Perhaps there is an element of self-protection at work — the comfort of being able to hold someone else (namely, top management) responsible for the lack of effective leadership. There is no doubt that a CEO who is opposed to fundamental change can make life difficult for internal innovators, but this hardly proves that only the CEO can bring about significant change.

Two Views on Leadership

Let’s consider some different statements about leadership and change: “Little significant change can occur if it is driven from the top.” “CEO proclamations and programs rolled out from corporate headquarters are a good way to undermine deeper changes.” “Top-management ‘buy-in’ is a poor substitute for genuine commitment at many levels in an organization.”

These statements are supported by the experiences of two innovative leaders, Phil Carroll of Shell Oil and Rich Teerlink of Harley-Davidson.

Phil Carroll recalls, “When I first came in as CEO, everyone thought, ‘Phil will tell us what he wants us to do.’ But I didn’t have a clue, and if I had, it would have been a disaster.” Likewise, Rich Teerlink says, “Anyone who thinks the CEO can drive this kind of change is wrong.”

There are several reasons why leaders like Carroll and Teerlink have come to a more humble view of the power of top management. First is the cynicism that exists in most organizations after years of management fads. When the CEO preaches about “becoming a learning organization,” people roll their eyes and think to themselves, “Here we go again. I wonder what seminar s/he went to last weekend.” Most corporations have had so many “flavor-of-the-month” initiatives from management that people immediately discount any new pronouncement as more “executive cheer-leading” or, as they say at Harley-Davidson, “another fine program.”

A second reason has to do with the difference between compliance and commitment. Hierarchical authority is much more effective at securing compliance than it is in fostering genuine commitment. “It seemed that every year someone pressured us to change our promotion review process to incorporate our values,” reflects former Hanover Insurance CEO Bill O’Brien. “But we never caved in to this pressure. A value is only a value if it is voluntarily chosen. No reward system has ever been invented that people in an organization haven’t learned how to ‘game.’ We didn’t want just new behaviors. We wanted new behaviors for the right reasons” (“Moral Formation for Managers: Closing the Gap Between Intention and Practice,” in Character and the Corporation, MIT Center for Organizational Learning Research Monograph, 1994). There is simply no substitute for commitment in bringing about deep change. No one can force another person to learn, especially if that learning involves deep changes in beliefs and attitudes or fundamentally new ways of thinking and acting.

A third reason a different type of leadership is needed is that top-management initiatives often end up moving organizations backward, not forward. This can occur in obvious ways, such as top-management downsizings and reorganizations that have the side-effect of increasing internal competitiveness, which ends up undermining collaboration and, ultimately, economic performance. But it can also occur more subtly, even in changes explicitly designed to improve learning. For example, a mandated “360-degree feedback” process not only reinforces a compliance mentality, but it also lessens the likelihood of people surfacing what Harvard’s Chris Argyris calls the “potentially embarrassing information” that might “produce real change” (“Good Communication That Blocks Real Learning,” Harvard Business Review, July/August 1994). This kind of information will come into the open only when people have genuine trust, curiosity, and shared responsibility — conditions not usually fostered by mandated programs.

Even so, it must be acknowledged that many large-scale change programs — reorganizations, downsizing, corporate-wide cost reduction programs, or re-engineering programs — can be implemented only from top-management levels. But such changes will not affect the corporate culture if it is based on fear and defensiveness. Nor will they unleash people’s imagination and passions and enhance their ability to form genuinely shared visions. They will not change the quality of thinking in the organization, or increase intelligence at the front lines, where people con-front increasingly complex and dynamic business environments. And they will do nothing to foster the trust and skills needed by teams at all levels if they are to reflect on hidden assumptions and to inquire into the reasoning behind their own actions.

Types of Leadership

For the past 20 years, many colleagues and I have been working with managers and teams to develop enhanced learning capabilities that center around five related disciplines: systems thinking, surfacing and improving mental models, fostering dialogue, nurturing personal vision, and building shared visions. Four years ago, a group of us at MIT began to form a consortium of corporations with two main objectives: to advance the theory and method underlying this work; and to demonstrate what is possible when organizations begin working together toward integrating new learning capabilities into important work settings. The MIT Center for Organizational Learning currently involves about 20 corporations, mostly Fortune 100 firms.

Within these companies, we regularly confront the dilemmas posed by the conflicting views of leadership described above. Resolving these dilemmas requires fundamental shifts in our traditional thinking about leadership.

These shifts start with the simple view of leaders as those people who “walk ahead,” people who are genuinely committed to deep change in themselves and in their organizations and who demonstrate their commitment through their actions. They lead through developing new understandings, new skills, and new capabilities for individual and collective learning. And they come from many places within an organization.

In particular, we have identified three essential types of leaders in building learning organizations, roughly corresponding to three different organizational positions:

1. Local line leaders, who can undertake meaningful experiments to test whether new learning capabilities actually lead to improved business results.

2. Executive leaders, who provide support for line leaders, develop learning infrastructures, and lead by example in the gradual process of evolving the norms and behaviors of a learning culture.

3. Internal networkers, or community builders, who can move freely about the organization to find those who are predisposed to bringing about change, to help out in organizational experiments, and to aid in the diffusion of new learning.

