experience that engages the entire physiology can feel overwhelming. How can we attend to the thousands of factors that can be manipulated to influence a person’s learning? How can we incorporate some of the wonderful work that has been done involving learning styles and multiple intelligences by Howard Gardner, Daniel Goleman, MelLevine, Dawna Markova, and others?

Fortunately, the task need not be daunting. One possible path through the complexity is a simple approach that stems from the early work of Geoffrey and Renate Caine, whose classic Making Connections: Teaching and the Human Brain(Addison-Wesley,1994) has helped many educators come to a better understanding of how humans learn (see the reinforcing loops of “The Experiential Learning Cycle”). As a place to begin, this framework ensures that three essential ingredients for effective learning are added to the curriculum: paying attention to the learner’s biology, providing an engaging experience, and assisting the learner to make meaning of the experience.

Relaxed Alertness. The circle begins with relaxed alertness. Creating a warm and welcoming atmosphere is important and not as simple as merely providing fresh coffee and a box of Krispy Kreme donuts. In fact, every sensory stimulus in the environment, planned or not, will either contribute to or detract from your purpose. Traffic noise, cooking smells, and other peripheral distractions make a difference.

At a more sophisticated level, the emotional and physical status of individuals and the group will affect outcomes. With the discovery of mirror neurons, we now have tangible evidence that one person’s emotional state will affect the entire group. For this reason, facilitators should create a warm and supportive tone, in effect modeling a relaxed and attentive approach to the session. Beyond that, they can choose from a host of techniques aimed at relaxing the body and preparing the mind, including progressive relaxation, guided imagery, and balancing and centering techniques. None of this suggests that facilitators should lull participants to sleep. Rather, the intent is to remove threats and in so doing allow the participants to focus exclusively on the challenging work of learning something new.

With the exception of on-the-job coaching, all structured learning events are to a certain extent artificial. After all, they are not intended to be real life/make-or-break events. Instead, I think of them as learning laboratories where participants may increase their skill, understanding, and capacity to better meet the challenges that lie ahead. Because the facilitator is creating the environment, it must be the facilitator’s role to prepare learners to enter that environment.

THE EXPERIENTIAL LEARNING CYCLE

This model captures the flow of three essential components in the learning process. Beginning at relaxed alertness will always remind us to attend to the learner’s biology first.(Adapted from Education at the Edge of Possibility, Caine and Caine (ASCD,1997))

This means creating safe physical and emotional spaces in which to begin an activity. It also means being clear about expectations for levels of participation and attending to the physical needs of the people in the room. Remember that during any learning session, participants will, for their own reasons, “check out” from time to time. Sitting in a classroom or meeting, they can do so unnoticed and then refocus on the session when ready. In any experiential work, “checking out” becomes obvious to the entire group. Making this need for downtime acceptable from the outset is part of the facilitator’s role. One way to do so is to acknowledge that everyone learns differently and that some people may choose to step out of an activity and merely observe for a while.

Immersion in Complex Experience. The circle continues with orchestrated immersion in complex experience. One of the grand paradoxes of designing rich learning environments is that we are never sure what learning is going to emerge. The richer the design, the more room for creativity and insight. In fact, aside from the teaching of essential skills and the conveyance of rote information, any attempt to limit or control the outcome of an event will likely impede the progress of the learners. Why limit participants only to what we know or expect? Also, complex activities provide opportunities for all learners to find a point of access that suits their particular learning style or intelligence.

By now, you are wondering if I’m going to say anything about the actual design of an activity. Because of space limitations, the answer is “no.” There are many excellent resources and books that, combined, provide thousands of activities aimed at specific learning outcomes. The key is to always let your intent drive your search for activities rather than the other way around.

Here are a few questions that may help guide you in increasing the “experience” factor in designing your own context-specific activities:

• What do I want the learners to learn?
• What do I want the learners to be able to do?
• How can I inspire the learners to become emotionally engaged in this activity?
• How can I involve their senses in the process?
• How can I engage them with another person?
• How can I encourage the learners to physically move, even if it is just to make a gesture?
• How can I increase the richness of the experience?

To the extent that you move learners along the continuum toward more experience, you will increase the potential for learning.

Active Processing. The next step along the circular path is active processing. All learning that arises from direct experience is felt by the learner. It lies inside his or her body, perhaps locked in some complex chemical mix that he or she cannot express verbally. Meaning may be hidden from the learner and, by logical extension, from the rest of the group. Processing is the act of teasing into consciousness and giving language to those feelings in the body. This process may begin as a solitary task employing a bit of quiet reflection. Things will eventually begin to emerge, such as creative solutions to difficult problems, new ways of framing essential questions, or insights about patterns of interaction in a work group. Tapping into the body’s innate intelligence takes time and patience but can lead to great rewards.

At some point, the facilitator may encourage participants to share their thoughts with the group, asking questions such as: What happened during the experience? What meaning does that hold for us? And, now what do we do with our new understanding? As observations come to the fore, the group can consider them and arrive at some shared learning. Often the understandings that emerge involve underlying assumptions about how the world works. (One advantage to participating in structured experiences that are not directly related to the bottom line is that they can allow learners to feel and speak very freely without fear of criticism or reprisal.)

Once the group has processed and assimilated the learning from an activity, it is ready to continue its journey through the cycle again (see “Guidelines for Experiential Learning Design”).

Initial Resistance

When you introduce experiential activities to a group, you may encounter some initial resistance. Here are some arguments I have heard against experiential learning, as well as some responses:

“We don’t have time for this; just tell me what I need to know.” Because we tend to separate physical activity from the intellectual work many of us do to make a living, assumptions about what it means to spend productive time on the job may lead some to question the appropriateness of physically and emotionally engaged learning. Despite all attempts to make it something else, learning is a biological process that takes time. The expedience of just telling people what they need to know often undermines their actually learning it.

“We don’t want to get into how people feel about this.” Deep learning profoundly touches people. When we employ experiential methods that require high levels of commitment and involvement, emotionally charged issues will emerge. Unless the group is a highly functioning and trustworthy team, or unless a skilled facilitator is present to help manage these difficult situations, the quality of interaction can deteriorate and the session may be counterproductive.

“None of that touchy-feely stuff for me.” Experiential learning often involves sharing emotions and, in some cases, physical touch. Some participants, especially if they are old enough to remember the encounter groups of the late 1960s, will react with everything from reluctance to disdain. This guilt by association is unfortunate. Well-designed experiences in work settings should not involve coercion, expectations to participate outside one’s level of comfort, or inappropriate physical touch. Facilitators must also remain aware of particular cultural differences regarding the appropriateness of different forms of touch. And although facilitators may sometimes borrow from the language of counseling, experiential learning is not about psychotherapy or probing into participants’ personal lives.

“You can’t prove to me this works any better than just having a meeting.” That is probably true, at least in the short term. The process is messy. Outcomes are often unpredictable, and evaluation can be difficult. Of course, we can measure whether or not learners have acquired some new understanding or skill. But the deeper learnings that involve changes in perception, behavior, or fundamental assumptions about how the world works are always in process. Perceptions shift, and meaning emerges over time. Traditional forms of assessment do not measure these things well, if at all.

“This stuff just doesn’t apply in the real world.” Some people will criticize an experiential approach because the game-playing nature of many activities and the emphasis on relaxed alertness do not seem to adequately mirror the difficult lives they lead in the work world. They wonder, justifiably, how a consciously constructed model or simulation relates to the chaotic nature of today’s business environment.

In response to this concern, I refer to the most stressful environment I know: emergency medicine and rescue. In training people to work under severe stress, where life and death decisions are often necessary and complex techniques and equipment must be employed, the training is often fun, laid back, infused with humor, and highly experiential. Although their jobs are loaded with real-world stress, these professionals generally build skills and capacities in an arena that supports learning.

Nevertheless, the issue of context raises legitimate concerns. Research and practical experience suggest that learning is highly specific to the environment in which it was acquired, and we must be very careful about assuming that learning will somehow magically transfer from one setting to another. Processing, by raising issues to the conscious level, may help us to frame questions differently or experiment with options, but with no guarantees of crossover.

A Seamless Whole

I’ve said nothing new. Experiential learning predates the emergence of Homo sapiens. But we need only to look at the state of most public schools to recognize that the techniques and technologies supporting learning have reached a bit of a standstill in the past century.

