Thinkovate – from Intelligent Management

Is all that effort to make connections in a network a waste of time? Network theory has something to teach us about all that.

A lot of energy is consumed every day by people, groups, and organizations who frantically try to make as many connections  as possible. They do so for a reason: to increase their contacts and, as a consequence, their probability of communicating and exchanging information, services,  and products.

But this is not always a predictable effect. Why is that so?

The science of network theory and preferential attachment

We have come to understand that there is a very well known mechanism behind the growth of a network, and that is the “preferential attachment” mechanism.
In other words, node x will “choose” to connect more easily to node y instead of node z because node y is massively connected to other nodes, while node z is not. New developments in Network Theory show that the mechanism of “preferential attachment” can be understood in a different way.

It is important not just to consider the number of connections to every node but also the “affinity” between nodes to create an effective link. In other words, we can create as many connections as we like, with as many nodes as we wish, but if we don’t take into account the affinity factor, then  linkages will be weak, and the connections will turn out to be sterile.

An obvious example is Facebook. Do we prefer to connect to “popular“ people or to people we have some affinity with? We may have many connections and many friends, but an authentic and  regular communication will occur only with a limited subset of these connections. The rest of the connections will be inactive most of the time.

Make it relevant

The answer is not without ambiguity, but “similar” nodes (those with some affinities) are much more likely to have stronger linkages and more effective interdependencies. This is the reason why often the hectic effort people make to connect with as many other people as possible does not bear fruit. Only the “relevant” connections, those that are created by affinity, will endure and produce some strong (real) linkages that contribute to the growth of the network. The “redundant” linkages will, sooner than later, become sterile, inactive, and will lie idle. The ability to recognize affinities becomes crucial for the growth of the network.

Process mapping and the affinity factor

It is not surprising, then, that we can recognize this very same mechanism when we engage in mapping out processes and interdependencies inside an organization. Dr. W. Edwards Deming used to say: “If you can’t describe what you are doing as a process,  you don’t know what you are doing”.

The Deployment Flow Chart (DFC) is the tool we use to describe processes and interdependencies inside an organization. A flowchart is a diagram that describes a sequence of events, activities, tasks and decisions that transforms input in a system, or process, into output. Flowcharts are therefore the key to the development of a proper understanding of where, how and if each link adds value within the chain.

When we start mapping, we identify the main interdependencies and the relevant nodes that make the system, or “organization”, work. Even if we acknowledge that the system is a whole, and that everything and everybody is somehow interconnected, we must avoid creating artificial connections among people, or between different processes.  We must only place relevance on the ones that really matter, i.e. those that connect nodes with “work affinity”, and that make the system effective, thus facilitating its growth.

The idea, or the attempt, to connect everything will make the organization look like a very complex, messy, tangled-up system that functions very ineffectively. It is not always true that more connections facilitate the growth of the network (or system). What is true is that the identification of the relevant connections, i.e. those that connect nodes with some affinities, does contribute to an effective growth of the network.

Dr. Giovanni Siepe

See also:

Operating a Systemic Organization: The Playbook

Managing a Systemic Organization: The Information System

The Physics of Management: Network Theory and Us

After a hiatus over the New Year and preparations for a big move West to British Columbia, the Intelligent Management Blog is back!

What do a Theatre Director, an entrepreneur and an organizational scientist have in common? When it comes to creating a New Economics, a great deal.

Last weekend in Los Angeles, I had the pleasure of  attending the first public reading of a play by renowned American playwright, Donald Freed. The conversations I had with various participants present at this event reveal how many connections there can be among seemingly disparate  sectors. This is a brief summary of those conversations.

The Entrepreneur

The Chairman of Comstock Mining, John Winfield, has a long-term vision for how enterprise can revive an economy by bringing sustainable benefits to the community far beyond the simple taxes a mining company pays to its county. A successful mine can be the engine for stimulating a chain of related economic activities while preserving the heritage of a historical mining district.

The Theatre Director

Artistic Director of the York Theatre Royal in the UK, Damian Cruden, sees the future of theatre in its interdependence with its community, especially in an increasingly less subsidized arts sector. He foresees a future where the very survival of theatre is ultimately connected with its ability to engage the local community through stories that are relevant to that community. His highly successful revival last year of the medieval Mystery Plays in the ancient city of York is a case in point, with over 30,000 people participating.

The Organizational Scientist

Organizational scientist, Domenico Lepore, has developed an entire methodology based on capturing the vision of a group in terms of legitimate needs that must be protected, in order to build a robust strategy and a precise and scientifically rigorous plan to implement that vision. This is how to close the gap between a desired reality and the actions required to make that reality happen.