Local Line Leaders

Nothing can start without committed local line leaders: individuals with significant business responsibility and “bottom-line” focus. They head organizational units that are microcosms of the larger organization, and yet have enough autonomy to be able to undertake meaningful change independent of the larger organization. To create useful experiments, they must confront the same issues and business challenges that are occurring within the larger organization. For example, a unique cross-functional task force may be less useful for a learning experiment than a team that manages a process that is ongoing, generic, and vital for future competitiveness, such as a product development team, a sales team, or a business division.

The key role played by local line leaders is to sanction significant practical experiments and to lead through active participation in those experiments. Without serious experiments aimed at connecting new learning capabilities to business results, there is no way to assess whether enhancing learning capabilities is just an intellectually appealing idea or if it can really make a difference. Typically, a Learning Center project will begin with a core team composed of line leaders who might initially work together for six to twelve months. During this time, they work on developing their own skills in systems thinking, collaborative inquiry, and building shared vision, and then begin applying those skills to their own issues. Only then will they be able to begin designing learning processes that might spread such skills throughout their organization and become embedded in how work is done.

For example, a team of sales managers and sales representatives at Federal Express worked together for over a year before they began to develop what eventually became the Global Customer Learning Laboratory “We felt we needed new tools for working with our key corporate customers as learning partners,” says Cathy Stopcynski of Federal Express. “That’s why the Global Customer Learning Laboratory is important. It gives us a whole new way to work together with customers to improve our collective thinking and come up with completely new solutions to complex logistics problems. “At Electronic Data Systems (EDS), a growing network of local line leaders is bringing learning organization principles and methods into work with customers through EDS’s “Leading Learning Communities” program.

Most corporations have had so many “flavor-of-the-month” initiatives from management that people immediately discount any new pronouncement as more “executive cheerleading” or, as they say at Harley-Davidson, “another fine program.”

In addition to playing a key role in the design and implementation of new learning processes, local line leaders often become teachers once these learning processes become established. In fact, the most effective facilitators in learning processes such as the Global Customer Learning Laboratory are usually not professional trainers but the line managers themselves. Their substantive knowledge and practical experience give them unique credibility. Facilitating others’ learning also becomes a powerful, ongoing way for line leaders to deepen their own understanding and capabilities.

However, engaging local line leaders may be difficult. As pragmatists, they often find ideas like systems thinking, mental models, and dialogue intangible and “hard to get their hands around.” “When I was first exposed to the MIT work,” says Fred Simon, former head of the Lincoln Continental program at Ford Motor Company, “I was highly skeptical. I had heard so many ‘academic’ theories that made sense but never produced for us. But I was also not happy with our team’s ability to work together. I knew there must be a better way, and my business planning manager was convinced this could make a difference’

Simon’s view is typical of many line leaders at the outset: he was skeptical, but he recognized that he had problems that he could not solve. He also had a trusted colleague who was willing to engage with him. Again and again, we have found that healthy, open-minded skeptics can become the most effective leaders and, eventually, champions of this work. They keep the horse in front of the cart by focusing first and foremost on business results. Such people invariably have more staying power than the “fans” who get excited about new ideas but whose excitement wanes once the newness wears off.

Because line leaders are focused primarily on their business unit, however, they may not think much about learning within the larger organization, and typically they have little time to devote to diffusion of their efforts. They may also be unaware of—and relatively inept at dealing with—the anti-learning forces in the larger organization. They become impatient when the larger organization does not change to match their new ideas, and may start to feel misunderstood and unappreciated. They can easily develop an “us against the world” mentality, which will make them especially ineffective in communicating their ideas to others.

Innovative local line managers are often more at risk than they realize. They typically believe, “My bosses will leave me alone as long as I produce results, regardless of the methods I use.” But the “better mousetrap” theory may not apply in large institutions. Improved results are often threatening to others, and the more dramatic the improvement, the greater the threat. Large organizations have complex forces that maintain the status quo and inhibit the spread of new ideas. Often, even the most effective local line leaders fail to understand these forces or know how to work with them.

Despite these limitations, committed local line leadership is essential. At least half of the Learning Center companies that have made significant strides in improving business results and developing internal learning capabilities have had little or no executive leadership. But we have seen no examples where significant progress has been made in an organization without leadership from local line managers, and many examples where sincerely committed CEOs have failed to generate any significant momentum.

Executive Leaders

At the Learning Center, our excitement around the practical experiments led by local line managers has frequently made us blind to the necessary and complementary roles played by executive leaders. Local line leaders can benefit significantly from “executive champions” who can be protectors, mentors, and thinking partners. When dramatic improvements achieved in one line organization threaten others, executive partners can help manage the threat. Alternatively, executive partners can make sure that new innovative practices are not ignored because people are too busy to take the time to understand what the innovators are doing. By working in concert with internal networkers, executives can help connect innovative local line leaders with other like-minded people. They also play a mentoring role in helping the local line leaders understand complex political cross-currents and communicate their ideas and accomplishments to those who have not been involved.

In one company, a local line organization had achieved what it regarded as dramatic improvements in the product development process, but its efforts lacked credibility when judged by more traditional metrics. For instance, at critical checkpoints the team had record numbers of engineering change orders. The team interpreted this as evidence that people were more willing to surface and fix problems early in the development process. But outside the team, these same orders were seen as evidence that the group was “out of control:’

Eventually, executives in the company commissioned an independent audit, which showed that the team was indeed highly effective. The executives also supported the development of a “learning history” to help others understand how the team had accomplished its results.