Brain research, still in its infancy, promises to help us gain some insight into natural learning propensities we have lost. Even now, it is providing good reason to do away with some of the dualistic thinking about human behavior that informs our culture. Paired opposites such as physical/mental, affective/cognitive, and hard skills/soft skills may drop from usage in the next generation.

Upon reflection, even the term experiential learning feels a bit dated. Science is now offering us a new way of framing experience that dramatically illuminates the relationship between head and heart. Perhaps as our understanding evolves, we will invent new language that honors the complex relationships that weave human experience into a seamless whole.

We have, with our technology, created a complex and challenging future – a future that will demand increasingly sophisticated learning to negotiate. But however advanced we become, we must remember that learning will always remain rooted firmly in our biology.

Kenneth L. Thompson is chair of the department of Experiential Education at Albuquerque Academy, an independent secondary school in New Mexico, where he coordinates wilderness programs and project-based learning. His 20-year career in education includes university teaching and work in corporate and organizational consulting.

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When formalized into new patterns of working together often through the creation of new umbrella

organizations with participants from diverse parts of society these mutually beneficial outcomes represent societal learning. Societal learning is a process of changing patterns of inter actions within and between diverse organizations and social units to enhance society’s capacity to innovate. Large scale problems such as poverty and environmental degradation require substantial societal learning in order for lasting change to occur.

Societal learning almost always involves the collaboration of the three organizational “sectors”: government, business, and civil society organizations (labor, community-based, religious, and nongovernmental entities). These sectors represent the three key systems of our society: political (government), economic(business), and social (civil society) (see “The Three Sectors”). All organizations can be categorized as being in one of the three organizational sectors, or as a hybrid of them. Any business that wants to profoundly alter its operating environment, any government that seeks to undertake fundamental reform, and any people who want to improve the world must partner with others from outside their sector.

Although societal learning represents an enormous challenge, the good news is that we have learned a lot about this process, and we have increased our capacity to make it happen. Still, the concept of undertaking big systems change is just beginning to influence the ways in which organizations operate.

Challenges of Societal Learning

Although related to individual, group, and organizational learning, societal learning is particularly challenging to achieve. Why? First, it necessarily involves changes in how complex institutions from different sectors operate, both separately and in tandem. So, for instance, in partnerships among environmentalists, government agencies, and corporations, all parties must embrace diverse view-points, forge new visions, and be willing to operate differently in the future than they have in the past. Reaching this level of cooperation and accommodation takes much work and a high degree of commitment, but the goal in this case, enhancing environmental sustainability is deemed well worth the effort.

Often, organizations discover that they must redefine the business they are in. In developing countries, many construction companies no longer regard themselves merely as builders of physical infrastructure, but rather as part of a joint effort to create sustainable water systems. This shift in perspective has enormous implications for how these businesses organize and undertake work. For instance, in order to engage the local communities in planning and building the infrastructure, they must take a broader approach to achieving their goals than simply completing project milestones on a tightly managed timetable.

Second, this kind of learning can take place on a local or regional level, but it also happens with global scale projects. For example, the Youth Employment Summit (YES) is a nongovernmental organization (NGO) that seeks to generate 500 million new employment opportunities for youth around the world over the next 10 years. This work involves generating cultural change through the interaction of businesses, governmental agencies, nonprofits, and others to boost the position of youth in society. An effort of this scope requires tremendous resources human, financial, and so on and profound levels of learning to accomplish.

Dynamics of Societal Learning

Given their ambitious goals, societal learning initiatives must go well beyond simply coordinating organizations and resources often referred to as single loop learning or first order change because it occurs within current structures and assumptions. Societal learning requires a shift in mental models and the development of new structures and processes, known as double loop learning or second order change.

Like organizational learning, societal learning deals with exploring the deep, underlying structures that drive behavior, surfacing the basic assumptions

we hold that limit our options, and developing innovative approaches to persistent problems. For instance, throughout the U. S., intense interaction between the banking industry and community based organizations (CBOs) revealed that the bankers’ view of poor neighborhoods as unprofitable markets was grounded not just in social biases but in fundamental business assumptions (see “Banking on Community Development”). Through their discussions with community representatives, the bankers began to understand that their assumptions about the poor were wrong. They also found that their rigid ideas about their own product lines, product development approaches, and delivery systems were the real limiting factors to the success of banking services in the neighborhoods, not the limited resources of the people who lived there. Working with CBOs and churches, the banks revamped their business models in order to better serve and profit from the community. Making this change happen took the creative synergy of all parties involved.

This kind of shift in thinking can spur complex synergies and powerful innovations. For example, the banks found that they needed to design new product development tools, because traditional telephone surveys and focus group methodologies were inadequate for conducting market research with individuals who don’t have strong English-language skills. The CBOs thus became expert articulators of their constituents’ needs and worked with the banks to develop, deliver, and manage leading edge products. Similarly, in South Africa, organizations engaged in constructing sustainable water systems discovered that the government’s budgeting process was a barrier. Once government leaders became aware of the problem, they changed the process, leading to a whole range of opportunities.

Such collaborations can even produce the more rarefied triple loop learning, which involves rethinking the way we actually think about an issue. Through their work on change initiatives, many poor people and wealthy people, business people and bureaucrats, social activists and conservatives have come to fundamentally change how they regard one another. By coming together in productive new ways, these groups create rich networks of social capital that allow societies to accomplish things they could not have done before.

Systemwide Change

In systems thinking terms, the challenge of those involved in societal learning is to understand and address numerous large and complex feedback loops. In development and change management terms, the challenge is to transform learning at a project and intellectual level into broad, sustainable systemwide change.

Because successful societal learning initiatives usually require innovations in business, government, and civil society simultaneously, some change agents are intentionally fostering organizational networks called intersectoral collaborations (ISCs). These collaborations can form at the community level, as with many community development initiatives; at the state level, as with education and workforce development programs; and at the international level, as with the worldwide “clusters” in natural resources, water and sanitation, youth, and traffic safety initiated by the World Bank.

Such collaborations facilitate interactions among organizations from each of the three sectors in an effort to generate and apply new knowledge. Collaborating involves recasting roles, responsibilities, and allocation of benefits from the partnership. The key outcome of the process is new relationships among the three systems that lead to improved results for the organizations involved and for society as a whole.

ISCs are potent social change vehicles because:

• They bring together perspectives from each of the three key sectors of society.
• They strive to develop actions that produce value for each of the different sectors.
• They offer a broad reaching mechanism for disseminating learnings and gaining adoption of new approaches throughout society. So, rather than having a government representative urge businesses to change how they operate, business people use their own business networks to champion change, based on business experience, in a language that other business people understand.
• They provide tremendous opportunity for mobilizing the diversity and scale of resources necessary for bringing about the desired change. Business comes with its financial and production assets, government with its rule making and tax resource assets, and civil society with its foundation funding and volunteer workforce.

To fully appreciate the distinctive qualities that the collaborating organizations have to offer, we must understand the generic differences among the three sectors (see “Attributes of the Different Sectors”). For instance, the “Assessment Frame” refers to how members of a sector decide whether or not their output is “good.” Government is particularly concerned with legality; business focuses on profitability; and civil society thinks in terms of equity and justice. Therefore, to be successful, a societal change initiative must produce these three outcomes.

In addition, understanding the core competencies of partner organizations helps participants better define their own roles in learning initiatives. This process emphasizes the rationale for bringing organizations in different sectors together in the first place: to combine core strengths and offset weaknesses. An entity in one sector may be less able to accomplish a certain task than an organization in another sector. For instance, a business may be proud of customers’ trust in its products, but it is impossible to compare consumer confidence to the level of trust that a good civil society organization, such as a church, can build within its community.

Civil society organizations tend to define their issues as “problems,” whereas businesses like to frame them as “opportunities.” YES originally defined its goals from a problem and social justice perspective young people lack jobs. Through their work with business partners, organizers came to understand that failing to articulate the business benefits of their mission might ultimately limit its appeal. YES was then able to identify a number of positive business outcomes, ranging from market development opportunities to support for human resources planning, that their program might produce.

Through productive debate and dialogue among the diverse participants, ISCs can maximize the contributions of each sector and produce innovations that are valuable for all involved (see “Potential Outcomes by Sector” on p. 4). These innovations typically could not be thought of or implemented by the participants on their own. For this reason, to be successful, collaborators must be willingly to share their own goals and processes openly.

For example, environmentalists have been able to point to creative ways in which businesses can significantly

reduce their energy costs; similarly, interaction with consumer advocates has led some companies to move from merely complying with government regulations to creating new products and markets by anticipating changing consumer desires and the resulting legislation. Thus, it is important to understand the distinct goals of organization members and build mutual commitment to achieving them. Partners must also be able to define collective goals part of a shared vision.

