Published on September 12, 2007
Complexity Management through Structural Change © By Alfonso Cornejo Author of the Book Complexity and Chaos: A Guide for XXI Century Management
Old Today s organization is being trapped within past paradigms that prevent it paradigms to be more flexible and dynamic. In past years organizations have unsuccessfully sought the formulas that would allow them to survive in a competitive environment which is every day more dynamic and disorderly. However, changes have been partial and organizations haven’t been able to adapt the business essence according to the new and incremental environmental demands. In spite of everything, we know the in the 21st Century organizations should learn to evolve and adapt their structures in this new environment if they want to stay within the competition arena. September 2007 Alfonso Cornejo CM~SC © 2
Environment pressures that demands continual adaptation Industry dynamics Technological change Required performance Globalization Cost Control Competitors Customer ever changing needs Profit Goals Economical cycles Competitiveness standards September 2007 Alfonso Cornejo CM~SC © 3
Organizational Complexity September 2007 Alfonso Cornejo CM~SC © 4
Complexity Management New paradigm to understand the dynamic of organizational processes. Powerful approach to ensure high performance and adaptation of corporation. As a result of structural change, organizational behavior improves. September 2007 Alfonso Cornejo CM~SC © 5
CEMEX Case Complexity Bordering on Chaos There are stranger places to see the latest in complexity theory in action, but Applications delivering cement in Mexico is a pretty good start. By Peter Katel Arie de Geus Scenario Planning Kees Van Der Heijden Living Company Interactive Scenarios James Moore Management Peter Schwartz Strategy The Death of Competition The Art of the Long View Margareth Wheatley Structural SPM Leadership and New Science Change Archetypes Organization Michael Mc Master Intelligence Advantage Peter Sengue Genetic Algoritms Processes Stuart Kauffman JOHN DEERE CEMEX Kevin Kelly Metaphors Principles Applications September 2007 Alfonso Cornejo CM~SC © 6
Complexity Do we look desorder......? • Conflict • Lack of priority • Flaws • Misalignment • Limited resources • Entropy ...or the Order behind Desorder......? • Structures • Behaviors September 2007 Alfonso Cornejo CM~SC © 7
Complexity The complexity and chaos that live within the organization is not a dice game, the situations leading to chaos are perfectly predictable if we pay close attention to those variables that tend either to increase or diminish them. We will mention a typical situation: One company acquires a new and numerous standardized truck fleet from only one supplier for the delivery of their products. To accomplish the repairs, parts handling, and spare parts control, it requires ability and learning development that must be accumulated by the team of people that is in charge of the product distribution technology. Two years later, due to the obligations that a top executive has, a great amount of units is bought again, but from a different supplier. Comments are not needed to know that the required effort within the organization for the management, tracking and control of, although apparently two similar technologies, needs an abundant waste of energy, an additional talent display and a more complex management for a situation that had already been stabilized. September 2007 Alfonso Cornejo CM~SC © 8
¿How to deal with every day Complexity ? 7 1 5 8 1 10 5 12 3 4 9 7 9 7 ...... ? ? • Low sales... • Rejected products... • Production delays... • Unsatisfied Customers.... • Fails on communication..... • Demotivated people .... • Hurries..... • Etc.... September 2007 Alfonso Cornejo CM~SC © 9
Types of Complexity . a) Origin Complexity: Due to original company characteristics, by example. 3M (innovation) vs Budweiser (logistics). b) Residual Complexity: Related with the everyday operation of the system, i.e. conflict, orders cancelation, lack of raw material, personnel, turnover, etc. c)Provoked Complexity: Generated by particular, political or ego center decisions instead of group consensus, i.e. to acquire wrong technology, to make inadequate executives selections, to launch to market new products based on incomplete analysis, etc. Alfonso Cornejo Alvarez CM~SC © 10 May 2001
Effect of a bad decision May 2001 Alfonso Cornejo Alvarez CM~SC © 11
System Capacity to Manage Complexity Everything that happens within the organization consumes energy and it must be taken into account that the energy must be dosed and not be used indiscriminately. Making efficient and effective use of the resources is translated in the capacity to properly manage the complexity of the situation. In order to manage complexity the proper capacity is required (Variety and Ability) from each element to attend the system demand. The System Capacity is optimum when the emergent properties are properly made use of. When the system components do not fulfill their roles and their functional expectations about them excess pressure is generated in the system which manifests itself in an efficiency and effectiveness loss, reducing the parts’ orientation because of the secondary effects that are provoked. Complexity is a very particular situation reality that we must understand and manage. Its proper management requires several observers (which form part of the complexity) that share the “Shared Map” reality in order to understand and manage it. September 2007 Alfonso Cornejo CM~SC © 12
System Capacity to Manage Complexity September 2007 Alfonso Cornejo CM~SC © 13