But the “better mousetrap” theory may not apply in large institutions. Improved results are often threatening to others, and the more dramatic the improvement, the greater the threat.

Part of our difficulty with appreciating the role that effective executive leadership can play in learning is that all of us are used to the “captain of the ship” image of traditional hierarchical leaders. However, when executives act as teachers, stewards, and designers, they fill roles that are much more subtle, contextual, and long term than the traditional model of the power-wielding hierarchical leader.

“We in top management are responsible for creating an operating environment that can allow continual learning,” says Harley-Davidson’s Teerlink. Although executive leadership has traditionally focused on structure and strategy, Teerlink and other executives are increasingly thinking about the operating environment in less tangible ways.

Effective executive leaders can build an environment that is conducive to learning in several ways. The first is by articulating guiding ideas. “I have always believed that good ideas will drive out bad ideas,” says Hanover’s O’Brien. “One of the basic problems with business today is that our organizations are guided by too many mediocre ideas — ideas which do not foster aspirations worthy of people’s commitment.” Guiding ideas are different from slogans or management buzzwords. They are developed gradually, often over many years, through reflection on an organization’s history and traditions and on its long-term growth and opportunities.

A second way to build operating environments for learning is through conscious attention to learning infrastructure. In a world of rapid change and increasing interdependence, learning is too important to be left to chance. “We have plenty of infrastructure for decision making within AT&T,” says Chairman Bob Allen. “What we lack is infrastructure for learning” (Peter M. Senge, et al., The Fifth Discipline Field-hook, 1994, p. 34).

I have met many CEOs in recent years who have lamented that “we can’t learn from ourselves” or “we are better at learning from competitors than from our own people.” But with little or no infrastructure to support ongoing learning, one might ask, “Why should successful new practices spread in organizations?” Who studies these innovations to document why they worked? Where are the learning processes that will enable others to follow in the footsteps of successful innovators? Who is responsible for creating these learning processes?

There can be little doubt of the long-term business impact of executive leadership in developing learning infrastructure. When the Royal Dutch/Shell Group’s central group planning leaders became convinced that “scenario thinking” was a vital survival skill in turbulent, unpredictable world oil markets, they didn’t initiate a set of scenario-planning courses for Shell’s management. Instead, they redesigned the planning infrastructure so that management teams regularly were asked not just for their budget and their “plan,” but for several plans describing how they would manage under multiple possible futures. “Planning as learning” has gradually become a way of life within Shell — a change to which many attribute Shell’s rise to preeminence in the world oil business.

A third way to build operating environments for learning lies within the executive’s own domain for taking action — namely, the executive team itself. It is important that executives recognize that they, too, must change, and that many of the skills that have made them successful in the past can actually inhibit learning.

I think these ideas will eventually lead to a very different mindset and, ultimately, a different skill-set among executives. “Gradually, I have come to see a whole new model for my role as a CEO,” says Shell Oil’s Carroll. “Perhaps my real job is to be the ecologist for the organization. We must learn how to see the company as a living system and to see it as a system within the context of the larger systems of which it is a part. Only then will our vision reliably include return for our shareholders, a productive environment for our employees, and a social vision for the company as a whole.”

Internal Networkers

The most unappreciated leadership role is that of the internal networkers, or what we often call internal community builders. Internal networkers are effective for the very reasons that top-management efforts to initiate change can backfire — oftentimes, no power is power. Precisely because they have no positional authority, internal networkers are free to move about a large organization relatively unnoticed.

When the CEO visits someone, everyone knows. When the CEO says, “We need to become a learning organization,” everyone nods. But when someone with little or no positional authority begins asking which people are genuinely interested in changing the way they and their teams work, the only ones likely to respond are those who are genuinely interested. And if the internal networker finds one person who is interested and asks, “Who else do you think really cares about these things?” he or she is likely to receive an honest response. The only authority possessed by internal networkers comes from the strength of their convictions and the clarity of their ideas.

It is very difficult to identify the internal networkers because they can be people in many different organizational positions. They might be internal consultants, trainers, or personnel staff in organization development or human resources. They might be front-line workers like engineers, sales representatives, or shop stewards. They might, under some circumstances, be in senior staff positions. What is important is that they are able to move around the organization freely, with high accessibility to many parts of the organization. They understand the informal networks through which information and stories flow and how innovative practices naturally diffuse within organizations.

Internal networkers are effective for the very reasons that top-management efforts to initiate change can backfire—oftentimes, no power is power….The only authority possessed by internal networkers comes from the strength of their convictions and the clarity of their ideas.

The first vital function played by internal networkers is to identify local line managers who have the power to take action and who are predisposed to developing new learning capabilities. Much time and energy can be wasted by working with the wrong people, especially in the early stages of a change process. Convincing people that they should be interested in systems thinking or learning is inherently a low-leverage strategy. Even if they are persuaded initially, they are unlikely to persevere.

When the Liaison Officers from the Learning Center companies were asked how they each got started in this work, they responded, virtually unanimously, that they were “predisposed.” All of them had something in their backgrounds — perhaps an especially influential college course, a particular work experience, or just lifelong interest — that made them more open to the systems perspective. They each had a deep curiosity about learning, or mental models, or the mystery of profound teamwork. In turn, they felt attuned to others they met who shared this predisposition.

