Systems theory in practice: leading in dynamic times

An organisation cannot perceive and take in everything that happens around it. It inevitably has to select. To do this, it automatically develops frameworks of observation and evaluation that structure and organise its perception according to organisation-specific criteria.

As a rule, these frameworks exist only implicitly, so the processes of distinction take place unconsciously. Hence the statement: organisations only see what they see. They do not see what they do not see.

This goes hand in hand with a dangerous self-confirming process. On the one hand, what has worked well in the past is repeated. Successful patterns of explanation and interpretation are retained and increasingly harden into basic convictions that can hardly be shaken, regardless of whether the environment now requires different criteria.

On the other hand, divergent observations are usually not perceived as such. They are reinterpreted until they fit the familiar pattern. Instead of regarding them as a signal of change, they are adjusted to what is familiar.

Organisations therefore only perceive what is already on their radar screen, until at some point the so-called “black swan” appears: an event that, until it occurred, was considered unrealistic or even impossible and that forces the organisation to become aware of its blind spots.

For managers, this means: nobody sees everything, and it is highly likely to go unnoticed that something is not being seen. One’s own perception also has blind spots.

Individual opportunities and challenges elude one’s own observation. The danger this poses can be counteracted by expanding thinking spaces. External impulses and food for thought are a good way of identifying one’s own blind spots and looking beyond one’s own horizon.

Workshops and networking events serve this purpose. Where attending in person is difficult, webinars and other forms of digital exchange do the same, apart from the chat at the coffee machine.

A further measure against blind spots is second-order observation. This involves regularly adopting a meta-perspective and reflecting on how the actions and working methods of one’s own organisation and developments in the environment are observed and evaluated, and how the organisation makes distinctions.

How the frameworks of observation and evaluation are designed depends strongly on the organisation in question. They are largely determined by its identity and its self-understanding of goals and purpose. A hospital considers completely different information relevant than a bank and therefore works with quite different distinctions and criteria.

Ecological issues show how such frameworks change over time. Since public sensitivity and buying behaviour have changed, a company’s environmental awareness influences its image and environmental damage can mean financial disadvantages, corresponding criteria are increasingly being taken into account in decision-making.

The criteria usually remain invisible in everyday operations. They therefore need to be put to the test regularly. The implicit frameworks of observation and evaluation of the organisation, and one’s own, must be worked out explicitly, beginning with examining which distinctions are used in gathering information.

Four questions are helpful. How do we explain our reality to ourselves? What do we not see because of our distinctions? Which options for action do our criteria of distinction and patterns of explanation make possible, and which do they block? How do we recognise and define problems, and does this way of doing so contribute to the problems arising in the first place?

Such questions make the implicitly existing frameworks explicit and thus workable. Anyone who knows the lens through which they look also recognises what they do not see with it. Anyone who knows what they do not see can adjust their frameworks and reduce their blind spots.

Two frameworks are to be distinguished. The framework of observation determines which dimensions are observed and which are not, and which aspects within a dimension are of interest. Examples are market developments, competitors or employees.

The framework of evaluation determines by which criteria an observation is judged relevant. Do market developments meet expectations or not? Is the competitor judged capable of keeping up with one’s own innovations or not?

Nobody knows what is coming. The future is and remains fundamentally uncertain. To become able to decide, there is therefore only one option: to make assumptions to the best of one’s knowledge and belief, to develop strategies and visions of the future on this basis and to build follow-up decisions on them too.

When forming these hypotheses about future developments, it is important to include different perspectives and to use the knowledge available in the organisation, the so-called system intelligence.

Following Königswieser and Exner, the approach can be described as a cycle. Hypothesis formation is followed by the decision with which an intervention is planned. Then the intervention takes place. Afterwards, observation follows and information is gathered, from which new hypotheses arise.

Once assumptions about the future have been made, it is important to keep a constant eye on current developments and to integrate new observations and insights into existing processes. Uncertainty on all sides requires agile working with small steps, regular coordination and reflection. Such a foresighted way of working can save a great deal of time, especially in a crisis.

