why tailless rats should alarm you…how to apply a systemic approach to business transformation
There is no act that is not the coronation of an infinite series of causes and the source of an infinite series of effects.
"The Flower of Coleridge", Jorge Luis Borges
Systems thinking is one of the most powerful tools in the leader’s toolkit. It prioritises an understanding of the whole over any individual part of a pattern. Systems thinkers can promise to better manage complexity, turn problems into opportunities and enact small changes that produce big results. It can even help you better predict future outcomes. But to begin to grasp it, let us first turn to the past.
Rats and sales targets: lessons from history
1902, Hanoi, French Indochina, Governor-General Paul Doumer mops the sweat from his furrowed brow. The flashing blades of his oil powered fan rustle the papers on his mahogany desk but offer no respite. He curses his luck.
His failed tenure as French Minister of Finance saw him shipped out to the empire. His determination, however, remained unyielding. In a few short years, he had rebuilt the inner city in grand Parisian style, including the Grand Palais in which he sat. Yet it was what lay hidden beneath that risked the entire enterprise. 19km of recently constructed sewer had led to an explosion in the rat population. Efforts to control it had stalled and the recently discovered link between rats and plague meant officials were desperate to get the situation under control. Doumer heard the scuttle of paws outside his window and in a moment of anguish signed the papers implementing a bounty for each rat tail locals handed to the government.
Within days hundreds of tails started flooding into municipal offices, within weeks thousands. Suspicions first arose when officials spotted rats running around without tails. Entrepreneurial citizens had found more effective ways of acquiring their bounty – why kill something that can breed a future source of income? The discovery of rat farms at the edge of the city drew a close to the initiative. Hanoi now had more rats than ever. In 1906, an outbreak of bubonic plague killed 263 people.
Soft-handed-office-dwellers like me might connect to the more recognisable tale of Wells Fargo imposing overly ambitious sales goals, under threat of expulsion for failure to meet quota. Employees responded with industrial levels of fraud, creating over a million fake accounts and signing customers up for products without their knowledge. The current (and growing) cost of fines and lawsuits related to their sales strategy is now over $3billion.
Isolated solutions = failed fixes
What unites these cases? At a basic level we can see that these are solutions to a problem that failed – in fact making it worse. We could then categorise them as perverse incentives; incentives (bounties, sales targets) that drove undesirable results contrary to their intention. A deeper analysis, however, asks not just how effectively these solutions were implemented, but how and why they were formulated at all. Wells Fargo and the Governor-General shared a hypothesis that their problem was an isolated event that could be resolved by a targeted action and that these variables existed in a direct relationship. Underpinning this is the belief that the world itself is created of separate, unrelated forces.
The default corporate approach to problems is to see them as a linear issue to (ideally) avoid or resolve through a discrete fix. If the fix starts to fail, we look to improve the current tactic rather than widen our lens. In both our case studies the ‘solution’ was indeed pushed harder before it completely unravelled.
The systems thinker takes a different perspective. The world is complex, uncertain, and our actions contribute to and create the problems we experience. Our education and management systems train us to expect our actions to lead directly to a desired outcome. Instead, they spawn a chain of events that each generate a set of outcomes of their own, some may be good, others less so. More Cat’s Cradle than Newton’s Cradle, so to speak.
“Businesses… are bound by invisible fabrics of interrelated actions, which often take years to fully play out their effects on each other. Since we are part of that lacework ourselves, it’s doubly hard to see the whole pattern of change. Instead we tend to focus on snapshots of isolated parts of the system, and wonder why our deepest problems never seem to get resolved.”
Peter Senge, The Fifth Discipline
Systems thinking: an Egremont case study
A problem in a specific part of the business reflects a problem with the wider system. It is a single outcome in a chain of events that each has an influence on the rest. An influence often hidden from view. Could your underperforming logistics team be held back by driver motivation, production schedules, salespeople’s promises, or even, dare I say it, their leaders? When we start by examining the wood rather than the trees, we learn what’s truly happening in our organisation – and problems become opportunities to improve the entire business. Perhaps even to create a whole that’s greater than the sum of its parts.
Thinking about the overarching organisational system is essential to Egremont’s transformation approach. When we look at a real client example, we can see how understanding the system is the key driver of effective change management.
One of our clients was frustrated that decisions being made in the Board Room were not translating into action in the organisation. Focused on the linear, apparently isolated issue, the executive team applied their discrete fix by making several futile attempts to ‘tell people harder’ to enact the decisions. Seeking to understand the deeper system at play in the organisation, our joint client/consulting team identified what became known as ‘The Bog’, a connected set of factors and influences which collectively caused decisions to become stuck. At its simplest level, we found the following system at play:
This simple picture belies the complexity that lurked behind it. Our analysis, conducted via interviews, focus groups and desktop diagnostic studies, revealed multiple interlinking stories and statistics all contributing to the overall story of why decisions in the boardroom did not translate into actions in the organisation. Understanding this systems level picture at its deepest level, we were then able to develop a set of coordinated interventions to reinvigorate the system as a whole and elevate the organisation out of “The Bog”.
As such, we began by improving the governance process at the executive level, clarifying accountabilities, decision rights, information provision and increasing speed of decision making. Building on this foundation we worked to create strategic clarity and sharpened organisational priorities, then worked and shared the strategy with the full senior leadership community to create alignment on what really mattered. We enhanced communication by creating two-way engagement to ensure that decisions were understood – taking more care to set people and teams up for collective success, limiting ambiguity and ensuring clarity of expectations. Finally, we made performance and progress visible throughout the organisation to shine a light on priorities, remove duplication and prevent things falling through the cracks.
Are you heading in the right direction?
Every organisation has its share of ‘pests’. That one link in the chain that seems to hold everyone else back. You probably have one in mind as you read this. A process you can’t get right, a team that are a law unto themselves, a product that’s never quite ready... You’ve tried everything – and a bit more for good measure – but nothing seems to work. Perhaps it’s time to look beyond organisational silos and consider how your ‘problem area’ interacts with the seemingly well-oiled machine operating elsewhere. You’ll learn a lot more about the system, about yourself, and you might find the solution lies (at least in part) elsewhere.
“If you do not change direction, you might end up where you are heading” Lao Tzu