Structure–Process Model “SPM” September 2007 Alfonso Cornejo CM~SC © 14
Need of alternative perspectives Improvement approaches have come and gone and still it seems that we are unaware of the possible effects of our acts, we don’t have identified levering points nor the key variables to manage the organization conduct. All of this is due to the fact that many tools have been developed (with great improvement potential) to attack in an isolated and independent way parts of the system. Nevertheless, as any other strong drug, we forget the lateral effects when applying the antidote, and all this in non controlled situations may be delicate for the organization. In fact it is still common practice to attack the symptoms of the problematic in the organizations without properly questioning if we have reached the bottom of the situation. We haven’t realized that everything that happens within the organization is interconnected and when we attack one variable it generates effects in other parts of the system. If this is not taken care of, we can lose control of the system. September 2007 Alfonso Cornejo CM~SC © 15
Need of alternative perspectives Also, it has been common practice to try to improve an organization from within its processes and not from its structure, when the latter is the one who generates the rules for possible actions to the processes. We had mistakenly searched attacking the chaos and organizational complexity through improvement processes without questioning which structures were generating the disorder. After all, what is the organization?, but a chess board where the figures live through events under certain rules and a squared board. On one hand, the board and the game rules are at the same time the structure that defines the game to be played and its possibilities, and on the other hand, the processes are the place that are gradually generating the system’s dynamic. And here is where the cycle ends because when the processes occur gradually they modify little by little the structure of the system, just like the water drop that graves the hardest rock as time goes by, and deforms it by the effect of a repetitive event. . May 2001 Alfonso Cornejo Alvarez CM~SC © 16
The Need for a Model of Complexity Management ...are the result of different interacting structures, forms, patterns Relations, paradigms, principles, etc. We can separate current situations that we observe and live in a model of polarities: 1.- Complex conducts Organizational 2.- The variables that Behavior and Conducts... generate these complex behaviors September 2007 Alfonso Cornejo CM~SC © 17
Structure – Process Model and Chess... Rules of the Game Characteristics of pieces Board Plays & Possibilities Relationships between pieces September 2007 Alfonso Cornejo CM~SC © 18
Which set of structures generate the processes? Structures Processes S1 P1 S2 S3 P2 S4 S5 S6 P3 S7 September 2007 Alfonso Cornejo CM~SC © 19
Structure – Process Model (SPM) Environment Environment Structures Processes Struct Proc System Frontier September 2007 Alfonso Cornejo CM~SC © 20
Structure – Process Model (SPM) Environment Environment Structures Processes Struct Proc System Frontier Structure and Processes is a universal duality; it is the form and function. Is the dancing relation of two virtual poles with dynamic movement for any system at any level of the universe, from the atom up to galactic cumulus. One requires from the other to exist, and since there are no processes if there is no structure, nor structure without processes. We can imagine the structure-processes model as two separate entities but united through bonds which connect both and are used to feedback their effects and modify their form through time. September 2007 Alfonso Cornejo CM~SC © 21
Structure – Process Model (SPM) On how many repeated occasions we were faced trying to implant a change in an organization, whether is called quality program, leadership, productivity, team work, etc. (processes). The problem is that we never were aware that we were trying to change the organization. Now it is clear that in the majority of cases is not possible to modify processes attacking the processes. It is necessary to adjust, create or modify the structure (may be policies, procedures, game rules, roles, etc.) in order to provoke the emergence of processes required by the organization. This is why it is important to discover the system natural levering points, that is, places where we can stimulate the variable with a minimum effort and great results can be achieved. September 2007 Alfonso Cornejo CM~SC © 22
Structure – Process Model (SPM) Chaos, complexity, lack of control, are concepts which we have been exposed to without knowing what produces them. Understanding the organizational dynamic seems to be unreachable because the quantity of dynamic variables involved and the quantity of possible states that are generated. Nevertheless, The Structure-Process Model allows us to see things from a different viewpoint, it allows us to step further into the Chaos and Complexity Management, in a world where the multiplicity of states darkens our vision and hinders our way to the predictability of future events. Some of the most important principles and properties of The Structure-Process Model are the following: •The system’s structure generates its own processes •The processes through time modify the system’s structure, rising this way another structure... which generates another kind of processes...and so on. •Changes in the Structure modify the processes and in the same way even the minimal change in processes has an effect on the structure. •Solid and aligned structures allow controlled processes. If the structural elements lack solidity then it will be easier that the processes modify the structure. •The greater influence actors can modify the structure and the processes in order to achieve the stability level that satisfies the interests of the groups with greater influence on the system. September 2007 Alfonso Cornejo CM~SC © 23