A New Economics

All three of these people have a profound intuition of the systemic nature of projects, and how the way ahead is not that of individual interests, but the much greater benefits to be achieved by engaging an entire community of interests around a common goal. They are all actively involved in bringing to reality a New Economics that will require increasing collaboration among all its various components if we are to transition beyond our current crisis towards a better way.

This may no longer be, as playwright Donald Freed points out, the American Century, but it is a century for harnessing the American spirit of breaking new frontiers to achieve what only the imagination dares to dream, and what only a community can embody.

This post is by Angela Montgomery, Co-Founder and Director of Intelligent Management.

In a recent article by Dawn Cranfield in The Guardian Express entitled  A Mining Company with a Heart of Gold – Comstock Mining, Inc., the author draws attention to what makes Comstock a very different kind of mining company:

“Comstock Mining, Inc. had their first pour of gold and silver doré, unrefined gold bullion, on September 29, 2012; in October, they hosted a three-day community event celebrating the historic event.  The return of mining to the historic Comstock mining district and the community at large means more than just the gold and silver being mined from the hills, it is about the pioneering spirit of a company and the revitalization efforts of the people involved.”

Comstock Mining is, perhaps, the first mining company in the world to apply a systemic management approach to mining. Supported by Intelligent Management,  Comstock is applying the Decalogue Management Methodology. Why does that make it so different?  Because it means understanding that the organization is an open system that continuously interacts with its environment. Leadership and management decisions have to continuously take into account not just what goes on inside the company and its own goals, but also the input and output and how that affects its environment and community:

“…this exceptional mining company [is] not exclusively interested in exhuming all of the gold and silver they can find and leaving a barren landscape behind; they have a rather different perspective, especially in terms of working in the historic Comstock Lode.  John Winfield, the Company’s Chairman is by all assessments, an environmentalist with a love of nature, having received recognition from the National Humane Society and others for his protection of endangered animals and wildlife.  Comstock Mining, Inc. has a covenant to preserve, protect, enhance, restore, and celebrate the Comstock Lode, and they have made a commitment to the community and the territory as a whole.

In the state of Nevada, there is no requirement for reclamation (restoration of the land) when a mining company is finished with their project on an open-pit or surface mine, other than to secure the area for safety.  Shocking.  Still, Comstock Mining, Inc. has pledged 1% annually of gross revenue towards reclamation.   They plan to grade, reseed the area using native grasses, and to leave an area exposed for tourism purposes.

First Dore Pour 09/28/12

In her article, Cranfield later points out that Comstock has made repairs to the Dayton Consolidated Mill when they saw it was in need of maintenance, and they have also purchased the old Cabin in the Sky; a dilapidated restaurant that they want to restore. They have also purchased the Gold Hill Hotel that was up for sale, maintaining jobs that were in question. Beyond Comstock’s interest in revitalization of the historic mining area of the Comstock where so much has fallen into disrepair, Cranfield is also impressed by the attitude of the CEO towards his staff:

“It isn’t just the economic development and revitalization efforts that make this mining company so distinctive; it is the way they treat their employees.

Dayton Consolidated Mill

Marcus, a young miner talked to me one evening, “That guy over there,” pointing to the CEO, Corrado De Gasperis, “Makes me love my job.  What other CEO would know every one of our names?  Or would even care who we are?”  Just then, Corrado walked up and greeted the young man and his two companions by name.”

When leaders and managers understand their organizations systemically, when they see the interdependencies that exist within their company and with the outside environment, then they are poised to do business in an intrinsically ethical and sustainable way. They are pioneers of a new kind of capitalism that sees no conflict between their own profit and the common good.

Intelligent Management wishes you all a happy holiday season and a fulfilling 2013. See you in the New Year!

The traditional model for control is the hierarchical model, and the reason for its existence is because personal capacity for control is limited, and adding hierarchical levels increases personal capacity of control. On the other hand, if we want to increase the capacity to listen to the customers and the suppliers, in order to satisfy the needs of the market, we should not adopt a hierarchical model. What is the solution to this conflict?

Hierarchy or non-hierarchy?

How can managers exert control effectively? There is an inherent conflict underpinning the problem of control. The traditional model for control is the hierarchical model, and the reason for its existence is because personal capacity for control is limited, and adding hierarchical levels increase personal capacity of control. On the other hand, if we want to increase the capacity to listen to the customers and the suppliers, so to satisfy the needs of the market, we should not adopt a hierarchical model.

