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.  

 

 

  

Part I: Leadership and Organization Development by Design Series - Organization Environment

Upon which foundations and according to what structural plans have organizations’ leadership and organization development (L&OD) programs been designed?

Josh Bersin, principal and founder of Bersin by Deloitte, recently noted in a LinkedIn article the following conclusions from 50 or so chief learning officers:

• Leadership development is a critically important challenge.
• To understand leadership, one must understand followership.
• Leadership development programs are too fragmented and not focused enough on company specific and current business strategy.

The first two posts for this blog were focused on conclusions one and two. The next series of posts are dedicated to exploring causes and solutions for the third conclusion...program fragmentation and lack of specific business focus. The discussions will include:

• Organization Environment
• Organization Strategy
• Strategic Agility
• Strategic Organizational Frameworks
• Environmental Dynamism and Complexity
• Munificence: Resource Scarcity or Abundance
• Distributed Intelligence and Accountability
• A Leadership Development Program Model

Let’s begin with organization environment.

Henry Hansmann said there are fundamentally three forms of business ownership in the United States. The three forms of ownership are for-profit, private nonprofit, and public or government-owned. Private nonprofits are categorized as either donative or commercial. Donative nonprofits receive their income from donors who are in effect purchasing services and/or goods to be delivered to a third party. Commercial nonprofits receive their revenue from fees for services and/or goods charged directly to the payor. 

Regardless of the form of business, what is done by organizations should create value. An organization’s environment should inform how leadership practically and strategically guides the creation of value. What is value? Robert M. Grant describes value as the monetary worth of a product or service. If L&OD programs align with building capabilities that increase the worth of products and services, then L&OD programs have a better chance of adding value. So, what is an organization’s environment? 

Ricky W. Griffin proposed an organization’s environment consists of internal and external forces that must be understood from the perspective of change. Forces include economic, government, legal, media, etc. Thomas Cummings and Christopher Worley correctly said major disruptions in an organization’s external and internal environment have the possibility of triggering transformation in response to or in anticipation of those changes. The most recent United States industry illustration is health care. 

Additionally, Jim Underwood described marketing and technology forces as dictating the rate of change. The two combined indicate the level of turbulence or competition in the environment. Why is this important? Two words describe current business environments across the world. They are chaos and complexity. Technological evolution is causing the rate of change to be exponential.

John W. Payne proposed, when uncertainty and complexity increase, leaders take mental shortcuts to quickly reduce the number of options available. Their decisions are based on limited information search and evaluation.  So, what? The question is perfect. Under chaotic, uncertain, and complex conditions, Scott Julian and Elton Scrifres proposed leaders are more likely to mismatch the response of the organization and the demands of the environment.

Potential for mismatch is essentially why L&OD practitioners, executive sponsors/leaders, and leadership industry experts need environmental clarity specific to the business. It provides a pathway to program alignment with the organization’s response to its environmental demands. After all, appropriate response is the stake upon which value creation hinges. 

The next post is dedicated to organizational strategy. Until then, ask and seek answers to the right questions in the right way and be the change you want to see. Let the conversation begin!

Phyllis L. Wright, Ph.D.

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

Follow @PhyllWright Twitter

References
  
Cummings, T. G., & Worley, C. G. (1997). Organization development and change (Sixth
        
      ed.).  Cincinnati, OH: South-Western College Publishing.

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

     Kingdom: John Wiley & Sons, Ltd.

Griffin, R. W. (1990). Management (Third ed.). Boston, MA: Houghton Mifflin Company. 

Hansmann, H. (1996). The changing roles of public, private, and nonprofit enterprise in 

     education, health care, and other human services. In V. R. Fuchs, (Ed.), Individual and 

     Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in 

     America (pp. 245 - 275). Chicago, IL: University of Chicago Press. Retrieved from 

     http://www.law.yale.edu/documents/pdf/Faculty/Hansmannthechangingroles.pdf

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/read/5000638778

Payne, J. W. (1976). Task complexity and contingent processing in decision making: An 

     information search and protocol analysis. Organizational Behavior and Human 

     Performance, 16(2), 366-387. Retrieved from http://www.sciencedirect.com.

Underwood, J. D. (2002). Thriving in e-chaos: Corporate strategy for uncertain times. 