Structure – Process Model 3 Levels (organization) Organizational Process Structure Cultual Process Structure Individual Process Structure September 2007 Alfonso Cornejo CM~SC © 24
Structure-Process Model Organization level P S Organization P S Culture P S Individual S P September 2007 Alfonso Cornejo CM~SC © 25
Culture One of the most important phenomena yet not defined but which we can understand under the Structure- Process Model is that of the Organizational Culture. This variable has always been extremely complex to comprehend and because of that there is a great number of definitions trying to structure it under different criteria and viewpoints, all of them valid and rich in possibilities for its analysis. However, I’m convinced that the organizational culture contains both elements of duality and from this perspective it may be perfectly understandable for managing it within the organization, and in this way it may not be seen as a caprice of human groups who exchange ideas, values and conduct codes to rule the behavior which characterize it. September 2007 Alfonso Cornejo CM~SC © 26
Structure-Process Model Cultural level P S Organization P S Culture P S Individual S P September 2007 Alfonso Cornejo CM~SC © 27
Structure-Process Model Individual level P S Organization P S Culture P S Individual S P September 2007 Alfonso Cornejo CM~SC © 28
Structural Change September 2007 Alfonso Cornejo CM~SC © 29
Design One crucial point for any system its his own design, because it is precisely at this moment in which its structure is molded and defined and so, the capacity to trigger the possibilities in its processes are created. The possibilities from whether the organization will be successful or not depend from now on. In fact a badly designed system is a costly system to manage, because it is a system where the entropy starts to grow without measure and eventually it may make the organization lose its capacity to create positive cycles. September 2007 Alfonso Cornejo CM~SC © 30
I. Current Situation Observed environment: competitive environment characteristics that affect organizational dynamics. Diagnostic of current observed processes. Structures that generate the current Current situation processes September 2007 Alfonso Cornejo CM~SC © 31
II. Desired Situation Change Perspectives: Environmental Trends and new Change Perspectives that trigger new organizational atitudes and behaviors Profile of required processes in order to maintain competitive edge. Structures required are identified to Desired situation support the new organizational processes. September 2007 Alfonso Cornejo CM~SC © 32
III. Structural Change S P Detailed action plan in order to implement Structural Changes required, involving different organizational areas (Technological, Administrative, Cultural and Human). Required changes are implemented to ensure the appearing of new Structural Change organizational process, and as a consequence, desired behaviors and patterns emerge. May 2001 Alfonso Cornejo Alvarez CM~SC © 33
IV. Learning New processes and behaviors are observed and measured in operation in order to detect effectiveness of Structural Change previously planned. A learning about the performance of processes is carried out, Structural adjustments are made, Learning and a new stage for organizational adaptation is established.. September 2007 Alfonso Cornejo CM~SC © 34
Organizational Complexity Among other things, the Structure- Process Model may support the organization with: – Environment Analysis and its repercussion on the Organization – The diagnostic of the organization as a whole, as an Open System and exchanging energy and information with its Environment. – Its capacity to adapt to its Environment. – Evaluate its structures vs. its “the must be” state – Evaluate its fundamental processes. – Evaluate the Organization Chronological Age as a function of the rigidity of its Structures. – Detect the greater influence Structures within the Organizational Culture. – Detect how the Culture influences different Processes types within the Organization and how it affects the Organization Structures. – The Organization Attractor effect: Vision September 2007 Alfonso Cornejo CM~SC © 35
The importance of Design “All the organizations are perfectly designed to obtain the results that they generate” September 2007 Alfonso Cornejo CM~SC © 36
Environment Environment Structures Processes Struct Proc System frontier If there is not Structural Change there won’t be significant and lasting change....... September 2007 Alfonso Cornejo CM~SC © 37
The Book Complejidad y Caos: Guía para la Administración del Siglo XXI Complexity and Chaos: Guide for XXI Century Management You can download or read the book here: www.structural-change.com http://www.eumed.net/cursecon/libreria/2004/aca/aca.htm September 2007 Alfonso Cornejo CM~SC © 38
Alfonso Cornejo firstname.lastname@example.org www.structural-change.com www.structural-change.jimdo.com September 2007 Alfonso Cornejo CM~SC © 39
Informing Science: the International Journal of an Emerging Transdiscipline Volume 11, 2008 Editor: Eli Cohen Structural Complexity and Effective Informing
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