Developing a Societal Learning Initiative

Developing a societal learning initiative requires patience, vision, and commitment. These transformations take time. About two decades passed before substantial changes occurred in the banking industry in inner cities in the U. S. However, as knowledge about how to collaborate on complex ventures grows, we’re considerably reducing the length of time it takes to realize successful outcomes. Depending on the scale and complexity of the task at hand, some initiatives can achieve significant results within three to five years.

Sometimes the collaborations begin as an NGO program, sometimes out of an event that produces common recognition that a problem/opportunity requires the resources of diverse organizations, and sometimes under the leadership of an influential individual or organization, such as a government agency. Often associations and federations of organizations take the lead in these initiatives, because such entities represent a large number of constituents faced with the same problem. However, societal learning efforts must also include frontline organizations, such as individual businesses, because these participants have different knowledge and concerns than do the associations that represent them and their industry partners and competitors.

Because these largescale projects are at the leading edge of what we know how to do in terms of creating change, they require ongoing learning and the development of innovative processes and structures. Organizers of societal learning ventures should keep the following principles in mind:

1. Make learning the guiding framework. Adopting a learning framework means that leaders must incorporate a planning action reflection cycle into every aspect and stage of the project. To do so, all participants need to agree that initial plans will be intentionally broad and that details will develop as the project proceeds. In the case of the World Bank clusters mentioned above, participating organizations began with a relatively vague idea about what they might do together. After getting to know one another, they developed learning agendas that included both looking at current strategies for working together and under taking experiments with new joint activities. A disciplined process to engaging participants in gathering data and analyzing it in real time is also a key way to develop common understanding about new ways to work together more effectively In addition, adopting a learning framework means providing workshops and other opportunities for skill development, because changing systems requires that we also change individual behaviors including our own. For example, the concept of, “co-leaders” is a natural extension of the need for peer like relationships among sectoral organizations. Rather than having “one captain of the ship,” several people share leadership. Currently, few people have the skills and few organizations have the structures and processes to share leadership responsibilities. We need to develop these abilities to move ahead with significant social change efforts.

2. Use action learning to support the societal learning process. Action learning involves developing knowledge about how to approach an issue and then creating a strategy for doing so, while at the same time gathering data to refine the approach. Coupled with systems thinking skills, this methodology can help people simplify and clarify complex problems. The World Resources Institute is using this technique to develop management tools to help governments, NGOs, and companies fulfill commitments made in international environmental conventions.

3. Begin by thinking through the full spectrum of issues involved in addressing a challenge. Governments and development agencies have long thrown money at the problem of inadequate water services in the developing world. Time and again, they have organized government bureaucracies or hired international engineering firms to build infrastructures of pipes, dams, and water treatment plants. Within six months, the new infrastructure is often in disrepair, and people are getting water through their traditional methods. Now that’s a fix that fails!

In this example, the well-intentioned parties wrongly define the problem as strictly a technological one, rather than also being one of societal learning. Analyzing the current situation and the intended outcome would define not just the necessary physical infrastructure, but also the changes in behavior, beliefs, resources, and organizational support required to optimize outcomes. The analysis should also show critical barriers to success; for instance, many people in the developing world think of water as being free and are unwilling to pay for it; communities cannot afford to remain dependent on outside experts to operate and maintain the system; and communities need to have a regulatory structure to monitor the system and ensure that it functions to quality standards.

4. Map the current system. Participants should take the time to identify all stakeholders in the system and analyze the relationships among them. Doing so offers planners a sense of the current reality, the key stakeholders, and the actors involved. It can also help them to identify organizations that are “early movers” an important category in any change process, because they are the ones most likely to lead the effort.

5. Follow the traditional planning action reflection learning process. Convene the players to investigate possible new directions; collectively design pilot projects and implementation steps; define learnings; plan for scaling up the initiative; scale up implementation, and so on. One important task is to develop tools to address classic problems that frequently crop up, such as maintaining the commitment of organizational participants; addressing “glocal” (global local) concerns (ensuring that the venture responds both to local needs and those of outside participants); maintaining organizational simplicity in the face of task complexity; and producing valuable outputs for both the overall project and the individual organizations. Regular review processes are part of the important work of formalizing feedback loops.

Unintended Consequences

Given the large number of variables in such global efforts, there are often many unintended consequences. In the banking example, some CBOs found that their increasingly close ties to the industry undermined their support from within their communities. Construction companies in developing countries realized they had to rethink their business model. And by decentralizing and privatizing public services, governments often discover that they need new budgeting, monitoring, and regulatory processes. All of these lessons reflect deepening societal learning. When the collaborations are working well, these lessons will be ongoing and profound.

As with any innovation, societal learning can involve substantial conflict. In successful collaborations, dynamic tension does not go away, but the parties find ways to harness that tension. Sometimes, the disappearance of tension indicates that societal learning is not occurring that collaborators are having difficulty getting beyond the exchange of pleasantries to get to the hard work of grappling with deeper issues and differences. Or, the lack of conflict might indicate that societal learning has already occurred, and the collaboration is moving into a maintenance stage. The absence of tensions usually indicates that participants should reassess the purpose of the collaboration, whether it has resulted in societal change, whether the change is limited to a small group of organizations, whether external change has made the collaboration irrelevant, or whether there is a new purpose that the group wants to develop.

Enormous Potential

Organizations often approach today’s problems and opportunities from yesterday’s perspective. Nevertheless, much has changed in the last decade. In that time, many new NGOs and businesses have formed; even more important, there are now improved global networks including the World Business Council for Sustainable Development, the International Business Leaders Forum, and CIVICUS (a civil society organization) that are engaged in intersectoral collaborations. Through experiments with these collaborations over more than a decade, we have vastly improved our knowledge about how to develop and sustain them. In this way, we have substantially increased our capacity for societal learning and our ability to effectively address complex issues such as the environment, war, and poverty and to create outcomes that are win win for all segments of society.

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Executives today are constantly seeking to predict how their organizations and the marketplace will behave. But because many leaders continue to use traditional reductionist methods to understand organizational behavior ones that focus more on symptoms than on causes of a company’s success they fail to gain real insight into how to build and sustain that success. The result is often reactive, crisis driven management with unanticipated side effects and unforeseen outcomes.

Contrary to this rigid perception of organizations as predictable machines, some management thinkers have come to view them as complex and evolving organisms. Accordingly, the tendency in the business world to define companies in terms of simple formulas and numerical results is slowly being replaced by the recognition that, to be effective in leading organizations, we must think of them in terms of the underlying structures and dynamic patterns of behavior that produce those results. In other words, we must begin to complement or replace linear thinking about how our businesses work with nonlinear approaches by applying the principles and tools of system dynamics.

System Dynamics Theory

Why do so many brilliant management strategies lead firms directly into decline or not produce the anticipated results?

In his classic 1961 book Industrial Dynamics, Massachusetts Institute of Technology professor Jay Forrester originated the ideas and methodology of system dynamics. He pointed out that the traditional approaches of the management sciences could not satisfactorily explain the causes of corporate growth or decline because they focused on simply explaining behavior. He believed that a system’s behavior is actually a product of its structure and that leaders should seek to identify where changes in structure might lead to significant, enduring improvements. They could then design organizational policies and processes that would lead to even greater success.

In order for managers to undertake this design process, Forrester advocated that they must analyze their organizations using dynamic models. For this purpose, he developed tools such as causal loop and stock and flow diagrams. These tools serve to illustrate the interconnected feedback loops that form a complex system. By identifying these feedback loops, management can figure out a system’s basic patterns of behavior, which include growth(caused by positive feedback), balance(caused by negative feedback), oscillations(caused by negative feedback combined with a time delay), and further complex interconnections.

