Adapting to complexity

Over the past few decades, the world of business has become increasingly complex and unpredictable. This development is largely the upshot of the transformative effects of the information revolution and the impact of rapid globalization.

Perhaps even more significant is the fact that organizational leaders themselves are becoming increasingly aware that business organizations and their environments are not as stable and as manageable as they were once thought to be, and that the management problems that they face are not as solvable as traditionally assumed. There has been a growing realization among business managers the world over that standard textbook solutions and long-established management principles have ceased to be effective—if indeed they have ever been—in dealing with the highly unstructured and ill-defined management problems that they face today.

Yet, there remains to be little agreement among management practitioners and management thinkers alike on how to deal with this unfamiliar world of complexity. For all the sophisticated analytical tools and theoretical models at their disposal, they continue to be at wit’s end on how best to cope with a world that is in a continuing stake of flux.

The Economist issue of Nov. 23, 2013 reported that on the 14th and 15th of that month, several hundred  management leaders from all over the globe came together at the Austrian capital of Vienna to exchange views on current business issues, and one of the top items on their agenda was how to manage complexity.

The path of least resistance is simply to assume stability where there is none and to handle otherwise complex problems by using the same template decision rules and management principles which, to this day, are standard fare in most business schools. Many of us remember the so-called KISS (acronym for “keep it simple, stupid”) principle which became popular in the 1960s. According to this rule, the best way to handle difficult management problems is to avoid unnecessary complexity and to apply simple, easy to follow solutions. This approach typically involves focusing on a few essential decision variables, specifying their potential impact on organizational performance, and taking action on the assumption that everything else in the organization and the environment remains unchanged.

We believe that this is an escapist stance, and is tantamount to closing our eyes to reality.

Managers are increasingly aware that the problems they face are unique to their organizations, and that these should be handled with solutions that are equally unique to their situations. So-called evidence-based solutions might have proven to be effective elsewhere, but not necessarily in one’s own organization. Moreover, defining problems in their traditionally accepted formats and applying the “technically correct” solutions often lead to disappointing results, the reason being that no sooner are the solutions put in place when the problems disappear and new ones emerge.

An alternative and more realistic approach is to address complexity head on, and to search for solutions that are more appropriate for dealing with this phenomenon. But first, we must develop a clear understanding of the workings of complex systems, and a better appreciation of how new patterns continuously emerge from the interaction of the multitudinous components that comprise complex systems.

Some guidelines

There are a number of promising tools for dealing with complexity, techniques such as agent-based modeling and predictive analytics. However, there are no established principles for managing complex organizations, nor are there template solutions for dealing with the types of problems typically found in them. Nonetheless, there are a number of general guidelines to help us in our quest for practical ways of adapting to complexity.

Rethink strategic goals

Business organizations and other forms of social institutions are commonly referred to as complex adaptive systems (CAS, aka “learning organizations”). Such systems are in a continuous state of emergence, and they seldom settle at any permanent state, much less one that could be characterized as being “in equilibrium” or “optimal.” The strategic quest for the best of all possible worlds should therefore give way to one of simply nudging the system in preferred directions, or to avert an impending disaster. This is accomplished by making small incremental changes in the face of continually shifting trends and emergent patterns both within the organization and in its environment.

Look at the big picture

Complex systems comprise of highly interactive components that continuously adapt to their changing environments. A change in any of those components, no matter how small, is bound to have ripple effects elsewhere in the system (a phenomenon popularly described as the “butterfly effect”). Organizational managers should therefore refrain from focusing on narrowly defined problems and should avoid making changes in any part of the organization without first ascertaining their overall impact.

Aim for maximum flexibility

To insure the organization’s survivability in a continuously changing and increasingly hostile environment, organizational managers should design organizations for maximum flexibility by judiciously allocating decision responsibilities among organizational members, and by creating an organizational culture of continuous learning and innovation.

Place of leadership

Adapting to complexity requires us to challenge traditional concepts of leadership. Gone are the days of the archetypal “great leader” who knows best what needs to be done, and who has the necessary personal skills to effectively goad, inspire or  intimidate others to play their assigned parts. In today’s knowledge-driven world, the exemplary leader is one who knows where the relevant knowledge can be found, and how these can be brought together in a massive collaborative effort involving individuals within and outside the organization.

(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a former Professor of Management in UP Mindanao. Feedback at <[email protected]> and <[email protected]>. For previous articles, visit <map.org.ph>.)