In ongoing experiments within line organizations, we have found that internal networkers can help in many ways. In our own Learning Center projects, they serve as project managers, as co-facilitators, or as “learning historians” — people trained to track a major change process and to help those who are involved to better reflect on what they are learning (see “Learning Histories: ‘Assessing’ the Learning Organization,” May 1995). As practical knowledge is built, internal networkers continue to serve as organizational “seed carriers,” connecting like-minded people from diverse settings and making them aware of each other’s learning efforts. Gradually, they may help in developing the more formal coordination and steering mechanisms needed to move from local experiments to broader, organization-wide learning. At Ford, for example, an informal “Leaders of Learning” group was formed by local line leaders and internal networkers who wanted to share leanings and serve as a strategic leadership body. They saw their work as supporting continuing experiments, connecting those experiments with the interests of top management, and wrestling with organization-wide capacity building and learning.

As with local line managers and executive leaders, the limitations of internal networkers are likewise counterparts to their strengths. Because they do not have a great deal of formal authority, they can do little to counter hierarchical authority directly. If a local line leader becomes a threat to peers or supervisors, they may be powerless to help him or her. Internal networkers have no authority to institute changes in organizational structures or processes. So, even though they are essential, internal networkers are most effective when working in concert with local line leaders and executive leaders.

The Leadership Challenges

The leadership challenges inherent in building learning organizations are a microcosm of the leadership issue of our times: how human communities can productively confront complex issues where hierarchical authority is inadequate to bring about change. None of today’s most pressing issues — deterioration of the natural environment, the international arms race, erosion of the public education system, or the breakdown of the family and increasing social fragmentation — will be resolved through hierarchical authority.

In all these issues, there are no single causes, no simple “fixes” There is no one villain to blame. There will be no magic pill. Significant change will require imagination, perseverance, dialogue, deep caring, and a willingness to change on the part of millions of people. I believe these same challenges exist in the work of building learning organizations.

Recently, a group of CEOs from the Learning Center companies spent a half-day with Karl-Henrik Rob rt, the founder of Sweden’s path-breaking Natural Step process for helping societies become ecologically sustainable. The next day, Rich Teerlink of Harley-Davidson came in and said, “I don’t know why I stay awake at night trying to figure out how to transform a six-thousand person company. Yesterday, we talked with someone who is transforming a country of four million people.”

The necessity of creating systemic change where hierarchy is inadequate will, I believe, push us to new views of leadership based on new principles. These challenges cannot be met by isolated heroic leaders. They will require a unique mix of different people, in different positions, who lead in different ways. Although the picture sketched above is tentative and will certainly evolve over time, I doubt that it understates the changes that will be required in our traditional leadership models.

This article is an edited version of P Senge, “Leading Learning Organizations” (Cambridge, MA: MIT Center for Organizational Learning Research Monograph, 1995). Copyright © 1995 by Peter M. Senge. It has also appeared in the Peter F Drucker Foundation book The Leader of the Future, M Goldsmith, F Hesselbein, and R. Beckhard, eds. (San Francisco: Jossey-Bass, 1995).

Peter M. Senge is director of the Center for Organizational Learning at MIT’s Sloan School of Management. He is the author of The Fifth Discipline: The Art and Practice of the Learning Organization and co-author of The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization.

Edited by Colleen P Lannon. Illustrations by Nancy Margulies of Mindscapes (St Louis, MO).

The post Rethinking Leadership in the Learning Organization appeared first on The Systems Thinker.

The “1992 Systems Thinking in Action Conference: Creating Learning Organizations” made a statement that creating learning organizations is a long-term process of fundamental change. The 600-plus participants showed their commitment to that journey through their enthusiastic involvement throughout the 27, days. Over 30 concurrent sessions helped add details and richness to the central theme, providing people with the opportunity to learn new tools and techniques as well as share their experiences putting those ideas into practice.

Each of the three keynote speakers provided a different perspective on what it means to create a learning organization. The following pages contain excerpts from their talks, which helped paint, in broad brushstrokes, the essence of what is needed to build learning organizations.

—DHK

“Acknowledging the collective nature of our perceptions marks the first step in the journey toward becoming a learning organization because the way we perceive the world is absolutely critical to all learning processes.”

PETER SENGE – A CRISIS OF PERCEPTION

Peter Senge’s talk, “A Crisis of Perception,” cut deep into our shared pool of assumptions. In a real sense, we are our assumptions because we perceive the world through the distinctions we make. But those distinctions do not originate from us as individuals; we inherit them through culture. Corporate paradigms and sacred cows are part of the “inherited” assumptions that affect how we perceive the world. Acknowledging the collective nature of our perceptions marks the first step in the journey toward becoming a learning organization because the way we perceive the world is absolutely critical to all learning processes.

We, as a species, have been evolutionarily programmed to be acutely aware of sudden, dramatic changes in our environment. There’s a very simple reason for that: for virtually all of our history, those were the primary threats to our survival.