An alternative model

The model we propose, instead, is “the enterprise as a system”, a direct reference to Dr. Deming’s model of “production viewed as a system”:

Deming: Production viewed as a system

      The adoption of this model automatically includes in the picture customers, suppliers, and interdependencies, which are completely absent in the hierarchical model. But this approach alone is not enough to manage an organization effectively. The capacity of a system/network of interdependent components to achieve its goal is limited by a very small number of factors, indeed often only one: the constraint.

The constraint as focus and leverage point

Whether you are aware of it or not, every system has a constraint. The constraint is what determines the pace/speed at with which a system generates units of its goal. In for-profit companies the units of the goal are linked to the generation of cash profit (value).

A system that is balanced, i.e. where local efficiencies are pursued everywhere, is highly costly.  A system that is instead unbalanced around its constraint is like a tube with one section that is narrower than the rest: there is one phase/process/group of resources with less capacity than all the others.

Why do we manage a system through its constraint? It is because an unbalanced system is simpler and cheaper to manage. In an unbalanced system everything revolves around the constraint phase, and a detailed plan is necessary for this phase only. This schedule allows us to manage the whole plant. Reducing (global) variation in an unbalanced system means concentrating on and investing in the constraint phase only, not every single part of the process.

If we have to manage a plant, then increasing the productivity or improving its performance is considerably cheaper, and less wasteful in terms of time and energy, if it is unbalanced around the constraint. This knowledge is the legacy of Dr. Eli Goldratt, creator of the Theory of Constraints.

The benefit of an unbalanced system

Markets that are stable and repetitive over time, both regarding quantity and product mix, are not very common. That is why following the variation in demand is very difficult. By unbalancing the system around its constraint, we can achieve a flexibility that is much more manageable because the problem of sizing capacity (and making any changes) only concerns the constraint and not every phase of the process.

The algorithm we use to manage production through its constraint is Drum Buffer Rope (DBR). Lead times in plants managed using DBR tend to get close to the time it takes to technically complete the process. This is made possible by eliminating almost completely queues and piles of inventory. Obviously, this short and controllable lead time can become a considerable competitive advantage.

The mechanism to manage a ‘physical’ constraint is, as we said, DBR. The three steps of managing the constraint are:

• Identify
• Exploit
• Subordinate

Identifying the constraint

Identification is relatively simple, since we can very quickly identify the machine, or the process, that limits the capacity of the system. However, considerations about capacity are necessary but not sufficient to identify the constraint. Indeed, in a real plant the product-market demand mix will vary over time and influence the capacity required by the various work centres. It is crucial that, once it has been chosen, the constraint remain the same over time, even when there is an increase in production capacity (“unbalanced” increase). That is why strategic considerations come into play in the identification of the constraint.

The constraint must be chosen bearing in mind that it is the element that determines the speed of cash generation for the whole organization. The main criteria include:

• Assessment of future strategies and scenarios in the market
• Comparative analysis of machines and resources (technical characteristics of the machines, skills of resources, interchangeability)
• Assessment of the investment required and ways of increasing constraint capacity

In our next post we will look at how, on a practical basis, we subordinate the system to the constraint to maximize throughput.

For further information on Intelligent Management’s approach to systemic management see our website www.intelligentmanagement.ws and our latest book ‘Sechel: Logic, Language and Tools to Manage Any Organization as a Network.

All processes, human and non, whether we are aware of it or not, are affected by variation. If we want to be able to predict the outcome of our processes, i.e. manage them, we need to understand, measure and manage the variation in those processes. The alternative is to manage by the seat of our pants. To function in a healthy and successful way, organizations do not need heroes of firefighters, they need managers that understand how to manage variation. Less glamorous, much more sustainable.

Intelligent Management and Statistical Process Control (SPC)

Let’s start by getting one thing straight: SPC is NOT a technique; it is a way of thinking, a mindset. SPC is foundational for Intelligent Management.

All processes, human and non, whether we are aware of it or not, are affected by variation. If we want to be able to predict the outcome of our processes, i.e. manage them, we need to understand, measure and manage the variation in those processes. The alternative is to manage by the seat of our pants. To function in a healthy and successful way, organizations do not need heroes of firefighters, they need managers that understand how to manage variation. Less glamorous, much more sustainable.