This takes courage and a willingness to correct course. Nobody should cling at all costs to decisions already taken. In dynamic times in particular, future developments can only be forecast with great uncertainty. It must therefore always be assumed that the state of knowledge may be different tomorrow and that there may be a better alternative tomorrow to the decision taken today.

The probability of error should always be communicated as well. This makes later correction easier. If other paths turn out to be more suitable and more promising, it takes courage to leave the wrong track and correct course.

Following Wimmer, organisational learning capacity can be shaped in three steps: variation, selection and re-stabilisation.

Feeding in impulses in a targeted way causes irritation, opens up new thinking spaces and illuminates blind spots. Deliberately generating such variation secures possible options for action for the organisation. The sources of irritation are expanded and the chances of learning impulses increase. Having more options than can be used gives organisational security. If paths taken have to be abandoned, new ones are already available.

Organisations tend to cling to what has proven itself and to select out the new and unknown. Selection is therefore a very demanding process that management must accompany and organise cleverly as a process. The aim is to increase the organisation’s internal capacity to process impulses for innovation. Critically reflected frameworks of observation and evaluation and interdisciplinary decision-making bodies that cut across hierarchies help to make room for the new in selection.

Once a decision has been made, implementation begins. Right to the end, organisations can resist the new and try to preserve established routines come what may. Re-stabilisation refers to the ability to turn the selected innovations back into usable routines. What is needed are learning architectures that interlink organisational and personal learning and take into account the non-triviality of organisations.

Measures intended to promote certain behaviours or ways of working do not always achieve the desired result. One possible reason is the difference between complicated and complex processes.

Understanding a spaceship down to the smallest detail requires years of study. Nevertheless, in the end it is clear: the spaceship will take off, provided everything is correctly assembled, every screw is in its place, the correct material has been used and the weather and other conditions are right.

Machines are trivial systems. In the way they work, they follow cause-and-effect relationships that can be explained physically and technologically. If something does not work as planned, there is a simple to complicated reason, from a loose screw to a complicated chain of different defects. When people and decisions come into play, things look quite different.

A football match is a non-trivial system. On the pitch are 22 individuals who ostensibly pursue the same goal but who repeatedly have to make decisions arising from the situation. Exploit the gap in the defence or pass to the teammate who is at a better angle to the goal? Go past the opponent on the right or the left?

Even the most renowned football expert could not predict what decisions the players will make in these situations, who will score when and how the match will end.

Organisations are more comparable to football matches than to machines. All employees do fulfil a particular function, as a screw does in a machine. In people’s heads, however, complex processes take place: from the interpretation of situations and tasks, through the attribution of meaning, to the motive of wanting to achieve personal goals.

These complex processes and social dynamics make it difficult or impossible to predict actions and their effects. The complexity of organisational phenomena and the importance of social dynamics should therefore not be underestimated. Scepticism is called for when well-meaning advisers propose trivialising solutions and measures to bring about necessary organisational change.

Uncertainty about the future, dynamic developments and the lack of predictability are often regretted. In fact, this uncertainty is the basic prerequisite for entrepreneurial action.

A thought experiment makes this clear. Suppose a company knew exactly how markets, social needs and customer behaviour would develop in the coming months and years. That sounds tempting. But if all competitors had the same information, it would remain unclear how a competitive advantage could still be achieved and how a company could set itself apart from the competition.

Because this information is not available with certainty and decisions are made on the basis of assumptions, it becomes possible in the first place to recognise trends and developments before everyone else. Success comes to those who discover needs and problems in the market or in society for which there are not yet any good solutions, and who find clever answers to them.

Uncertainty can therefore be regarded as the source of entrepreneurial activity and as an opportunity to actively help shape one’s own environment with innovative and surprising solutions.

This is the basic idea of the white paper: a systems-theoretical attitude can be a valuable advantage, especially in dynamic times, because it reckons with blind spots, complexity and uncertainty.