Part V - Leadership and Organization Development by Design - Environmental Dynamism and Complexity

What do snowflakes have to do with leadership? Snowflakes are unique in structure and obtain their shape and size as the flake moves through the atmosphere and is affected by different temperatures and humidity systems. Since snowflakes are virtually unique, their structure is complex and contains a high degree of variation. Just as the natural environment impacts the complexity and variation in the size and shape of a snowflake, the organization's environment impacts the magnitude and character of leadership thinking and decision making.

Two terms emerging from the description of snowflake formation come to mind as I contemplate leadership thinking and decision making. They are environmental dynamism and complexity.


Just typing those terms tends to give me a slight headache! However, those awfully big words convey very important concepts which can affect leaders' thought processes. If understood and appropriately acted upon, then these concepts can help to frame and appreciate the perils and victories of leadership decision making.

 

So, what is environmental complexity? Aldrich essentially defines environmental complexity as a function of the level of standardization (uniformity) or variation (heterogeneity) of firms within an industry.  Can you think of a firm that is in a fairly standardized industry? How about banks...?

What is dynamism? Aldrich describes dynamism as the variability of the industry’s growth or market instability. Can you think of an industry growing by leaps and bounds? How about Internet-related services and products...?

Some researchers view complexity as meaning the number of factors in an environmental event and dynamism as meaning the rate of change in and among the factors (Clark, Varadarajan, & Pride, 1994; Sharfman & Dean, 1991).

Underwood describes complexity as nonlinear or unpredictable interactions of systems within the global system in which there are still elements of predictability. The factors that need to be understood include economic, government, legal, media, climate, moral, psychological/social, and ideological. According to Griffin, organizational environments consist of internal and external forces which must be understood in the context of change. Cummings and Worley argue major disruptions in an organization’s external and internal environment can trigger transformation in response to or in anticipation of those changes. More importantly, Underwood describes marketing and technology forces as dictating the rate of change. The two combined indicate the level of competition in the environment. The term Underwood uses to describe the level of competition is turbulence.

Why are these distinctions important as it pertains to how leaders think? Can you say the words "increased potential for mismatch"? Yes, according to Payne, as complexity of a decision increases decision makers will go for problem solving, learning, and discovery techniques that eliminate choices as quickly as possible. Their choices will be based on limited exploration and evaluation of information. In times of complexity and uncertainty, leaders’ with mental models limited to Hodgkinson's linear economic model are more likely to mismatch the response of the organization and the demands of the environment (Julian & Scrifres, 2002).be valid. The

Julian and Scifres propose decision-makers who operate in stable and simple environments tended to think there is plenty of time to respond to emerging strategic issues. Their thinking is made plausible because it has been reinforced by their past experiences.  In high levels of dynamism and complexity, the tendency to think there is plenty of time to respond leads to what statisticians refer to as an increase in Type II errors.

This environmental misperception leads to decision-makers choosing not to act when they should (Boyd, Dess, & Rasheed, 1993). In times of stability, the potential for Type I errors increases when the mental model is opposite of what was previously described. This misperception leads to decision makers taking unnecessary actions.

What is any self-respecting Leadership and Organization Development professional to do given these circumstances? Again, the answer points back to understanding underlying assumptions and the frame the leader utilizes as he/she processes information. The added challenge is to get clarity on how the complexity of the environment and the dynamics of the industry are informing his/her thinking.

While you may choose for your consultation to be simple and "surface deep", remember your counsel, solutions, and credibility are linked to clarity regarding the situation and the outcomes expected. So, go deeper. Ask more of the right questions to understand and then to simplify the situation. Once you understand and simplify the situation, then you can get to the golden treasure known as clarity. Remember decisions are no better than the information they are based upon.

The next post will be dedicated to the topic of munificence. Don't let that word worry you too much! The word munificence refers to an abundance or scarcity mentality. I'll bet you can't wait to see what impact this mentality has on leadership thinking and decision making. However, I do imagine you already know! Nonetheless, take a look at the next post to learn more. Until then ask and answer the right questions in the right way and be the change you want to see! 

Phyllis L. Wright, Ph.D.

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References

Aldrich, H. E. (1979). Organizations and environments. Stanford, NC: Stanford

        University Press.

 

Boyd, B. K., Dess, G. G., & Rasheed, A. M. A. (1993). Divergence between archival

        and perceptual measures of the environment: Causes and consequences. The

        Academy of Management Review, 18(2), 204-226.  Retrieved from

        http://www.jstor.org 

 

Clark, T., Varadarajan, P. R., & Pride. W. M. (1994). Environmental management:

        The construct and research propositions. Journal of Business Research, 29(1),

        23-38. Abstract retrieved from http://www.sciencedirect.com

 

Cummings, T. G., & Worley, C. G. (1997). Organization development and change

        (Sixth ed.). Cincinnati, OH: South-Western College Publishing.

 

Hodgkinson, G. P. (2005). Images of competitive space: A study of managerial

         and organizational strategic cognition. New York, NY: Palgrave MacMillan.

Julian, S. D., & Scifres, E. (2002). An interpretive perspective on the role of

         strategic control in triggering strategic change. Journal of Business Strategies,

        19(2), 141. Retrieved from http://www.questia.com 

Underwood, J. D. (2002b). Thriving in e-chaos: Corporate strategy for uncertain
        times. New York, NY: Writers Press Club.