Applied to organizations, this way of thinking challenges the notion of measuring success only through financial results. Because people can see financial results, they think they have control over them. But these results are actually produced by the organization’s underlying structures. These structures consist of:

• Organizational Architecture: the basic organizational design (such as the functions or divisions that the company includes) and the governance system (such as the planning and control system)
• Organizational Routines: standard operating procedures, decision making processes, behavioral archetypes
• Tangible and Intangible Resources: financial capital, human resources, buildings, machinery, land, brands
• Organizational Knowledge and Value Base: patents, core competencies, cultural beliefs, attitudes

When we focus on systemic structures and behavioral patterns, we gain the knowledge to design our organizations to produce desirable day-to-day results in areas such as profits, employee motivation, customer satisfaction, and so on (see, “Structure, Behavior, and Results”). The basic idea of the dynamic approach is that, although people shape their organizations, their behavior is ultimately influenced, and therefore limited, by the organizational framework in which they operate. Consequently, leadership means much more than optimizing businesses for short-term outcomes; it involves creating and cultivating structures and enabling organizational behaviors that guarantee the viability of the whole firm. Therefore, in order to manage their organizations successfully, leaders must realize that the best way to achieve sustainable results is not by relying only on what they see or measure but by:

• Describing and assessing the observable behavior of the system;
• Understanding the interdependencies between a system’s behavior and its underlying structure;
• Making assumptions about and modeling these interdependencies using system dynamics tools; and
• Finding and implementing policies to redesign the structure of the system in order to improve its performance.

Building on this system dynamics foundation, we propose to take leadership one step further, to what we call evolutionary leadership. The natural process of evolution offers a compelling model of how leaders might intentionally design and guide growth and balancing processes to create a viable organization. Evolutionary leadership involves the deliberate interplay of two management functions: strategic management (designing structures and processes that stimulate growth) and management control (guiding the external and internal factors that regulate growth). But before we explore the synergy between these two functions, we need to talk about how evolution works in nature and in organizations.

Evolutionary Theory in Organizations

Evolutionary theory has been the predominant paradigm in natural sciences for more than a century. Recently, theorists and practitioners in the social and management sciences have begun to adopt the ideas of evolutionary theory as a framework for describing and analyzing organizational development. The basic concept these pioneers have set forth is that processes of variation, selection, and retention as well as the struggle for scarce resources trigger the evolution of an organization.

Sociocultural evolution differs from biological evolution in that it allows for the intentional variation and selection of ideas. In this context, an organization’s fitness its “viability,” or ability to survive and thrive depends on how its decisions and strategies affect its position in product and resource markets and on its legitimacy from the point of view of important stakeholders. Chilean neurobiologists Humberto Maturana and Francisco Varela have deeply influenced thinking about viability with their theory that living systems are complex systems that can self-generate. A system dies when it loses its ability to renew itself. In the business world, a company that fails to renew itself by changing its strategic orientation and/or internal structure in response to shifting conditions will die. In contrast, a viable organization is one that can continually create its own future and there by assure its fitness in an evolutionary sense.

But how does a viable organism develop this capacity to self generate? According to Maturana and Varela, it happens when the organism

• Preserves its identify by repeatedly drawing system boundaries (i.e., defining what is “internal” and, “external”); and
• Maintains its ability to adapt to a changing environment.

Within ever-changing environments, external forces constantly threaten the existence of a species by altering its living space. To survive, a species must adapt to the changing conditions successfully without losing its identity. For example, in nature, many kinds of birds have adapted from natural to urban environments, but not all have managed to do so. In the banking industry, banks have profoundly shifted their strategies in the past decade in response to technology changes and new competitors. Many brick and mortar institutions have gone “virtual.” In doing so, they are able to maintain their existence by simultaneously preserving their identity while adapting their strategy and structure to a changing environment.

The key to an organization’s survival lies in mastering the trade-off between preserving its identity and adapting to a changing environment. Leaders do so through strategic thinking and acting, and by asking how they can maintain the fit of the organizational structure and its environment. There are two ways to achieve this goal:

• Maintain your identity and structure and avoid fundamental adaptations by changing the environment or searching for an appropriate new environment.
• Fundamentally change your structure and redefine your identity to reestablish a fit between the organization and its ever changing environment.

In reality, most organizations choose adaptation strategies that lie somewhere between these two extremes.

Organizations can only make alterations to the extent that their structures and resources make modifications possible. A firm has a good chance to successfully adapt to a changing environment when it has a strong learning capacity, that is, the ability to anticipate, influence, and quickly react to environmental changes, along with the ability to recognize, vary, and advance the underlying mechanisms of the learning process itself. For example, Shell Oil enhances its learning capacity by combining strategic planning and organizational learning through scenario planning. Scenario planning provides a mechanism for thinking in alternatives and making underlying assumptions explicit. This process reduces the company’s risk of encountering negative surprises and increases the speed with which it can implement changes. In short, organizational learning is a dynamic feedback process that can help organizations remain viable and therefore survive the external pressures of natural selection (see “The Evolutionary Cycle in Organizations”).

Growth and Balance

In addition to having the ability to adapt and learn, systems must be able to grow. Generally speaking, growing means incorporating more and more available resources like nutrients for a plant or natural or human resources for a company in order to become larger and larger. For a company, growth can mean an increase in market share or market value. But is growth in itself sufficient for survival? Clearly, the answer is no, because nothing grows forever. But where and what are the limits to growth?

In nature, reinforcing processes, such as population growth, are slowed by balancing processes, such as limited food supplies and the spread of diseases. If normal balancing processes aren’t blocked and assert themselves before a population reaches the limits of its habitat, that species can maintain a harmonious relationship with its environment. Such balancing processes ensure that the evolving system remains within a viable range of activities, in this case, healthy population density. Indeed, these balancing processes are more crucial than reinforcing processes, in that they keep the overall system alive. If, on the other hand, important balancing processes are missing, the species might become extinct by overtaxing the resources in its environment.

Are there similar natural boundaries to the development of social systems? The answer is yes. For example, a firm’s development can be limited by its production capacity, the size of its market, or the number of its competitors. The faster the company grows, the more rapidly it reaches these boundaries. From time to time, such limits to growth can change. For example, shifts in market conditions, such as those created by the Internet boom or the world oil crisis of the 1970s, can increase or decrease the time it takes an organization to reach a certain limit, unless people find ways to use their limited resources more efficiently.

We can say that an organization is evolving when its configuration, routines, tangible and intangible resources, knowledge, and value base develop in accordance with the changing external environment. Scientists now know that most healthy living systems follow a developmental path described as punctuated equilibrium periods of balanced growth that are interrupted by periods of exponential growth (see “The Stages of Organizational Evolution” on p. 4).

We regularly underestimate the tremendous power of exponential, or reinforcing, growth. We tend to assume that growth is linear and increases consistently over time. However, exponential growth happens much more precipitously. If we observe the two over a short period of time, exponential growth approximates linear growth. Over a longer period, however, the gap between the two becomes enormous.

Because human beings tend to perceive short term rather than long-term changes, we often reach the boundaries of exponential growth faster than we anticipated, often completely unexpectedly. We see this happen to companies when booming success is followed by equally dramatic failure. For example, cellular telephone companies experienced this phenomenon when they projected that their sales would continue to increase at a high level. But they eventually saturated the market and experienced declining sales. For this reason, unless we understand and anticipate the impact and boundaries of exponential growth, we will have a distorted perception of the evolutionary process, leading to unpleasant surprises and even to an existential crisis for the whole enterprise.

Organizations sustain themselves when they attain a balanced evolution off setting reinforcing growth action with timely balancing impulses. Sustaining this balance is the only way to ensure that companies remain in the realm of “sound growth” as they develop and that they don’t exceed the limits of their environment or resources. Balanced evolution plays an especially critical role during periods of exponential growth, when the organization is at a much higher risk of losing its viability than in periods of balanced growth, when the stakes aren’t as high.

For example, when a leap in growth occurs for a limited time(through external factors such as deregulation or new developments in technology, or through internal factors such as changes in top management or a merger and acquisition), leaders need to off set that growth by intentionally introducing balancing feedback loops. They can do so through control and coordination systems as well as productivity enhancement programs. These loops keep the organization’s growth from consuming the company.

Leadership in Organizational Evolution

But how can leaders help firms achieve the balanced growth they need to evolve? Through strategic management, leaders expand the business; through management control, they regulate the growth process, making sure that it remains within a sustainable range. Together, the two functions form a balanced leadership cycle for guiding and controlling the company’s evolution.