The problem is that our world has changed and we have not. Today, all the primary threats to our survival come from slow, gradual processes, but we’re still waiting for sudden events. One way to think about this dilemma is as a crisis of perception. It is as if we are driving down a dark road and at the same time we are accelerating, we’re also turning down the headlights. Our power, our prowess, is causing the acceleration. Our diminishing capacity to see what’s around us is dimming the headlights. But as we accelerate, we really need an even greater capability to see into the future. That is, as our power increases, our perceptiveness also needs to increase…

Fundamental Assumptions

To address this crisis, we have to begin by exploring this question: what do we mean by perception? A common notion of perception is that we’re here and the world is out there. We don’t see it perfectly, since it’s very complex, so we filter, abstract, and process it. This view of perception is based on two assumptions: that there is an external reality, and that we can say something intelligent about its intrinsic nature, independent of our interaction with it.

There are a couple of problems with this common notion of perception. First, it’s rooted in assumptions. Secondly, progress in the field of understanding the biology of perception is beginning to show that it is an untenable viewpoint…

The reason we have this love affair with this simple model of an external world is that it suggests a basis of certainty. We have a deep love of certainty. It starts our whole cognitive process off with an external point of reference — the reality that is out there. What we need to do is give up the belief that there is absolutely, intrinsically, an external reality.

Perceiving through Our Distinctions

We perceive the world by making distinctions — but where do those distinctions come from? That is the territory of culture, because by and large, how we make distinctions is inherited. Our perceptions are collective, not individual. To a much higher degree than we recognize, we, collectively, are the perceiving apparatus, not I.

So what might be some of the implications? One implication is that it will begin to shift the perceptual center of gravity in our culture. Right now that center has shifted to the extreme of events and short-term orientation. The practical question is, what can we be doing to shift that perceptual center of gravity? (See “Causal Loop Diagrams—A Tool of Perception.)

Forecast vs. Prediction

Several years ago my friend Pierre Wack, the man who developed the scenario planning process at Royal Dutch Shell, was telling me an interesting story that highlighted the difference between prediction and forecasting. He had lived in India for much of his life, and he told me that if it rains for seven days in the foothills of the Himalayas, you can predict the Ganges will flood.

Now, it’s not the rain that causes the flooding, but the intermediating structure. If it rained for seven days in the middle of a tropical rain forest, there would be no flood. It’s the structure of the network of rivers, the absorbency of the ground, and the waters flowing through that create flood conditions. Relating that to forecasting versus prediction, Pierre explained, “A forecast is an attempt to get some quantitative information about the future. A prediction, however, is an understanding of certain predetermined consequences. You don’t know exactly when they’ll happen, you don’t know exactly how strong they’ll be. But you have some appreciation of an underlying phenomenon….”

Proprioception of Thought

If you close your eyes and raise your hand, you are aware your arm is upraised. When you close your eyes, you know where your body is. That phenomenon is called “proprioception,” and it is linked to one particular part of the brain. If that part of the brain is damaged, you have to learn to use visual cues to control your body, because you are no longer conscious of your body movements.

It appears we have no proprioception regarding our thoughts — we just have them. Our perceptions just occur to us. If we’re really trying to create a whole new domain of behavior, actions, and possibilities, but our perceptual apparatus is dysfunctional, then we have to become conscious about it. We have to become proprioceptive of our thought and our perception…

Seeing into the future is not about our eyes. The capacity to expand our time frame is not about what we can see; it’s about the distinctions we make and the way we think. We need to be able to speed up time in a way that allows everybody to see it. We need to be able to see into the future and extend our time horizon, by virtue of the distinctions we invoke. Maybe the whole purpose of this systems thinking stuff is nothing but expanding our capacity for perception…

Dialogue

Our perceptions may be vastly more collective than we think. The work that’s going on today in the area of dialogue is looking at this issue very directly. In dialogue, as we’re starting to understand it, we begin to probe into the cultural creation of meaning.

The exploration into dialogue is clearly in the right area, because it looks at the generative process whereby we invent cultural distinctions collectively. This is not an individual job. This is us, not me, not I…

One thing I keep coming back to, as a deep, deep, personal cornerstone in the changes that have to be made, is this business about certainty. There is something in all of us that loves certainty. And my own experience in watching others is that one of the things that may be the hardest to give up is that rigid external point of reference — what is it really?…

RUSSELL ACKOFF — ORGANIZATIONAL LEARNING AND BEYOND

If our old ways of perceiving the world are dysfunctional, then the institutions and structures that are a product of those perceptions need to be reviewed and redesigned. Russell Ackoff presented a different kind of organizational structure that is more closely aligned with the democratic ideals that govern the way we operate as a nation. He proposes a circular design where hierarchy is not just top-down but bottom-up as well. Every system has essential properties which none of its parts have. If I bring an automobile into this room and take it apart, I no longer have an automobile. The reason is that an automobile is not the sum of its parts — it’s the product of their interactions. The same thing is true in business. Business schools offer courses in production management, finance, accounting, marketing, etc. They take the organization and business apart. The assumption is that if you know how to run each part, you can then put them together into a well-run whole. But there’s a fundamental principle in the system of science that can be rigorously proven — if every part of a system operates optimally, the whole cannot operate optimally.