Intelligent emotions

The tool used in Statistical Process Control to measure variation in a process is commonly known as a control chart or process behaviour chart. These charts provide insight into processes and trigger rational thinking. After many years of relentless application of Shewhart’s charts, we can safely say that they are a powerful tool to manage intelligently the emotions triggered by the analysis of a process. We would discourage anybody from managing organizations using probability theory; what we suggest here is to leverage some basic, well proven, scientific ideas concerning the intrinsic variation of any human and organizational activity to take decisions that have an economical value.

In control and out of control

The way we deal with variation in a system is totally different in the case of ‘in control’ and ‘out of control’.

When a process is in control, it is working with the minimum variation possible given specific conditions of use. If these conditions remain stable, the process is in the best possible state as its behaviour is predictable over time.

In order to further improve this process we can only try to reduce its variation with the following actions:

• Stratify the data by dividing them into categories based on different factors and analyze how the data fall into subgroups
• Separate the data by dividing them into various categories and treating them separately from the others
• Gain experience by applying the Deming Continuous Improvement Cycle (PDSA): plan, do the experiment, monitor its results, learn from the effects observed and act

When a process is out of control, there is not a lot we can say about it.

Indeed, its behaviour is not predictable over time. It is subject to unpredictable jumps and all the data relating to it lose their predictive potential and become ‘historical’ data.

What to do when things are out of control

In order to act on an out of control process, i.e. try to bring it into control we must:

• Gather data as quickly as possible to identify rapidly the special causes that generate instability in the system
• Activate an emergency solution to limit damage
• Find out what made the special cause occur
• Implement a long-term solution

There are at least two excellent reasons for not wanting a process to be out of control. The first is connected to the impossibility of predicting which often makes it impossible to plan and carry out programs.

The second is linked to the costs associated with activities in a company that confuses common causes with special causes of variation.

Indeed, performance that seems good will often disguise poorly optimized use of resources.

However, this does not mean that ‘out of control’ is always bad. When you have a stable process, let’s say a sales data series which predictably oscillate within the upper and lower control limit, and we are trying to enforce a plan to increase sales, we actually hope to see the system going OUT of control on the upper side, so as to detect that an ACTION caused a shift in the system toward the desired direction, namely an increase in sales. By the same token, a process in statistical control is not necessarily a desirable process; oscillation limits that are too wide are often the result of poor understanding and execution of the process and force unnecessary costs on the system.

Again, the analysis must be performed with intelligence and common sense, and the charts have always to be read considering the operational context.

For further information on Intelligent Management’s approach to systemic management see our website www.intelligentmanagement.ws and our latest book ‘Sechel: Logic, Language and Tools to Manage Any Organization as a Network.

How did a mining company succeed where others had failed in reviving mining responsibly in a historic mining district? Comstock Mining CEO explains in an interview how Intelligent Management’s systemic Decalogue methodology has brought his company to  mine successfully and in a responsible manner. This is an extract from an interview with Corrado De Gasperis in ‘Energy & Mining International’.

Successful, sustainable mining

“With the successful completion of the first pours, mining has responsibly returned to the Comstock, one of the largest and most historic mining and industrial centers in the world during the mid-19th century.” Corrado De Gasperis, CEO of Comstock Mining Inc.,  attributes Comstock Mining ’s success to an uncommonly strong alignment toward a common and clear goal. This alignment is founded on the leadership and planning of its management team, the quality of its people and processes and a project-based discipline emphasizing positive change. The approach is defined by “the Decalogue,” its operating methodology and is founded on quality, speed and sustainability. This methodology guides the company on how it defines its system, the goal and its operational measurements. The system is supported by a “playbook” that thoroughly maps all of the interdependent processes, defining all roles, responsibilities and operational measurements. This management theory is based on Dr. Eliyahu M. Goldratt’s Theory of Constraints and Dr. W. Edwards Deming’s Theory of Profound Knowledge.
“A system can only move as fast as its slowest part. The Decalogue is an algorithm or method that takes the management thinking of Deming and uses statistical process control to understand how the process works,” he explains. “We define our system and its measurements so that we truly and intimately understand the rate that we generate throughput, that is, the rate that we generate cash.”

A unique management methodology
In the 1990s, he says, two professionals that had devoted their lives to understanding and implementing these systemic management processes – Domenico Lepore and Oded Cohen – developed the Decalogue as an integration of Deming’s and Goldratt’s theories to create one cohesive process, tools and software that bring the work of these two thinkers to a more practical and productive level of accessibility. Comstock Mining used this thinking to plan its future, establish its goals, design and implement its system and ensure the ability to predictably deliver on all of its objectives.
“It’s not common in this industry for companies to adopt this method fully from the boardroom to the shop floor, but that’s what we’ve done,” De Gasperis says. “It ultimately focuses the whole enterprise on a finite resource. If we don’t ensure that point – the point the constraint defined – is running 24/7 on the best possible product mix, the opportunities are lost and can never be recovered. It creates a tremendous focus, intimate understanding and clear sense of urgency.”