Strategic Management. Through strategic management, leaders cultivate the conditions for a company’s sustainable growth. Specifically, they perform the following three functions:

1. Set Direction. As mentioned earlier, leaders need to preserve or redefine the organization’s core identity and develop its structures in ways that lead to lasting success. They do so by communicating the company’s values and beliefs to employees and external stakeholders through shared vision and mission statements, and by strengthening internal rein forcing processes such as employee morale. They also formulate and implement strategy, not by detailing a map of action but rather by defining a corridor of learning opportunities.
2. Build Resources. Leaders need resources to support entrepreneurial activity. They can acquire them externally (such as machinery or capital) or develop them internally (such as people or policies). From a resource based perspective, only internally built resources can provide the basis for competitive advantages and above average returns, because they are specific to the company and therefore more difficult to imitate. On the other hand, resources that are available on the open market are available to all competitors.
3. Create Infrastructure. Leaders must not attempt to drive growth but rather to influence the factors that can block or support it. As such, they need to design an organizational context that eliminates barriers to company development (such as fear, distrust, centralized decision making, too tight control, and insufficient resources) and develop processes to promote learning (such as organizing flexible teams, supporting communities of practice, creating incentive systems for transferring knowledge, and creating learning spaces).

From a system dynamics perspective, these three functions combine to form a reinforcing process called the “Strategic Management Loop,” which strengthens the company’s growth(see “The Balanced Leadership Cycle”). But for the organization to remain viable, this reinforcing loop must be reined in by balancing processes, such as those that make up the “Management Control Loop.”

Management Control. Management control acts to bring equilibrium to the expanding system. To do so, leaders must perform three central functions:

1. Assure Internal Consistency of Infrastructure, Resources, and Direction. Leaders need to maintain the coherence of a system, particularly in large companies where management functions often get split among different organizational units or departments. To handle this specialization of functions, they must synchronize the development of strategy, resources, structure, and systems. They do so by working with others to develop a shared view of the system, which acts as a basis of companywide activity. However, this model is necessarily a subjective simplification of complex reality, so it can easily become selective and distorted.
2. Compensate for Selective Perception. Therefore, leaders and their teams must compensate for their selective perception by continually enriching their assumptions with relevant new information and challenging their mental models. For example, they might use management information and decision support systems, which provide comprehensive data and make blind spots of organizational perception visible. Management control thus leads to more informed decision making and better anticipation of the consequences of those decisions.
3. Appropriately Limit Developmental Dynamics. Designing appropriate limits on developmental dynamics involves two realms: content and time. Leaders must analyze whether the firm’s expansion exceeds the limits set by its internal conditions (for instance, the number of staff with expertise in certain areas) and the external forces of its environment (for example, the size of the market), thus endangering its boundaries. They also must regulate how fast the firm grows. They do so by pacing the speed of growth so it doesn’t over tax the current management capacity (resources and infrastructure) or environmental limits (size and growth of the market).

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Leaders put these functions into action using different diagnostic tools, such as the balanced score card and budgeting. The balanced scorecard helps them see the inter connections among the key measures of the business, for instance, between employee capacity and customer satisfaction, or between customer satisfaction and market share. Executives can then ensure that key measures stay in balance. Through the budgeting process, they translate strategic direction into financial objectives, setting the frame work for the allocation of resources and the utilization of infrastructures to assure internal consistency. By limiting and balancing developmental dynamics as well as by assuring internal consistency, these tools contribute to the fulfillment of the management control function in the balanced leadership cycle.

In order to avoid survival threatening oscillations between growth and decline, leaders need to take into account the time delays that occur before balancing impulses take effect. Working properly, the interplay of strategic management (growth actions) and management control (balancing impulses) assures a synergistic rhythm of a company’s evolution, a characteristic of particularly successful firms in dynamic environments.

The post Evolutionary Leadership: A Dynamic Approach to Managing Complexity appeared first on The Systems Thinker.

Emergent learning practices turn these three biases on their head. The corresponding biases of emergent learning are:

• First, the essence of learning is the discovery and use of knowledge, and one of the best sources of actionable knowledge is that which emerges from people’s own experience.
• Second, a learning discipline should be woven into ongoing work, which integrates getting “real work” done with building greater capability.
• Third, learning is both possible and appropriate at a group level — by working and thinking together in certain ways, a work unit can build a real capacity for learning.

By weaving a disciplined process for learning through experience into the tapestry of ongoing work, an emergent learning practice helps people to use their own experience as a context for generating, refining, and validating knowledge, while enhancing their ability as a unit to “learn our way through” difficult and complex situations

The U. S. Army’s After Action Review

Twenty years ago, U. S. Army leaders began to develop an approach to using on-the-ground action as the crucible for learning; today, this practice is one of the best, and longest running, examples of emergent learning. They named it the “After Action Review” (AAR). Originally developed to support training exercises, the

One of the best sources of actionable knowledge is that which emerges from people’s own experience

AAR is now used within the Army for purposes ranging from improving operations efficiency to dealing with the impact of frequent assignment rotations. It is viewed as an expression of core Army values such as readiness and leadership

The most visible aspect of an AAR is that of a leader gathering his or her team on a frequent basis to address a series of questions about their actions. For example, questions typically at the center of an AAR session include:

• What was supposed to happen?
• What actually did happen and why?
• What are we going to do (the same or differently) next time?

The lessons that emerge shape the plan for the next similar event. This new plan, along with the action that occurs based upon it, becomes grist for yet another AAR session, and so on. When this rhythm of reflect-plan-act revolves around a central performance challenge, the practice begins to function as a competence-building machine: Over a number of iterations, the implicit and explicit knowledge held by the team about effectiveness in that particular domain evolves substantially. New practices and standards of excellence emerge. With enough iteration, the discipline tends to produce a distinct arena within which the group has honed its ability and confidence enough so that it is able to produce the results desired, regardless of circumstances — a so-called “island of mastery.”

Because the Army is a very large organization, there is considerable variation in how frequently the AAR is used — some officers rarely use it, while many see it as inseparable from how they do leadership. Overall, though, most Army leaders consider the AAR to be instrumental to the Army’s evolution as an institution. Its simplicity and broad relevance have helped it become part of the institution’s cultural fabric. How did a learning practice become so integral a part of this organization?

The Evolution of the Army’s Learning Practice

Following the unsatisfactory results of the Vietnam War, the U. S. Army was compelled to reflect on and adjust its assumptions and methods. The Army’s senior leadership hypothesized that if units could be trained in a realistic environment closely simulating real combat — in scenarios that troops must be prepared to face in the future — the competence, spirit, and confidence of the force would be re-energized. The simulations would also be appropriate settings for leaders to realistically test their units’ readiness.

Four specialized facilities were created to operationalize this vision. Collectively, the mission of these training centers was to prepare Army units to win decisively, beginning with the first battle of the next war. The first of these, the National Training Center (NTC), came on line in 1981 at Fort Irwin, CA. A rotation at the NTC featured 14 days of simulated desert combat against a highly skilled, uncooperative “enemy” force based at the center. The typical day might include reconnaissance missions starting near midnight, a full-scale battle erupting at unpredictable times, a series of AARs, preparation for the next anticipated engagement, and maybe four hours of sleep before starting the whole process again.

Early AARs at the National Training Center. In the early days of the NTC, reviews were conducted at the company level as a retrospective critique of a unit’s performance — a post-mortem. The expectation was that field units would visibly benefit from, and then quickly adopt, the rigorous level of critical analysis provided by the NTC staff. However, it soon became apparent that these critiques were not, in fact, producing the desired results:

• The formal critique format required a highly qualified officer, called an “Observer/Controller” or “O/C,” to dissect what the leader and soldiers had done wrong and leave them with a checklist to follow on the next mission. The emphasis on correction frequently led to an adversarial interaction and aThe Army’s senior leadership hypothesized that if units could be trained in a realistic environment closely simulating real combat — in scenarios that troops must be prepared to face in the future — the competence, spirit, and confidence of the force would be re-energized.

  focus on how well the unit had completed items on their checklist, and put unit leaders on the defensive.

• Handed a checklist, soldiers were not involved in teasing apart the elements of a problem, designing a solution, and determining how their actions contributed to the end result. Though they might know what to do, the why behind tactics remained elusive. In dynamic situations, they lacked the habit and tools to think together on their feet. Officers had no opportunity to develop an understanding of the effect their favorite tactics might have under unfamiliar conditions.