Effective management has to be the management of the interactions of the parts, not of the parts taken separately. Divide and conquer is no longer an effective strategy for management. How, then, can we organize in order to manage interactions? To do so, we need to understand a fundamental difference between “power over” and “power to.” “Power over” is the ability to exercise authority — to punish and reward. When you have a well-educated workforce, you can’t get things done by exercising power over them. There’s a negative correlation between “power over” and the rising education of subordinates. We can no longer get things done in our organizations by exercising power over people…

Democracy and Hierarchy

The solution, then, is to democratize organizations. Now, this appears to raise a paradox. Hierarchy is essential for the organization and coordination of work. But hierarchy and democracy are inimical. You cannot have a democratic hierarchy, because hierarchy is inherently autocratic, right? Wrong. Absolutely wrong.

There is nothing under the meaning of organization which requires that we represent it in two dimensions — levels of authority that flow up and down and responsibility that flows right and left. It’s just a convention. And because we haven’t been able to see organization in more than two dimensions, we have not been able to see how to develop a democratic hierarchy….

The Circular Organization

There is such a thing as a democratic hierarchy — the circular organization. The essential idea in the design of a circular organization is the creation of a board. Since the board of directors is considered to be a good idea for the chief executive, why should we deprive every other manager of having a board? So every manager has a board which will consist of himself, his immediate superior, and his immediate subordinates (see “The Circular Organization”). This promotes interaction within the organization, because each manager interacts with five levels of management — two levels up, two levels down, and across at his own level. In most organizations you don’t have that kind of an opportunity.

At the very bottom of the organization, the work groups should be small enough so every employee of the organization has the opportunity to serve on the board of his boss. Also, no group on the board should be larger than the number of subordinates. The subordinates do not have to be the majority, but they ought to be the largest single group on the board…

Now what do the boards do? They have six functions. First, the board produces plans for the unit for which it is the board. Secondly, they establish policy — they set up the rules that govern decisions. The third function is the board is responsible for coordinating the activity of the level below it. This way, coordination, or horizontal interactions, are in the hands of the people who are being coordinated (with the participation of the two higher levels of management).

The fourth responsibility of the board is integration. Because of the vertical integration of the circular organization, no board can pass a plan or a policy which is incompatible with a higher level. This eliminates a lot of problems, since 50% of the problems managers face are created by managers at some other level of the same organization. Why? Because decisions that are perfectly sensible at one level of the organization can often be disastrous three or four levels down.

The fifth function of the board is it makes the quality of work life decisions for the members of the board. The sixth function is the most critical one: they evaluate the performance of the manager whose board it is, and are responsible for helping him increase his effectiveness.

No manager can hold his position without the approval of his board. That’s what makes it a democracy and not an autocracy. Nobody can be in a position of authority over others without the others collectively having authority over him or her. So you get circularity. That’s why it’s called a circular organization…

Traditional Management

There are fundamentally three traditional kinds of management. One is the kind that says, “The current situation is intolerable, and things are getting worse. I wish things were like they used to be.” Their primary function is to recreate the past. This type of management is called reactive. It’s “reacting” — acting back, going back to a previous state.

A second way of dealing with problems is to forecast the future, decide where we want to be in that forecast, and plan a path from where we are now out to the realization of our vision. The problem is that the path lies through a future that is out of our control to forecast. That’s called proactive, as opposed to reactive.

The third position is inactive. These are people who say, “Well, the world may not be perfect, but it’s good enough. Let well enough alone. Don’t rock the boat. Let nature take its course.” So their principle objective is to do nothing.

Occasionally, the people who are trying to make things better, and who, in the eyes of the inactive manager, arc responsible for all the problems, sometimes create a problem which threatens the survival or stability of the inactive’s organization. Now the manager has to react to the crisis, so he practices crisis management. That means he’s always active, because with an increasing rate of change in the environment, the intensity and number of crises increases.

But the inactive manager would be busy even if there were no crises. Why? Because people don’t like doing nothing — being inactive. They have to do something. And therefore, the inactive manager’s principle concern is, “How do I keep people busy doing nothing?” This creates bureaucracies…

Corporate Perestroika

In almost every organization, the service units are bureaucratic monopolies. Why? They’re subsidized from headquarters through a budget that’s allotted to them, and their users do not pay for the services or products they receive. Their users have no choice as to where they get their accounting, or their advertising, or their research and development. They have to use the internal source. And the internal sources have no choice in to whom they supply their service. So we get bureaucratic monopolies…

Companies don’t operate under the market economy. In fact, they operate with an economy which is identical to the economy that the Soviet Union had before it recently reorganized. So what I’m describing is corporate perestroika. Just as what I just finished talking about was corporate glasnost, or the democratization of the corporation.

What happens if we introduce the market economy within rums as well as between firms? The essential characteristic of that new system is this: every unit in the organization whose output is consumed by more than one customer or consumer will be a profit center. That does not mean profitability will be the measure of its performance — but it will be taken into account in evaluating its performance. And, subject to a few constraints, every unit will have the following freedoms: it can sell its output to whomever it wants (internally or externally) at whatever price it wants to sell it; and it can buy what it wants anywhere it wants to at whatever price it’s willing to pay…

Learning

You never learn anything from doing something right. Because if you do something right, you already know how to do it. So, all you get is confirmation or affirmation of what you already know. You only learn from mistakes — that’s obvious, right? What is not obvious is that almost every organization — public or private, for-profit, or not-for-profit — is designed to conceal mistakes, particularly from those who make them. As a result, they can’t learn. Because if you don’t know what mistakes you make, there’s no way you can improve.