Statistical monitoring and selfless management
Comstock Mining uses this method to statistically monitor the entire system “in intimate detail,” he stresses. The Decalogue guides how it plans its business strategies and how the company schedules its activities. De Gasperis says the system requires “selfless people who are more interested in the system’s goal than individual goals,” but the individual goals can all be met, as well, if the company puts the right people in the right positions.
“Everyone in the operation has to subordinate to the system, and that’s not at all a bad thing,” he adds.
De Gasperis admits it is not common for companies to work this way, but without a structure like this in place, many operations deal with “misalignment, lack of clarity with goals and faulty measurements.” Comstock Mining engaged Lepore to help train its entire organization in this way of operating, and its success is ongoing.
“With this system, we know what we want to do,how we want to do  it and how much time it will take,” he says.

For further information on the Decalogue Methodology please see www.intelligentmanagement.ws and our books.

What happens when more than one person or more than one entity work together in the same direction? Is the result just the simple sum of their efforts?

What happens when more than one person or more than one entity work together in the same direction? Is the result just the simple sum of their efforts? The answer to this question is yes, but ONLY when the elements involved are independent of each other. In the theory of systems, the global “performance” of any collection of entities that are NOT interconnected is simply the sum of the single performances.

However, when the entities are interdependent, i.e. interconnected, then the global performance of these entities is NOT the sum of the single performances. The performance of the whole is not just the sum of the separate parts. It can be so much more.

Let’s take an example

If we talk about an organization, e.g. a company that is  made up of 5 different production facilities that operate without inter-depending (as if they were independent companies) then the profit of the whole organization is the simple sum of the profit of the single facilities. Nothing complicated here.

The situation changes drastically when you have a set of facilities that inter-depend. The interdependence is manifested in the exchange of products/services between the different facilities. This exchange generates a global performance that is affected by the variation and co-variation associated with the “exchange process”, and by the combined effect of the different “efforts” of the single facilities. Due to the highly non-linear nature of this process, the global performance of the system cannot, and will never be, the simple sum of the single performances.

How do we ensure optimal performance?

Since we do not know in advance the nature of the variation and co-variation we are dealing with, technically speaking we don’t have any “tool” that can predict the performance of the system. The combined effect of the different effort can generate a performance that is even better than the sum of the single performances.

The solution to the “optimal performance” problem has various  aspects, and they form the foundation of any attempt to manage an organization systemically. They consist in:

1. Understanding the System
2. Understanding the Variation that affects our processes
3. Synchronizing the System

Let’s take a brief look at these:

1. Understanding the System
First we have to understand the system. What does that mean practically? It means we have to design the interdependencies. We do this by mapping out all the processes with the aid of Deployment Flowcharts.

2. Understanding the Variation that affects our processes

We need to understand the nature of the variation associated with any process we operate.  We can do this by using Statistical Process Control, and we stabilize the processes and work toward the reduction of the associated variation through process improvement.

3. Synchronizing the System
Once the processes are stable, we synchronize the system by subordinating each part of it to a well chosen constraint. In this way we focus the work of the organization towards a common goal   instead of focusing on individual, “local” goals as this leads to sub-optimization.

Hold your horses

In order to give a visual example, the result we obtain is similar to the sum of vectors. What would be the effect of two horses that are pulling a load but are heading in different directions instead of the same direction? The individual effort is the same, but the combined effort is different, depending on the directions they head towards. The more they pull in the same direction (common goal), with minimum diversion (low variation) and in synch, the greater the combined result. We need to design our organizations systemically to make sure that happens.

What is the guiding rule that should inspire any managerial decision? The job of Management is to work on the system and create a predictable environment; as Dr. Deming reminds us “the job of managers is to reduce variation”.

Management and predictability

A company is a complex system ruled by non-linear interactions that make it difficult to make any prediction when any change is effected. That’s why any approach to improve the system has to be “holistic”, i.e. address the whole system, and consider all the interactions/interdependencies.

The description of what everybody does, input and output, understanding the interdependencies and, finally, understanding the variation associated with each process, is foundational to any form of “intelligent management”.

