I would like you to take a little quiz. Place a checkmark alongside each statement below that you believe is true about your business enterprise—or businesses, in general.
- We (our management team) understand the cause-and-effect relationships that lead to results in our organization.
- We can understand how our enterprise works by reducing the overall system down into smaller parts (like departments and functions), and then examining carefully each of those pieces.
- The best way for us to manage our enterprise is to control the actions of individuals and their actions within functions and departments.
- Small changes lead to small effects; and large changes lead to large effects.
- We can obtain the best results from our enterprise by working to optimize the efficiency of each department and function.
- Our enterprise is orderly and follows principles that are, more or less, like a very complicated machine. Inputs and outputs are predictable and understandable to us.
- Processes in our enterprise flow along more or less orderly and predictable paths with clear beginnings and results that we can rationally predict.
- All costs within our organization are additive. If we reduce expenses in any department or function, we reduce expenses for the entire enterprise and will make more money.
I confess: in some ways, the quiz is a trick. Here’s why:
- If you agreed with most of the statements, you are merely saying that you concur with a great deal of what is still taught in most schools of business and is the “theoretical” understanding of most businesspeople today—from Fortune 100 executives to hundreds of thousands of small business executives and managers.
- If you did NOT agree with most of the statements, you may have found yourself thinking: “I know this is the way things are supposed to work, but my experience is telling me something else. I just don’t know why my experience doesn’t line up with the theory.”
Old ways of thinking must go
Since Frederick Winslow Taylor introduced scientific management theory more than 100 years ago, executives and managers have often thought of their enterprises like “machines.” Perhaps not intentionally, but implicitly, they frequently come to manage the people, functions and departments like cogs in a great machine. Their thinking would be something like this: “If we can keep each individual cog ‘well oiled’ and in good condition, then the whole ‘machine’ ought to work as well as can be expected.”
That approach worked reasonably well for a great deal of the last century—at least for the majority of businesses and industries.
However, the emergence of the Internet-empowered consumer, global competition, brand proliferation, extended supply chains, and many more factors has caused business enterprises and supply chains to no longer operate like “machines.” Instead, there is a growing consensus that business enterprises and supply chain have become, in fact, complex adaptive systems (CAS).
If we want to avoid the potentially negative unintended consequences of our management actions, we need to move to a view that considers the entire system.
A systems view allows us to complement the more common reductionist scientific paradigm, which focuses on one thing at a time, to the exclusion of everything else. Looking very closely at one thing can reveal important information. However, if we don’t take the systems view into account, and instead depend exclusively on a narrow view, we are in danger of experiencing negative unintended consequences.
["Understanding Complex Systems." University of Minnesota. May 4, 2011. Accessed February 21, 2015. http://www.csh.umn.edu/wsh/UnderstandingComplexSystems/index.htm.]
This means our old—generally, deeply ingrained—patterns of thinking also need to go.
Business Process Reviews (BPRs)
A common approach to improvement still used by many—read: most—today is the business process review. This approach, as generally implemented, is precisely the opposite of moving toward “a system view” (as mentioned above).
Instead, BPRs focus on each department and function individually. I know. I used to do them. In fact, I used to be a big advocate of them.
Fortunately, I got myself rescued from all that.
I recall being brought in to work with one large, nationwide enterprise about eight years ago. They had an extensive BPR project underway—just wrapping up, actually—at the time of my arrival. The CFO and his team could not have been more proud of the collection of some five or six five-inch three-ring binders laying conspicuously on their conference room table. Each of these carefully indexed binders was chock full Visio™ diagrams along with page after page of prose. Further, the flowcharts and prose were accompanied by tables and charts, documenting in detail each of the processes carried out by departments and functions across the enterprise.
Here’s the problem: Machines tend fail because of the failure of an individual part or subcomponent. Complex adaptive systems, however, tend to fail in the interactions between the parts that make up the system. Adaptations happen continuously and these adaptations could never be kept up-to-date in Visio diagrams and prose. These adaptations, in turn, lead to new interactions and requiring further changes or adaptations by other actors in the system.
Unfortunately, the thousands of dollars and hundreds of hours invested in those BPR binders were, for the most part, a waste. The contents of the binders only managed described the theoretical way in which each function within the system operated. But reading every word and studying every diagram in those binders would never inform the reader about how the system—the entire enterprise—actually worked (or failed to work) on a day-in and day-out basis.
There is a better way
There is a better way to capture the essential elements that are likely to affect the outcomes of your entire system.
The Thinking Processes are highly adept at capturing this kind of information and allowing management to document and review the real interactions in your enterprise that are leading to greater (or lesser) achievement of your goals.
Some years ago, I gave up trying to help companies create a process of ongoing improvement (POOGI) through business process reviews. I have found it much more effective to guide them into a real system view of their enterprise by employing the Thinking Processes. This also opens the door to helping the management team invent their own solutions. From there, they are frequently able to move forward on their own with a POOGI, requiring less and less help from consultants like me.
That, I call, real success.
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