Changes in Mental Models. In a complex modern battlefield, the Army needed broadly skilled, thinking soldiers, not technicians with their faces in the rulebook. In systems language, the early approach to AARs shifted the burden of thoughtfulness and double-loop learning to an outside intervenor instead of to the active battle participants. To their credit, NTC staff successfully refined the AAR practice over the last 20 years, evolving their tactics and mental models in significant ways. For example, today:

• The O/C role is an expert facilitator of learning, rather than an expert providing criticism and answers.
• O/Cs typically meet with the officer whose unit they will observe — in advance of a battle series — to agree on the most useful types of data to collect. O/Cs then use this data to focus their facilitation of the subsequent AAR.
• O/Cs focus the troops on trends and key data points and ask them to explain and posit actions to sustain or improve.
• The AAR cycle encompasses the complete challenge, beginning with the logistics of leaving “home station” and arriving at the NTC prepared for battle.
• Most importantly, AARs start at the platoon level and work their way up the chain of command: At each command level, leaders and their direct reports engage in disciplined self-discovery, evaluating their own performance against goals and standards, ferreting out systems problems, and developing improvements to test the next day.

The NTC today uses a great deal of technology for collecting and communicating data so that each unit can know as soon as the battle ends precisely what happened and see how its role in the big picture played out. Army staff have discovered that rich learning for officers and troops alike comes from comparing the “commander’s intent” — stated at the start of the mission — with what subsequently happens. The vivid intersection between Army “doctrine” (standard practices sorted out by recognizable situations such as a “movement to contact” with an enemy unit) and direct battle experience allows espoused theory and actual practice to shape each other on a daily basis.

A Typical AAR. After a battle, platoon leaders typically conduct their AAR session right in the desert, which might mean drawing in the sand or using jeeps to hold flip-charts:

• • They focus on issues of local concern such as situational awareness, mechanical breakdowns, and communication.
  • They compare their stated intent with the results achieved and their actions with what Army doctrine prescribes. These comparisons lead to a sharper understanding of leadership challenges (e.g., the unit commander is simultaneously in communication with all of his units on the ground).
  • They elicit the thinking behind and underline the importance of following doctrine (e.g., why imprecise coordination between vehicle movements and supportive artillery can result in your killing your own people).

• To generate the insight needed to plan their next day’s action, they may also access other resources, including battlefield statistics, videos of pivotal moments, cuts of radio communications, and satellite-generated playbacks of the battle.
• The unit may even get a visit from the “enemy” commander to hear what happened from his perspective — his objectives, strategy, situational awareness, hypotheses, and real-time adjustments.

Adapting the Army’s AAR to Business Settings

The AAR was first introduced to the business world by ex-Army leaders, who brought the AAR with them into their new civilian work roles as company board members or staff. One of the earliest adoptions was in 1994: With retired general Gordon Sullivan on its board of directors, Shell Oil started using AARs during a transformation in its governance structure. But no matter the source, in every successful application, leaders have recognized the importance of adapting the process to fit their specific environment. Three companies’ stories exemplify the variety available in designing effective AAR practices.

Harley-Davidson. Ted Gee uses an AAR practice to prepare his people for new model introductions at

Harley-Davidson’s Kansas City plant. As director of manufacturing projects, Gee applied AARs to the build process to ensure that his team learned what it needed to launch a new product. After each pre-build, Gee conducted a series of AARs in which actual performance was matched against initial assumptions. Assumptions were then refined, standards were raised, and another prebuild was conducted.

Gee sees a double payback: Not only does the AAR practice produce performance improvements, it offers the onus of increased team knowledge and confidence during production planning. He finds that his people are excited about their increased knowledge of the whole operation and have gained strong planning and data-gathering skills.

Geerlings & Wade. Steve Danckert built an AAR practice to manage warehouse operations at Geerlings & Wade, a wine retailer and distributor. He conducts formal, quarterly AARs with his team by phone, focusing on one particular event that happened during the quarter. For example, the focus of a fourth-quarter AAR was a pre-holiday spike in orders. Although not a surprise to anyone, the situation gave the team a chance to look at how its systems work under stress. Danckert reports that these reviews not only improved performance in spike periods, they got everyone in the habit of analyzing successes and failures (and now it’s not left for the boss to do).

Dankert pairs his quarterly AARs with informal, one-on-one, 15minute “spot” AARs and finds the two reinforce one other. To build rapport with a new team in order to foster candor, he shows up at a warehouse in jeans periodically to pack orders alongside his warehouse managers for a few hours. He finds that over time his people have developed a mindset and a confidence that things will improve as a result of their AARs, and they take the initiative to call him with things to AAR.

Power Construction. Gary Shreiber, a vice president at Power Construction, recognized that the firm had grown too large to continue to rely solely on informal mechanisms to transfer knowledge and to problem solve. Every construction project is a complex undertaking requiring a close working relationship between multiple organizations — architect, general contractor, owner, subcontractors, and so forth — as well as a high capacity for on-the-fly adjustments.

POST-MORTEM VS. AAR PRACTICE

Schreiber created a series of “Lessons Learned Workshops” (LLW), modeled in part after the AAR, that bring the multi-firm project team together at the beginning, middle, and end of a large project. In a LLW, team members articulate their aspirations and expectations, and review plans and performance data. On a wall-sized timeline, they identify “bullets” coming their way and “defining moments” from past experience that they see as relevant to those challenges. Shared hypotheses emerge about what will work going forward, accompanied by action commitments. This process allows teams to reveal their underlying thinking and concerns, and increase their effectiveness in sharing responsibility for producing a collective success.

The AAR Is Not a Meeting, But a Practice

Those who would like to use the AAR in corporate settings need to recognize that AARs and traditional methods for reflection serve different purposes. For example, if a team needs to piece together in detail what happened during the course of a project, produce general recommendations to improve the process, or make technical corrections to a product, a post-mortem or retrospective can be an appropriate vehicle. However, a post-mortem is unlikely to be effective if a group needs to both make an improvement and self-correct in the future, or to effect a cultural transformation through local initiative (see “Post-Mortem vs. AAR Practice” on p. 3).

Unlike post-mortems, the AAR is a continuing practice that is focused forward, generating lessons to be applied in the immediate future by the same people who developed them. As the Army found, it is only through an ongoing practice — a connected series of forward-looking AAR meetings — that a team grasps the causality at play in their field of action, begins to self-correct, and builds confidence in their ability to do so.

Developing an Emergent Learning Practice

Leaders wanting to develop an emergent learning practice such as the AAR in their organization should consider four patterns that characterize emergent learning and are consistently found in successful AAR applications: localness, forward-focus, punctuation, and iteration.

Localness. “Localness” here refers to task proximity — the group that’s directly responsible for the task and the results. If responsibility for results lies with a person outside of the group, any new practice is likely to fade quickly under the pressure of everyday time constraints. In order to integrate an AAR into the rhythms and norms of their group, leaders must introduce the practice with a tight focus on a challenge — one that meets three criteria: It is compelling to participants; it is embedded in the group’s scope of work; and it is solidly connected to reaching core business goals.

Team members are encouraged to gather “ground truth” data for the next AAR session as they go. Learning through their own actions, they see the impact of their decisions and behavior. As they explore trends in their data in order to develop testable hypotheses about effective action in their domain, team members improve their ability to see and understand the interplay of factors that shape their performance over time. In this way, localness naturally leads people to develop a systemic perspective.

Forward Focus. “Forward focus” means looking toward the future first and spending as much time planning based on your lessons learned as you spend reflecting and identifying those lessons. This process involves scanning forward to identify your next challenge; recalling a past similar event; developing your insights; and looking forward again to plan an application of the lessons learned.

In each AAR session, participants identify up front a clear opportunity in the near future for them to implement, test, and refine insights that emerge from the session — an “opportunity field” for learning in action. For instance, a team might be about to begin a series of roll-outs of a new product or is looking at its effectiveness in a frequently repeating business process such as developing contracts or conducting quarterly meetings.

Punctuation. Much of our daily work experience seems like a blur metaphorically, one run-on sentence after another. Emergent learning practitioners develop the ability to “punctuate” the blur in their mind’s eye in order to find natural start and stop points and to derive units of action that repeat. They glean possible “opportunity fields” — arenas within which they might pursue iterative improvement. For example, the Army took the blur of battle and broke out certain repeating units of action; soldiers first learn to recognize when a “movement to contact” begins, and then to call up their knowledge of what to do in that context. Over a series of movements to contact in widely varying circumstances, this punctuation enables them to improve their effectiveness.

Once we learn to see and use them, such opportunities abound. For instance, Danckert saw the chance to iterate in his challenge to open 16 warehouses: “We’re not opening 16 warehouses. We’re opening one warehouse 16 times.” The first one he opened, in Texas, took six weeks. By using what it learned in an AAR after that event, the company was able to reduce the time it took to open its next warehouse, in North Carolina, to only two weeks.

