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.

View my profile on LinkedIn: www.linkedin.com/in/phyllislajunewright/

Follow @PhyllWright Twitter

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.

 

Part IV: Leadership and Organization Development by Design - Strategic Organizational Frameworks

What was I thinking? Isn't that the question we most often come up with when we fail at something? Well, as discussed in the last post, leadership thinking and decision making is astronomically important. Why? Because, as Odiorne and Grant remind us, mistakes in strategy lead to mistakes in goals and mistakes in goals lead to mistakes in activities. Can you imagine the significant waste of an entire organization's members leaning their ladders against and climbing the wrong walls? If the organization is a United States publicly traded company, then this waste is typically recognized quickly and brutally punished on Wall Street. This is as it should be! Whether the organization is on Wall Street or Non-Profit Corner, leadership thinking and decision making matter in the creation of value. 

 

What does Hodgkinson have to say about it? He said if an organization's strategies are shaped by the mental models or frames of its leaders, then we should study the models or frames to understand the processes and mechanisms through which strategies are formed and changed. Hodginkson documented three frames for creating managerial and organizational strategy. The frames are:

• economic
• organization theory and
• cognitive

McGee argues effective strategies are a result of the careful inclusion of elements of all three frames.

So, let's take a closer look at each frame.

In the economic frame, the experiences within the world can be placed into boxes. The experiences within each box are the rational outcomes explained by general economic laws. For example, prices rise when demand is greater than the supply. McGee proposed the problem with the frame is its simplistic underlying assumptions about individual and collective behavior. In other words, one size is a fit for all.

 

Essentially, McGee challenges whether the linear thinking, no-frills application, and rear view mirror perspective of the frame are appropriate responses to intricately complex situations.

 

The organization theory frame essentially emphasizes the economic model. Its “principles of specialization and coordination are means of simplifying and rationalizing the organization’s behavior” (McGee, 2005, p. xvii). The specialization or division of labor lends itself to hierarchical, silo, and bureaucratic behavior.

 

The problem with the frame is similar to that of the economic frame. Difficulty arises from its simplistic assumptions about individual and collective behavior.

 

Hodgkinson’s cognitive frame for creating managerial and organizational strategy is characterized by strategic thinking. It is built on the argument that the difference between success and failure can be attributed to the extent to which leaders can make sense of and respond to rapidly changing and difficult situations.

 

Making sense of situations or circumstances requires leaders to be capable of interpreting information as close to reality as possible. Sense making is also required in the context of complexity.

 

Hodgkinson wrote leaders in organizations often deal with multiple and conflicting goals and make decisions with incomplete understanding of imperfect information. Therefore, leaders develop a simplified understanding of reality by creating cognitive or mental models that are the outcome of filtering and organizing the multitudes of information they receive. Leaders use the information to shape macro-organizational strategy.

 

What is any self-respecting Leadership and Organization Development (L&OD) professional to do

given these circumstances? We are back to discovering underlying assumptions. The added challenge

 

is to recognize the leader's organizational framework. Is it:

 

1. a tidy one size fits all or stay within the box frame?

 

2. an orderly, chain of command, and control frame?

 

3. a strategic frame?

 

4. or a frame formed by a combination of the above?

Remember...Hodgkinson appropriately proposed the leader's mental frame should be an 

applicable combination of the economic, organizational, and cognitive models. So, would the

use of a consultative approach in which alternatives are offered to the leader based upon an

understanding of his/her thought processes

and/or an offer to support the leader's facilitation

of a discussion with a cross-function of trusted

colleagues in which underlying assumptions

are disclosed and constructively challenged

support better decisions and outcomes?

The objectives of the discussions are 

determination and clarity regarding

approaches (cognitive frame), order

(organizational frame), and boundaries

(economic frame). If L&OD is to be a trusted advisor, then this is the uncomfortable

territory within which a great degree of savvy and influence must be exercised to

help leaders see the water in which they are swimming.

 

 

In the next post, we will talk about environmental dynamism and complexity!

You will gain an appreciation for how these factors affect leadership thinking and decision

making! 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.

View my profile on LinkedIn: www.linkedin.com/in/phyllislajunewright/

Follow @PhyllWright Twitter

References

Grant, R. M. (2010). Contemporary strategy analysis (Seventh ed.). Chichester, United

          Kingdom: John Wiley & Sons, Ltd.

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

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

McGee, J. (2005). Foreward. Images of competitive space: A study of managerial and

          organizational strategic cognition. G. P. Hodgkinson. New York, NY: Palgrave

          MacMillan.

Odiorne, G. S. (1979). MBO II: A system of managerial leadership for the 80's. Belmont,

          CA: FearonPitman Publishers, Inc.