Managing organisational complexity

My recent post on the #Occupy movement and how it can help organisations become more social prompted me to dig out and (re)read some of the great work written by the late and great organisational thinker and writer, Colin Ward.

One short essay in particular, Harmony Through Complexity, started me thinking again about non-hierarchical and self-organising systems and how today’s ‘networked enterprises’ – to use McKinsey’s terminology – should embrace Ward’s clear and forward-thinking work to become better at managing the organisational complexity necessary to survive in the contemporary networked reality.

Originally published in 1978, Harmony Through Complexity is well ahead its time, drawing as it does on anthropological studies of tribal societies, linking this with the (then) still emerging field of cybernetics and distilling this complexity into a clear argument for the benefits of leaderless organisation.

Ward’s fundamental argument is that tribal societies, organised around informal and largely leaderless practices are far from simple or primitive as sociological or scientific “experts” in the civilised West believed. They are, rather, held together by vastly complex social arrangements that rely on customs, cooperation and collaboration to evolve and survive.

Such “socially-calibrated” practices are not, Ward suggests, representative of “society’s simplicity and lack of organisation, but of its complexity and multiplicity of social organisations.”

In fact, Ward argues, civil society institutions from Government through to NGOs and businesses can – and should – learn a lot from these social, self-organising arrangements.

Putting these anthropological insights into an organisational framework Ward fascinatingly makes the connection between these complex, tribal organisational forms and cybernetic management theory – still a relatively new idea in 1978 – which offers a novel way of approaching the management of “complex, self-organising systems”.

For a handy overview of systems thinking, see Joanna Beltowska and Amy Rae’s great presentation below:

Ward also draws on the work of British cybernetician William Ross Ashby to highlight the ‘Principle of Requisite Variety’. This organisational theory demands that the variety of practices within a controlling system must be at least as varied as the system it controls. Or to put it another way, while we have traditionally attempted to ‘simplify’ organisational structures by creating discrete, siloed departments managed hierarchically, the reality is that effective organisational co-ordination and management can only come from an approach that is as social and complex as the organisation itself.

The full problem organisations face is brought to life by another British cybernetics pioneer and mathematician, John D. McEwan, who observed:

First we have the model current among management theorists in industry. This is the model of a rigid pyramidical hier­archy, with lines of ‘communication and command’ running from the top to the bottom. There is fIxed delineation of responsibility, each element has a specified role, and the procedures to be followed at any level are determined within fairly narrow limits, and may only be changed by decisions of elements higher in the hierarchy. The role of the top group of the hierarchy is sometimes supposed to be comparable to the ‘brain’ of the system.

The other model is from the cybernetics of evolving self-organising systems. Here we have a system of large variety, sufficient to cope with a complex, unpredictable environment. Its characteristics are changing structure, modifying itself under continual feedback from the environ­ment, exhibiting ‘redundancy of potential command’, and involving complex interlocking control structures. Learning and decision-making are distributed throughout the system, denser perhaps in some areas than in others.

So far, so good. But what can we learn from this? The top-down model is widely adopted and ingrained in current industrial and social practice. It’s the dominant model for government, schools, businesses, NGOs and most other institutions conceived and established in the industrial era. It’s how we used to operating so why should we change?

One reason we need to think about helping organisations to embrace complexity and become more social is that failing to do so impacts signficantly on their viability and sustainability.

Research by the Deloitte consultant and ‘edge’ guru, John Hagel, shows that the efficacy and performance of US firms has fallen significantly with return-on-assets down 75% from 1965. Not only that, but the current life-expectancy of businesses in Standard & Poor’s 500 has fallen from 75 years in 1937 to just 15 years today.

Significantly Hagel traces the cause of these downward trends to the mid-20th century when companies began to consolidate their structure and operations, rather than seek continual institutional innovation and adapt to the growing complexity of the social environment.

The significance of this institutional innovation is highlighted by Dave Grey from XPlane who, drawing on the work of Shell’s Head of Startegic Planning, Arie de Geus, argues that sustainable and successful organisations all feature three common traits:

• Ecosystems: Long-lived companies were decentralized. They tolerated “eccentric activities at the margins.” They were very active in partnerships and joint ventures. The boundaries of the company were less clearly delineated, and local groups had more autonomy over their decisions, than you would expect in the typical global corporation.

• Strong identity: Although the organization was loosely controlled, long-lived companies were connected by a strong, shared culture. Everyone in the company understood the company’s values. These companies tended to promote from within in order to keep that culture strong.

• Active listening: Long-lived companies had their eyes and ears focused on the world around them and were constantly seeking opportunities. Because of their decentralized nature and strong shared culture, it was easier for them to spot opportunities in the changing world and act, proactively and decisively, to capitalize on them.

Bringing all this together it’s interesting to see how a lot of what we have been doing recently in the consultancy team here at We Are Social seems to support the call for embracing and empowering organisational complexity.

For example, you can quite nicely boil down our process to an ‘active listening’ stage where ongoing research is conducted across an organisation’s internal culture and its external social landscape; followed by a strategy stage where we use research insights to identify organisational shared-values or define the social capital that binds internal and external networks together; next we build on this strategic vision by designing a social business ‘ecosystem’ that enables networked communication – both internally and externally. Finally, we then help clients create an evaluation framework to ensure they are measuring and improving the performance of their organisational ecosystem.

While this process is, of course, bespoke and flexible enough to meet client’s diverse needs at it’s core is the ability to enable clients to embrace and harness the emergent potential of their organisational complexity.