Iteration. When is a “lesson learned” learned? The Army thinks learning has not occurred until an insight shapes actual behavior and is validated by results. Gregory Bateson, author of Steps to an Ecology of Mind, posited that learning requires the repetition of a recognizable situation or process, and that information resides in comparing, not in analyzing individual elements or events in isolation. Both perspectives support the idea that a lesson involves more than one learning opportunity — iteration

Iteration is the process of feeding information or knowledge from one instance forward in time into the next similar instance. Knowledge about a past sale, warehouse move, or project kick-off can inform the conduct of an upcoming one — but only if that data or insight is captured and fed forward. The AAR enables that capturing and feeding forward process to take place. For instance, much of the NTC’s potency in accelerating skill development stems from allowing people to engage in a high number of action iterations in a short time, coupled with dense behavioral-data feeds such as video.

Iteration has another positive effect when an emergent learning practice becomes “part of how we do things here”: As people grow to expect to reflect with their peers about their collective actions in terms of trends and goals, they tend to raise their individual level of performance and their ownership for seeking improvement.

Two Pitfalls to Avoid

Companies seeking to adopt an AAR practice must avoid two possible pitfalls. First, the current interest in knowledge management leads initiators of learning practices to make an easy mistake — placing an early focus on producing outputs for use in a knowledge base for the benefit of people outside of the team. The first and best customers of a learning practice must be those directly involved. If a team is asked to conduct an AAR solely for the benefit of capturing knowledge for someone else, they are unlikely to sustain the practice.

Second, if sponsors try to assess the AAR’s value with a single-meeting trial run, they will be disappointed. Why? Because much of the power of the AAR comes from iteration. Also, the AAR asks participants to talk frankly about their own and their leader’s behavior, so several cycles of learning and action are often needed to generate confidence in the process and trust in one another’s team spirit. As that confidence and trust develop, participants begin to bring more and more substantial issues to the table and act on them. Then, the kinds of visible improvements that are gratifying to themselves and the larger organization become possible, and a virtuous cycle sets in. In turn, the excitement participants feel — of collectively producing outputs that have a visible impact — gives an AAR practice a life of its own within a group. Therefore, before assessing the impact of a new AAR practice, sponsors should think in terms of at least four to five linked sessions as the baseline commitment (see “Three Benefits from an AAR Learning Practice”).

Bridging Thinking and Action in a Complex World

In a complex and dynamic world, every action plan, every strategic plan, every leader’s initiative is in fact a working hypothesis — our current best thinking about what will lead to success going forward. When a group develops an emergent learning practice, it is building a living, dynamic bridge between the world of thinking and the world of action.

The post Emergent Learning in Action: The After Action Review appeared first on The Systems Thinker.

MANAGING BY MEANSOR RESULTS

Companies that take this approach are practicing “management by means” (MBM). That is, they design production systems according to precepts that guide all living systems, including:

• self-organization, particularly an ability to identify “self by local rather than central control,
• an emphasis on the relationships among all parts of the organization, and
• the generation of diversity.

Managing by means contrasts sharply with the approach that most businesses follow, called “managing by results” (MBR). With MBR, firms use centralized decision-making to establish abstract quantitative targets for each part of the organization (for instance, “We’ll crank out 250 red widgets on this production line every hour, with zero flaws”). Moreover, decision-makers at these organizations attempt to control the company’s various parts as if the whole thing were a machine (see “Managing by Means or Results?”). Typical MBR control structures include:

• activity-based costing (ABC)
• activity-based management (ABM)
• performance measures to motivate individuals or teams, and
• material requirements planning (MRP) to control operations.

Compared to practices shaped by conventional cost-management thinking, management by means generates far less waste, higher efficiency, lower overhead costs, and more diverse outputs — all the qualities you find in natural, organic processes. In fact, if we look at a living ecosystem — a forest, for example — we see startling efficiency and diversity. Each part of every tree, such as the root system, consumes only the resources it needs to perform its function; in this case, delivering water and nutrients to the rest of the tree. Whatever waste is created, such as the oxygen that results from photosynthesis, is used by other systems connected to the tree within the same ecosystem. So, humans and animals take in the oxygen that trees produce as waste. And throughout evolution, nature has generated virtually unlimited varieties of shapes, sizes, colors, and textures in trees as well as in other living systems.

What does MBM look like in a business setting? Let’s take a closer look at one of the living-system principles that guide MBM — “local control” — to find out. Organizational learning expert Peter Seng explains local control by using a simple analogy: If you cut your finger, your body does not send messages to your brain for permission to act. Rather, your circulatory system generates coagulants near the injury, which flow immediately to the cut. Likewise, at Toyota, everyone who stamps, welds, paints, and assembles cars is guided not by a centralized scheduling system but by one aim: to meet the needs of their direct “customer” the person to whom their work flows next. Materials move smoothly from person to person, with minimal waste. And if workers encounter a problem, they immediately signal for consultation and assistance, never allowing a defect to pass on to the next worker.

MBM can pay big dividends for companies that adopt it. Consider Toyota’s experience: Since 1960, the company has never had a loss year, nor has it ever teetered on the brink of bankruptcy — unlike many of its competitors. Moreover, market capitalization data reveal that Toyota’s market value rivals — and sometimes surpasses — that of the American “Big Three” auto makers combined.

Clearly, MBM offers important advantages over MBR. Yet, most companies continue to organize work according to MBR principles. Why?

The Big Lie

Companies that use MBR have bought into the “big lie” a simple assumption that sounds reasonable on the surface but that makes little sense when you look at how it actually plays out. This big lie is this: You can change the total cost or total profit of your organization by a certain amount by changing the costs or profits of the company’s parts by the e amount. In other words, because the total cost or profit of an organization presumably equals the sum of the costs or profits in parts, the total can be changed in any amount simply by changing its parts in the same amount.

Let’s take a closer look at that last point. This idea — that you can change the magnitude of the whole simply by changing parts in the same magnitude — is everywhere. Open any management accounting, finance, or economics textbook currently in use in MBA programs, and you’ll see this assumption implicit in any discussion about cost management. People actually believe that if they want their company to show an increase in profits of $1 billion, then all they have to do is cut $1 billion from somewhere in the firm. Perhaps they should sell off a division or outsource a major function. The idea is that, by treating the company’s parts as pieces that you can move in or out of the system like game pieces, you can influence the overall organization’s performance in absolutely predictable ways.

To be sure, you can do that with most machines. But with living systems — and human organizations are living systems — trying to optimize the whole by optimizing the parts only leads to declining performance. Still not convinced? Imagine a top-notch basketball team. Now think about what would happen if each player tried to optimize her individual performance by scoring as many baskets as possible during a game. What would happen to the team’s ability to function as a smoothly running, coordinated team? If you envisioned a chaotic mess easily bested by the opposing team, you understand the danger inherent in this assumption about optimizing parts of a natural system.

Where did this mechanistic way of treating human systems come from? In the West, the idea has a long history. Galileo, the 16th century Italian astronomer and physicist, first introduced the concept of separating the idea of motion from a moving object itself — and then measuring that motion. He came up with this idea as a way to address anomalies in moving objects that existing theories inherited from Aristotle couldn’t explain. After the 16th century, Westerners began trying to quantify everything. As Galileo’s thinking was further developed by Rene Descartes and then Isaac Newton, Westerners began seeing the world as a set of independent objects. They defined the characteristics of these objects by absolute measures and believed that it was only external force or impact, not embodied patterns in a web of relationships, that moved these objects.

When Actions Backfire

Today, management science still draws from the mechanistic worldview. But when you treat organizations as machines, you behave in ways that ultimately keep you from achieving your original goal of improving company performance to its full potential.

“Working Harder.” Companies that manage by means achieve a simplicity that lets each step in the production process move forward cheaply, quickly, and with high quality. But when you believe the big lie, you “work harder” in each of the organization’s parts in order to “improve” performance in the whole. What does working harder look like? To force better performance in each part of the organization, you create imbalances among parts and systemic delays that cause you to build an elaborate infrastructure — processes for scheduling, expediting, controlling, reworking, and so forth. In other words, you make things complicated.

Thus, companies that manage by results create complication, which clogs up the workflow with waste, delays, and high costs. This degree of complication gets costly in terms of the people and other resources required to run this infrastructure. Indeed, accountants call this cost “overhead” or “indirect cost.” In many companies, this cost amounts to as much as half of all the costs incurred by doing business.