How do we design a system which will make people aware of their mistakes without acting as a policeman and punishing them for errors? August Busch, at Anheuser Busch, one of the best corporate executives I’ve known, had a very simple saying for his executives: “If you don’t make a mistake this year, there’s something wrong with you because it means you’re not trying anything new. But you better not make the same mistake twice.” Now, that’s the right kind of a rule to have. You want a system which allows you to make errors but enables you not to make the same error twice — a system that deals with learning not only skills and information, but gaining understanding and hopefully even wisdom…

“Almost every organization—public or private, for-profit, or not for-profit—is designed to conceal mistakes, particularly from those who make them. As a result, they can’t learn. Because if you don’t know what mistakes you make, there’s no way you can improve.”

SUE MILLER HURST — COME TO THE EDGE

Designing and implementing new structures will not fully transform an organization if the people do not release themselves from the old internal structures that say “1 can’t,” or “I am not worthy.” Sue Miller Hurst spoke to the learner inside each of us, talking about challenging our assumptions about our limitations and then breaking through them. Creating a learning organization requires a community of learners — and if we do not believe in our capacity to learn, then we cannot help create the space in which learning thrives. One of my favorite poems is by St. Appollonaire: “‘Come to the edge,’ he said. They said, ‘We are afraid.’ ‘Come to the edge.’ They came, he pushed them, and they flew.”

Eric Hoffer has said “in a time of drastic change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.” One of the possible questions for us today, while we’ve been so diligent about our learning, is in what way have we followed the path of the learned instead of the path of the new learner? Imagine or remember if you can when you were a little child, when the beginner’s mind was not something you had to put on, but actually was something you lived through and in. Think about the child in you, still present. You are a marvel. You are unique. In all the world, there is no other child exactly like you. In the millions of years that have passed, there has never been another child like you.

We come as children, and when we come we really ask of life to be nurtured, to be loved, to be inspired. And we ask of life to notice us and to feel that we’re a gift. We come, each of us precious, fragile and very, very unique. And as we come, we come with the highest of hopes. And it’s the possibilities I want to talk to you about today…

Breakthrough — Moving to “I Can”

I want to talk to you about breakthrough. I have a sense that we’re wiser than we know or we’ve claimed. Over the last decade, over the last millennia, we have actually discovered much. But it seems as if it sometimes sits “out there” as interesting stuff. Somehow it’s hard to take it in and really act like we know it from the place of behavior instead of the place of intellect.

Remember Nobel Prize winner Ilya Prigogene, who was looking at the second law of thermodynamics and questioning whether the universe actually does run down in energy? He won the Nobel Prize for his work with dissipative structures. The interesting part is that he talked about how organisms under enough stress and perturbation actually fall apart and fall back together at a higher level of organization. The more complex the organism, the more easy it is to actually disrupt it so it will fall apart and fall back, fall apart and fall back—except that with human organisms we get the choice, do we want to fall back together or just leave it?

“If we are so rich in potential, what bars the door to our wisdom? To our collective action?…Maybe our skills and knowledge are the means for becoming acquainted and reacquainted again and again with our infinite capacity…”

When we look at the work of other pioneers — Karl Pribram, Rupert Sheldrake, Roger Sperry, Lyall Watson, Howard Gardner, or the ground-breaking work of Lazonov, Bell, Pert, Borysenko, David Bohm, Robert Rosenthal, Marian Diamond — we can see we have learned much about the human mind, the uncertainty of our sciences, and the holographic nature of memory. We can sense the limitlessness of our human capacity and the limits of our current working models of life. If we are so rich in potential, what bars the door to our wisdom? To our collective action?…

Remember the AIDS quilt? One of the quilts said, “If we are made in the image of our maker, then we are not human beings having a spiritual experience; we are spiritual beings have a human experience.” I want to invite us to the beginner’s mind that suggests maybe we are not using our learning capacity to gain the skills and knowledge we need. Maybe it’s the reverse — maybe the skills and knowledge are the means for becoming acquainted and reacquainted again and again with our infinite capacity…

Attention as Leverage

What really is the leverage for opening up to wisdom? Maybe it’s as simple as our attention. What do you want to pay attention to, right here, right now? When there’s disharmony between us — when I forget to think of the system, when I’m blaming and accusing, when I’m feeling like a hero, when I’m feeling like a victim, when I can’t figure my way out — what would happen if we just focused our attention? What if I actually honed all this ability — not of the brain but of the mind — right to this one point of attention? I actually think whole changes would be made on the planet, one by one by one…

I’d like to call you to a different action than some might do: I want you to make all the organizational changes you can think of that will make things more democratic, that will actually give people a voice, that will actually honor their being. I want us to reform and rethink and redesign factories. In fact, let’s call them design shops instead of factories. That way we can be free to place the furniture and the people differently so we might really empower people to come to work in a way that the soul comes to work. And then I want to empower you to stand in a place in 1993 that maybe you never stood before. This group here today can actually be the momentum of a wide change, coming not so much because we knew we had to fix it, but because we knew we could help — that we could hold the possibility and call on others to join in. Now that’s a beautiful possibility, and it’s a journey I think we’re getting ready for.