    New York, NY: Writers Press Club. 

Part 1: The 50 Billion Dollar Leadership Development Questions

The leadership development industry is composed of the vendors selling their know-how and programs to organizations and individuals interested in developing leadership expertise. Is the leadership development industry in danger of death?

In The End of Leadership, Dr. Barbara Kellerman warns that if the industry continues in its current state, then it just may be. The book is a must read for leadership development scholars and practitioners. One major benefit of the book is the crisp and thorough review of the history of leadership. The second major benefit is the resulting dialogue on this topic. It is catching on fire. Hopefully, the result will be the development of a pathway to constructive change since one was not offered in the book.

In the book, Kellerman proposes the following:

• the leadership development industry has presented insufficient evidence to prove their success in preparing leaders despite companies' $50 billion annual investment.  Proof includes the:
• current political gridlock
• crisis in leadership highlighted by the 2008 economic breakdown
• continued and significant increase in the loss of credibility and trust in the competence and ethics of C-suite members, particularly in CEOs and political leaders
• teaching people how to follow is missing from the curriculum despite the seemingly sea change rise in followers' open challenges to leadership power, authority, and influence across the world.
• organizations' environments/contexts (contextual intelligence) are given less than desirable attention and are presented shortsightedly.
• the rapid acceleration in technology and use of social media, environmental complexity, and followership challenges end in the need to take a different viewpoint on the importance of leadership and on how to prepare those who lead. 
• the leader role has diminished in its importance.

Wait! Don’t shed another tear...just yet...into whatever you may be drinking at the moment! Let’s all hope Kellerman has confined her prediction to the end of the leadership development industry in its current state and not the end of leadership per se. After all, wouldn’t you agree the word “leader” suggests there are followers? Daringly, we can assert the majority of us are following someone either socially and/or professionally albeit passively or actively or somewhere in between. So, someone somewhere for some reason is being viewed as a leader. Social media such as Facebook, LinkedIn, and Twitter, according to Kellerman, has assisted followers in the erosion of the power, authority, and influence of leadership and in so doing the role of the leader has diminished. This is a sobering fact. Yet, I suggest the same media has also exponentially empowered leader and follower connections within and outside organizations’ traditional structures and has created a foundation upon which the leader/follower relationship is likely to be maintained, albeit in a very different form than exists today. As a result, rather than being reduced to the sands of time, I suggest that leadership will be forced to change from its current state and live on and up to its importance.

How should one respond to this state of affairs? Answers aren’t new! They have been offered by leadership theorists for years. Suggestions include time has passed for command and control leadership styles and time has come for wider distribution and free flow of information to all employees. There are many who have suggested change. Let’s focus on two theorists in addition to Kellerman for today.

Predicting chaos and complex times ahead, over fourteen years ago, Margaret Wheatley wrote information has to connect internally as it is distributed, interpreted, and acted upon by all members of the organization, not just its leaders. So, if information is still being hoarded in organizations by leaders given the current chaotic and complex environment, then what is the rationale for this behavior? Over fifteen years ago, along with Kellerman, Gill Robinson Hickman wrote the role of leaders and followers was changing. Hickman suggested that leaders and followers in organizations can and should exchange roles as appropriate. Specifically, he contended the philosophical shift in the functioning of leadership, while not negating authority, should be a "fluid" role in which the employee and leader move from employee to leader and leader to employee “based upon capabilities, expertise, motivation, ideas, and circumstances, not solely on position or authority”.  To what degree is this exchange being played out in organizations today? If not, then why not?

In Part II of this series, I will conclude with the $50 billion dollar leadership development questions. Until then, ask and seek answers to the right questions in the right way and be the change you want to see. Let the conversation begin!

Phyllis L. Wright, Ph.D.

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

Follow @PhyllWright Twitter

References:

Hickman, G. R. (Ed.). (1998). Leading organizations: Perspectives for a new era.

       Thousand Oaks, CA: Sage Publications, Inc.

Kellerman, B. (2012). The end of leadership. New York, NY: HarperCollins Publishers.

Wheatley, M. (1999). Leadership and the new science: Discovering order in a chaotic world. San

       Francisco, CA: Berrett-Koehler Publishers.