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 anarchist 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”.

Without delving too deep into cybernetics or systems theory (See Joanna Beltowska and Amy Rae great presentation below for a handy overview of systems thinking) Ward 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 Strategic 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.

It’s interesting to see how a lot of this thinking is being converted to action in the more cerebral social agencies out there.

For example, you can quite nicely boil down de Geus’  active listening to ongoing research conducted across an organisation’s internal culture and its external social landscape; followed by a strategy stage where research insights identify organisational identity in shared-values or define the social capital that binds internal and external networks together; next this strategic vision is is used to shape an organisational‘ecosystem that enables networked communication – both internally and externally. Finally, all agencies should be creating evaluation frameworks for their clients to ensure they are continually measuring and improving the performance of their strategies in a complex organisational environment.

Is McKinsey and Nielsen’s social media division a backwards step?

I saw this story earlier in the week and now Drew B's blogged about the announcement that the media metrics people Nielsen have teamed up with the management consultancy McKinsey to launch a social media division.

Drew's rather positive about the venture, called NM Incite, suggesting that it's "good to see [this] type of advisory coming from the bright sparks
at McKinsey
". I'm rather more skeptical and wonder whether they can offer the level of depth and understanding of the social space as social media and even communications consultancies. Of course, that may not be the primary motivation for McKinsey – rather the lure of lucrative contracts.

Without being able to comment in-depth on McKinsey's reputation at management consultancy I am  suspicious about management consultancies offering genuine communications consultancy. Only last month I was chatting with a senior PR consultant who was lamenting a 'brand strategy' put together by the client's management consultancy.

What I find particularly fascinating about this move is that NM Incite appears to be offering products *as well as* solutions. According to the 'Offerings' section on their website they can provide:

  • Customisable dashboards
  • APIs
  • Tracker reports and alerts

Interesting that as 'social media' becomes more about strategic business consultancy to socialise organisations, the traditional management consultancies are turning to selling widgets rather than knowledge.

It just goes to show that not even the bastions of the global business management empire are immune from disintermediation.