What is the guiding rule that should inspire any managerial decision? The job of Management is to work on the system and create a predictable environment; as Dr. Deming reminds us “the job of managers is to reduce variation”.

Statistical Process Control (SPC), the main offspring of the Theory of Variation, is the body of knowledge that helps managers to act rationally for the improvement of the system. SPC is not a technique; it is a way of thinking that should be fostered by Top Management at every level in the organization.

The data and the way we collect them are as important as the analysis we perform on them. The starting point to understand the system and its different processes is to select key points where we monitor variation. Once we have identified these points, we can start with the analysis.

Understanding processes

The most practical way to understand processes is to draw a picture of them, by means of a flowchart. A flowchart is a diagram that describes a sequence of events, tasks and decisions that transform input in a process/system into output. Flowcharts use some standard symbols and conventions to make it easier to communicate and understand them and portray a process with a map or chain of activities and decisions.

We can describe the flow of materials, information and documentation; we can show the various activities included in the process, explain how these activities transform input into output, indicate the decisions that have to be made along the chain; we can design interrelations and interdependencies among the various phases of the process that are important, and we can easily acknowledge that the strength of a chain depends on its weakest link.

In describing processes we realize that it is very difficult to establish very precise borders between departments and functions. In order to deliver a product, or provide a service, these fictitious separations are often crossed. We see, therefore, that these processes cut across a traditional organization chart or organization pyramid. Flowcharts are then the key to developing understanding of if, how, and where every single link is adding value to the chain.

Using flowcharts

“…a flow diagram also assists us to predict what components of the system will be affected, and by how much, as a result of a proposed change in one or more components…” (Deming, The New Economics).

What we do is to map out processes and compare them with how they should ideally work, so as to understand where complications lie, identify misalignments between authority and responsibility if any, look for critical points, and determine breakage points in the chain that link the supplier with the customer.

From this analysis we have to recognize ‘Key Quality Characteristics’ (KQC), i.e. aspects of the processes that heavily influence their capacity to contribute to the goal of the system. By highlighting these critical characteristics, we can identify the points where it is more useful to gather data on the variables of the processes. From the analysis of these data we can understand whether the processes are in control (predictable) or not before taking any action to improve them, and whether improvement actions are effective or not.

This post is an extract from the book ‘Sechel: Logic, Language and Tools to Manage Any Organization as a Network’

Everything we do in an organization can be considered as a process, and, whether we realize it or not,  every process is affected by variation. We need to understand and manage this phenomenon of variation if we want to achieve the best results.

Let’s look at the process of sales

In our last post ‘Managing Variation: Why Entropy Matters’ we looked at variation and entropy with regard to organizations. In this post we are going to look at variation regarding a process. Let’s consider the sales process of a company. ‘Scoring’ a sale is just the last step of a process that starts with purchasing the raw material, goes through manufacturing and assembly, up to shipment. To be sure we score the sale we have to consider the variation associated with every part of the process:

• the arrival time of raw material
• time to inspect it
• time for moving material from the raw material warehouse to manufacturing
• time for manufacturing
• time for assembly
• time for moving material to the warehouse of finished products
• shipment time

There is no way to ‘predict’ the final outcome of the process without considering the different steps that brought us to the finalization of the sale; the only way is to approach the process ‘holistically’.

Understanding and improving the performances of highly interdependent processes in complex organizations is possible only if we understand:

• the variation associated with single processes,
• the cause-effect relationships among them, and
• the impact that they have individually and cumulatively on the final result

In other words, we have to approach the organization (system) as a whole.

The system as a network

As we know, a system is a network of interdependent components that work together to achieve a common goal. If there is no goal, there is no system. If we have a set of segregated parts, neither interacting, nor interdependent, A, B, C, the Theory of Systems shows that the performance of this kind of network is ‘additive’:

Perf.(system)=Perf.(A)+Perf.(B)+Perf.(C)+Independent network

On the other hand, if the components are dependent and/or interacting, the cause-effect relations among the various parts of the system are “non-linear”, and the Theory of Systems shows that:

Perf.(system)=)¹Perf.(A)+Perf.(B)+Perf.(C)+…

Interdependent network

Organizations and complexity

Interdependence and co-variance are elements that influence the “dynamics” of a system.

When we have large interconnected systems, it is virtually impossible to predict the effect that changing a single component will have on the system overall. We face a problem of complexity, where non-linear interactions play an important role.

Complex system

This post is an extract from the book ‘Sechel: Logic, Language and Tools to Manage Any Organization as a Network’