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 II: Leadership and Organization Development by Design - Organization Strategy

According to Robert Grant, strategy is about winning and strategy links the organization to its environment.

I recall a conversation a year or so ago in which a leader and I were discussing the misuses of the word "strategic"? It sometimes seems that people use the adjective, strategic, to indicate they are visionaries who leave the details to others. Misuse of the term strategic, to borrow a Venita-ism, just "wears me slick". So, let's do a little level setting.

What does "strategy" mean? Robert Grant and Jim Underwood said, strategy is an approach or a plan that answers where and how organizations will compete to make money or create value for their benefactors. For-profit and commercial non-profit organizations also have to ensure they are generating the highest net present value of the organization's future cash flow. Underwood suggests companies who create and execute good strategy are far more successful in achieving the goal of profit maximization than those who do not.

As a quick reminder, Grant wrote the primary benefactors of profits in for-profit organizations are the shareholders. According to Hansmann, in non-profits and government owned organizations the public is the primary benefactor. Non-profits and government owned organizations may also have security holders who are benefactors (e.g., those who have purchased Treasury notes, bonds, T-bills, etc.).

Grant also proposed the firm’s goals and values are or should be directly linked to its strategies. Consequently, developing winning strategies requires significant thinking agility of leaders and staff within organizations. Hickman described leadership as sensing, analyzing, and incorporating environmental changes through processes of interactions between themselves and employees. Yet, he also proposed, while leadership initiates the first steps toward change, employees are expected to be involved as “highly motivated critical thinkers and actors who perform equal but different roles than leaders to meet their mutual goals”. Do you think this sounds like a recipe for employee involvement and engagement? Under these conditions, hoarding information is definitely not a good idea.

So, why should leadership and organization development (L&OD) practitioners care? Great question! Let's assume leadership has a somewhat accurate perspective on the organization's environment. Accordingly, let's also assume leadership has developed a strategy, a critical few strategic goals, and objectives. Let's also assume you have facilitated or they have let you in on their thinking.

Once you are clear about their thoughts, as L&OD practitioners, the job is to ask key questions and provide consultation regarding talent implications and gaps. Why? The reason is alignment. Yes, it is the best way to ensure L&OD work is focused and cohesively meeting the organization's needs. Key questions you could ask and collaboratively answer once you are clear regarding the environment, strategic goals, and objectives include:

1. What must leaders and staff know?
2. How must they behave/act? and...
3. What must they be able to do in order to respond to environmental challenges, execute the strategy, and achieve the resulting key strategic goals and objectives?
4. Which, if any roles, are missing or need to change?
5. How will knowledge, skills, behaviors, roles, and goal accomplishment be reinforced?
6. How will knowledge, skills, behaviors, roles, and goal directives be quickly adjusted as environmental challenges dictate?
7. How will differentiation in rewards for success be leveraged to motivate leaders and staff? 
8. How will you continuously improve and tie outcome metrics to your L&OD efforts?

To be strategic, the big picture or vision is of critical importance and so is some sense of the appropriate level of details or plans. Chaotic and complex times demand some non-linear and inclusive thinking. In these times, to borrow another Amy-ism, we should consider "both/and" when comparing alternatives rather than risk the fallacies of either/or decisions.

After all, truly strategic people should be able to show meaningful outcomes that support their claim of "strategery"! As you may recall, "strategery" was coined by James Downey on Saturday Night Live in a sketch where Will Ferrell played President George W. Bush. The term was later adopted by some in Bush's administration as a joke. Yes, I am joking a little and I am very serious at the same time!

In the next blog, strategic agility will be the topic. 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

This post contains a phrase I adored from one of my former leaders. Her name is Venita McCellon-Allen. She gave me an opportunity, the encouragement, and the motivation to grow! Thank you Venita. The phrase or Venita-ism is "wears me slick"! This post also contains another Amy-ism from Amy Tawney. She could produce these nuggets of gold in a split second flat. This time its "both/and". Don't you love it!

References


Grant, R. M. (1998). Contemporary strategy analysis (Third ed.). Oxford, United Kingdom:

      Blackwell.

Grant, R. M. (2010). Contemporary strategy analysis (Seventh ed.). Chichester, United      
     
      Kingdom: John Wiley & Sons, Ltd.

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

Underwood, J. D. (2002). The new corporate strategy. Oxford, United Kingdom: Capstone

     Publishing.