Higher costs in turn prompt you to produce a smaller variety of products or services in an effort to control those costs. After all, it takes enormous energy and effort to create variety. Companies that emphasize MBR often try to do things as homogeneously as possible; that is, they resort to mass production in order to streamline costs and processes. But in an age of increasingly complex customer demands, mass production isn’t the kind of response that’s going to endear a company to its external customers.

Complication increases the time required for work to move from one destination to another. And when work does move from stage to stage, it progresses intermittently. It lurches along rather than flowing smoothly and effortlessly. Quality also suffers when things get complicated. If you define quality as giving customers what they want, when they want it, and how they want it, it’s hard to achieve all that when you’re grappling with a complicated order-delivery system.

All told, performance drops rather than improves with MBR. If we compare the costs and benefits of MBM and MBR, the differences between the two approaches are striking (see “The Advantages of MBM”).

Working Separately. The big lie also causes you to treat each part of the company as a separate entity. Departments arise in which people work independently of each other. Indeed, people in the various departments, or functional “chimneys,” may even feel indifferent to what folks do in other departments.

In such an arrangement, work comes together only through the vast array of infrastructures that have been created to collect and combine materials or information. Although people in the various departments may all be doing useful, valuable work, the system itself — the organization — doesn’t help the work flow from stage to stage in a smooth, continuous way.

The Big Truth

In truth, you can’t optimize a whole organization by trying to optimize its parts. That’s because in natural systems, the whole doesn’t equal the sum of its parts. We hear that phrase often — but what does it really mean for human organizations?

Because organizations represent an individual human system writ large, let’s see what happens when we compare the value of a whole human being with the value of his or her individual parts. If you disassembled a person into all the molecules that make him up and removed the water that constitutes most of any human being’s cells, what you’d have left wouldn’t weigh more than a few pounds. And, it wouldn’t be worth more than about 50 cents on any market. If you took things one step further and broke those few pounds of molecules into the atomic particles that make them up, you’d have a pile of “stuff” so tiny that you couldn’t even see it with the naked eye.

Now imagine doing something similar with a business. Picture adding up the value of all the separate parts of the business — the equipment, the supplies and inventory, the cash, the building, even the human beings who work there. The dollar amount that you come up with won’t be anywhere near the actual value of the organization when it’s working as a system — that is, when the relationships among all those parts are functioning. The value of the overall organization comes not from its various parts but from the way in which those parts interact. Thus, it is because of those relationships that the whole is worth far more than the sum of its individual components.

Moving from Managing by Results to Managing by Means

So how can your organization avoid the pitfalls inherent in MBR and reap the benefits offered by MBM? It’s not easy. You have to look at work through a radically different lens. Put another way, this change requires you to stop trying to identify better answers and instead ask a new question: What would your organization be like if it ran according to the principles that guide natural systems?

Here are three provocative ideas to get you started:

Nurture Relationships.

If you ran your organization according to natural systemic principles, you would stop trying to optimize performance in the company’s individual parts in order to improve the overall organization’s performance. Rather, you would try to improve the quality of the relationships among the parts.

THE ADVANTAGES OF MBM

For example, you might take steps to channel the flow of information and material into direct pathways between employees whose work interconnects. Ideally, each worker would hand material directly to the next worker in response to a signal from that worker. Where distance in space or time makes direct flow impossible at the moment, workers might use indirect signals, such as empty slots in a rack or order cards. But the goal should be to replace such tools with ways to make it easier for the “upstream” employee to see what the “downstream” employee (his or her “internal customer”) needs.

By having work follow standardized procedures as well as having it flow along direct pathways from worker to worker, you ensure that any problems that arise are visible to people as soon as they occur. This instant, widespread feedback lets people respond immediately to problems and play a direct role in their resolution. In addition, you would make sure that all material flowed at the rate demanded by the customer (whether internal or external). Work should not lurch from stage to stage at varying rates. When it does, the company needs places to store backlog and processes to keep track of it. Expenses start mounting. And whenever material and information come to a standstill, the delay reverberates all the way along the rest of the work path. It’s impossible to deliver quality — giving customers what they want, when they want it — under conditions of uneven or intermittent flow.

Management expert Dr. W. Edwards Deming emphasized the importance to quality of building proper relationships in organizations including always knowing how every customer connects with every worker. Deming suggested a powerful exercise to demonstrate where you need to clarify and strengthen relationships in your organization: Ask everyone to stand up and grab hold of the hand of the person who supplies them with whatever it is they need to do their work. Now ask them to take their other hand and grab hold of the person who needs something from them to get their work done. According to Deming, if your workforce can’t do that, your company is suffering from serious disconnection.

Another management visionary and poet, Judy Brown, offered a compelling image of the importance of relationships in MBM. Brown describes building a log fire. The flame comes from the logs, she agrees, but simply jamming logs together won’t generate a flame. To get a good, strong fire, you have to pay attention to the spaces between the logs. If you stack the logs too tightly, the flame may start, but it’ll sputter out quickly owing to lack of sufficient oxygen. If you stack the logs too loosely, the flame will never get started. To get the flame just right, you have to stack the logs just right. That flame is like the performance an organization is able to achieve, and those spaces between the logs are like the relationships between the people and other components in an organizational system.

Take a Long-Term Focus. While MBR tactics can boost financial performance for short periods, they invariably lead to more unstable and inferior performance in the long run. A company that runs according to principles that guide natural systems will enjoy long-term results that are more stable and more satisfying than the results recorded by a company that runs according to MBR principles. This difference is portrayed in a graph of the performance of two hypothetical organizations — Company A (run based on MBR) and Company B (run based on MBM) (see “Stability Vs. Drama”). To evaluate the two companies’ performance, the graph plots performance over several business cycles, using traditional financial metrics, such as operating income, operating profit, return on investment, and so forth.

In this graph, Company A shows a variable, unstable performance pattern. Company B’s performance pattern varies much less; overall, this firm seems much more stable. At first glance, Company B’s performance looks kind of lukewarm. The firm never loses money, but it never achieves the kinds of peaks that Company A does. However, Company B always does reasonably well. Indeed, in the long run, its average results may prove better than its competitors’.

Toyota is an example of a Company B enterprise. Its long-term financial performance is less variable and, overall, less “exciting” than that of its competitors. In times of peak prosperity, its bottom-line returns seldom garner the attention the press often pays to its competitors’ soaring profits. But during recession periods, it never suffers negative returns.

Differences in accounting conventions make it difficult to unambiguously compare Toyota’s average long-term profitability with that of the American auto makers. However, stock market capitalization data indicate that Toyota earns a consistently higher average level of profit than any of its competitors. Indeed, annual data compiled since 1988 show that Toyota’s “market cap” exceeds the market cap of every one of the American “Big Three” auto makers in each year, and it equals or exceeds the combined market cap of the Big Three in three of those years (see “Toyota Vs. the Big Three”)!

Support a “Multicellular” Organization. In a “natural” organization, work follows a simple and straightforward path. Orders come in, and products go out. That’s it. How does this happen? Everyone in the company functions as an essential part of a multi cellular organization: They each figure out what they need to do to satisfy their customer — whether it’s someone within the company to whom their work flows next or someone outside. The flow of work through the entire system resembles that of the metabolic flow through the cells in a tree or in a human body. Moreover, the rate of that flow is dictated not by centralized control mechanisms, but simply by what the customer wants, in the time he or she wants it. As a result, work flows at the same rate among all the cells of the “organism.”

Thus, rather than looking to financial controllers, cost accounting procedures, and computers to tell them what to do next, employees in a natural organization look to the flow of work itself — at every step in the value stream — to determine what needs to be done. The work itself gives them all the information they need. To have the information that guides work be present in the work itself is not possible, of course, until the work flows more or less continuously from hand to hand. Connecting work in a continuous flow is how a company begins to free its operational information from bondage to computer control systems.

To run your organization according to the principles that guide living systems, you may well have to let go of old assumptions and adopt challenging new ones. But as Toyota has proven beyond question, the payoff makes the effort worthwhile. Indeed, Toyota’s example shows that treating the means as “ends-in-the-making” is a much surer route to stable and satisfactory financial performance than to continue, as most companies do, to chase targets as though the means do not matter.

TOYOTA VS. THE BIG THREE

Stock market capitalization data indicate that Toyota earns a consistently higher average level of profit than any of its competitors. Indeed, annual data compiled since 1988 show that Toyota’s “market cap” exceeds the market cap of every one of the American “Big Three” auto makers in each year, and it equals or exceeds the combined market cap of the Big Three in three of those years.

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