Carlos Cassanada would have called this a “cubic centimeter of chance,” and I think it’s worth taking. As we touch the web of each other’s lives, and the web of something much deeper than we can understand right now, if we can hold each other in a place of that mystery and that caring, I think it might come into being…

In the opening speech, Peter Senge stripped away the veil of unsurfaced assumptions and challenged us to examine the very nature of reality. To address the major crises we face today, we cannot learn what we need to learn without extending our perceptive capabilities beyond the short time horizons to which we are accustomed. Russ Ackoff described alternative models of an organization that can take us further in helping us break through the dualities that bind us in our dilemmas. Sue Miller Hurst challenged us to look deep inside ourselves and recognize the eternal learner in all of us that can set our spirits free. And it is that spirit that will bring life to this thing we call a learning organization.

—Edited by Daniel H. Kim

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Marx said the conflict between workers and bosses is inevitable in a capitalist system. Maybe so. But a hierarchy can also fit together smoothly for the benefit of both the parts and the whole. It happens in the human body, in a fine sports team, in a symphony orchestra, and sometimes in a well-run business. What does it take to create that kind of harmony? Why does it so often break down?

A small business close to home is a classic example.

It is a retail store, established to demonstrate how businesses should work, to save money for the customer, to encourage local producers, and to bring community people together.

The store sells products of high quality at fair prices. It does not waste money on advertising gimmicks. It is customer-owned and dedicated to treating people with respect. Its board of directors makes decisions by consensus.

The store did pretty well at first. Customers liked its honest and homespun quality. But during a particularly hard time a large debt accumulated and the business nearly went under. The crisis pulled in a new no-nonsense board, serious about fiscal responsibility. At the same time a levelheaded, talented young woman was found to manage the store.

That is the design problem of capitalism: how to combine the view from the top and from the bottom, how to see the system whole.

While the board tightened up the cash flow, she made the store bright and attractive, eliminated non-selling items, added new products. She knew the customers, knew the merchandise. She found other employees like her, dedicated to the business, willing to work long hours and to do everything -unload trucks, restock shelves, find suppliers, wait on customers-all for low wages.

With better management from the board and the staff, business slowly improved. The debt was being retired. At that point the staff asked for modest pay increases. Most board members were sympathetic to the staff’s request. They would have liked to hand out raises, but they were worried about the still-wavering bottom line. They felt the staff didn’t understand that the business was still in trouble. Some board members suggested the debt could be paid off even faster by firing everyone but the manager and hiring minimum-wage cashiers.

The discussion, at this point, got a bit insensitive on both sides. The staff felt unappreciated and discouraged; some of them quit; all of them talked about quitting. The board, in a badly-timed move, suggested a new bylaw allowing themselves to meet in closed session. The staff took this as a further blow to their status as partners in the enterprise. Labor and management moved further apart.

This little example, still unfolding, is especially sad because the intentions of all parties are so good. These people are not motivated by personal greed; they are all dedicated to the high principles of their enterprise. Given the information the board and the staff have, each side is behaving rationally and understandably. I think the main problem is that they don’t have the same information. They are living in different worlds, and those worlds have stopped communicating.

Any board sees an enterprise primarily through its balance sheet-that’s the board’s job. On a balance sheet a debt looms large, and a labor force is a pure expense. Higher wages are an extravagance. A pleasant atmosphere, a smile for the customer, flowers in the window boxes do not show up. Balance sheets reveal quantity, not quality.

The staff see all the little efforts that make the place work. They know the difference between an organization where everyone feels appreciated and works with commitment and an organization where everyone just puts in time. They see good workers not as an expense, but as the source of revenues. From their point of view money spent for the greater quality is an investment that will repay itself.

Both these ways of seeing the business are important. They have to be integrated and balanced, if difficult decisions are to be made wisely. That is the design problem of capitalism: how to combine the view from the top and from the bottom, how to see the system whole.

All sorts of devices are used to keep information flowing between the levels of business hierarchies: written reports, skillful arbiters, straightforward talks. All these devices abstract human experience through numbers and words, symbols. They leave out wordless but vital perceptions of quality, or the absence of quality. Those perceptions can only be shared by direct experience, by walking as they say, in each other’s’ moccasins.

If there is to be a bylaw change, it might require every board member to work occasionally in the store. Airline executives probably couldn’t qualify to work shifts as flight attendants, but I’m told that one airline CEO flies on his own airline regularly, unidentified, economy class. At least that way he gets to appreciate how passengers are treated and how hard attendants work. It would be most instructive for the folks voting on the school budget to handle a class of third-graders now and then. And somehow Dartmouth trustees should experience the college not on special “trustee weekends,” but as its secretaries or students or faculty members do every day.

Everyone in an organization should understand its balance sheet and share responsibility for financial soundness. Everyone should also have a feeling for the morale of the workers, the quality of the products, the satisfaction of the customers. That shared perception of the total picture would not make tough business decisions easier, but it might make them more compassionate and more wise. It might even become clear to everyone that labor and management, quality and quantity, raises and debt payoff usually rise or fall together.

Donella Meadows is an adjunct professor of environmental and policy studies at Dartmouth College. She writes a weekly columns for the Plainfield, NH, Valley News.

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