Practice #8: Spread Systems Thinking

Practice #8: Spread Systems Thinking


To achieve a leadership culture, the power of systems thinking needs to spread throughout the organization. It’s not sufficient if just a few people understand how your organization creates value. Everyone should be able to see it as a system of work that results in value to a set of customers. Everyone should be able to think in terms of building systems that result in the greatest value at the least cost.

  • Thinking in terms of systems gives people the ability to make change occur where it is most needed.
  • By spreading systems thinking, people can become data-driven in their thinking, visualize their work from the customer’s frame, and adjust business processes based on customers’ expectations, not internal assumptions or traditions.
  • By spreading systems thinking, leaders can instill deeper levels of innovation and performance throughout the organization.

Systems Thinking Approach

When you use systems thinking, you start to view everything that happens in your organization as a system.

  • There are production and delivery systems.
  • There are systems that generate the greatest value to your customers.
  • And systems that create the greatest profit for the company.
  • There are market systems acting upon your organization.

When you view things from a systems perspective, you develop a visual picture in your mind of the entire enterprise. When solving problems, symptoms become relegated to the background as you identify underlying causes. Small signals may become more important as you try to detect what’s really going on. You see patterns of recurring behavior reinforced by either positive “learning loops” or negative “ignorance loops.” You come to understand the importance of constantly challenging assumptions. And you appreciate that one can neither be too hasty nor too slow. Timing is everything.

The Five Frames of Systems Thinking

Systems thinking can help you appreciate the multiple ways that one can “frame” a problem. In the field of cognitive science, it’s well understood that frames influence how people think about a particular issue or problem. Each frame typically oversimplifies the problem and inhibits systems thinking.

In the world of business there are many frames, depending upon where you’re sitting and the view before you. There’s the organized labor frame. (“The unions will take advantage of this.”) Or the shareholder frame. (“Our profits are more important to our shareholders than protecting the health of the environment.”)

We teach our clients to see their organizations holistically, asking them to look at it from five system perspectives—strategy, governance, performance, process, and people:

Strategy

From this system perspective, you focus on the longterm market trends affecting your business. You think about your competitive position, where growth will occur, and what broad initiatives are required to capitalize on those trends.

  • You respond positively by thinking about the long-term use of your resources and how to focus to achieve your most important priorities.
  • You respond negatively by focusing too much on what your competitors are doing.​​​​​​​

Governance

From this perspective, you focus on the system of decision making that controls the direction of your company. You think about the relationship between your board of directors, your chief executive, and your leadership team, and what authority is designated to each.

  • You respond positively by thinking about governance and being very specific about delegations of authority. You make sure people are clear about their respective decision-making roles.
  • You respond negatively by blaming people for making misguided decisions when the system isn’t clear.​​​​​​​

Performance

From this perspective, you focus on the systems for measuring performance—first at the overall organizational level, then at the level of the various business units within the organization, and finally at the team and individual level.

  • You respond positively by deciding what metrics and targets to track at each level, and what systems of communication will best align business units and teams of people in understanding where they are succeeding—and where they need to improve.
  • You respond negatively by paying too much attention to individual cases of poor performance.​​​​​​​

Process

From this perspective, you focus internally on the processes of producing value. You look at how sales are generated or how orders are fulfilled or how products are received or delivered. You look at measures of effectiveness and efficiency.

  • You respond positively by thinking about how to improve cycle time, quality, and the IT systems that support the process.
  • You respond negatively by singling out individuals for not managing a process consistently or efficiently.

People

From this perspective, you focus on your system of hiring and rewarding people. You focus on how to get the right people on board and how to develop them in their roles. You look at the competencies you need and how you can develop people to their best potential.

  • You respond positively by developing feedback systems that enable people to learn continuously, to receive coaching and feedback, and to take responsibility for their performance. And by rewarding people for excellence and performance.
  • You respond negatively by selecting/promoting people based on arbitrary factors, such as how much you like them and how much they support you.

If you’re attentive to these five perspectives, you’ll gain a much richer appreciation of your organization—an appreciation you can share with others. The art of systems thinking is to make sense of it all by organizing your thinking and realizing that each perspective needs to be weighed against the others. Failure to do so can lead to errors in judgment.

Conclusion

Watching leaders and managers in action, I’ve observed that there are three major challenges to maintaining a systems perspective.

First, because we live in an era of accelerating change, it’s easy to become distracted by the daily influx of events/issues.

“To spend twenty-four hours a day fighting fires.”

As the vice president of a healthcare system told me.

Almost by nature, people tend to focus on fixing things: on the people who aren’t performing, budgets that aren’t met, or logistical issues that need attention. It’s easy to become bogged down in the details and forget to use systems thinking to create leveraged solutions.

Second, people don’t get training in systems thinking.

Few companies offer it. Few human resource managers recognize its value. It simply isn’t a priority. As a result, there is no forum, no conversation, for leaders and managers to engage in systems thinking together. Lacking a dialogue around systems thinking, it’s easy to miss the opportunities and the benefits.

Third, aside from getting distracted and the lack of training, it’s human nature to avoid confronting deeply rooted problems.

“There are some issues I’d just as soon leave alone,” one manager said. “We have to pick our battles.”

That may be human nature. But failing to listen to data, to challenge assumptions, or to use systems thinking to address underlying issues ultimately imperils the organization. One need look no further than General Motors, Lehman Brothers, or Enron.

In contrast, think about Porsche, which has single-mindedly focused on engineering high-quality cars for twenty-five years. It’s not an accident that Porsche is one of the most profitable automobile companies in the world. And, not surprisingly, managers at Porsche put a premium on core values, on disciplined performance, and on analyzing their customers and their competitors from a systems perspective. It’s this kind of thinking that builds high-performing organizations.

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