Table of Contents
Go Back
Managing Organizational Change: Integrating strategy
through the exploration of detail and dynamic complexity.
Anthony Gill
Phrontis Limited
Beacon House, Horn Hill Road, Adderbury, Banbury, OX17 3EU, UK
Tele: +44 1295 812262 Fax: +44 1295 812511 Web: http://www.phrontis.com
Email: Tony.Gill@phrontis.com
Abstract
This Poster Presentation will explore how multimethodology — combining areas of
strategy, system dynamics and the Viable System Model in a single study — can be
used to inform the management of change. The process of managing change defines
the gap between where an organization currently is and where it would like to be.
This makes the process a goal seeking one and performance measurement is thus
required to ensure the “gap” is reducing over time. The Balanced Scorecard is used
for this purpose. It is hoped that a debate on the ramifications of this approach may
develop and these comments will be fed into the final draft for the Conference
Proceedings.
Key words: Strategy, Resource Based View of the Firm, Balanced Scorecard, Viable
System Model (VSM), Deployment Flowcharting, System Dynamics, Strategy
Dynamics and Multimethodology.
Introduction
TQM, BPR and now Business Process Management (BPM) plus the ever increasing
power of Information Technology (IT) have given people in organizations ways of
defining and managing far greater complexity than has been possible in previous
decades. The growing use of Enterprise Resource Planning (ERP) and Customer
Relationship Management (CRM) software are instances of this. New forms of
organization made possible by outsourcing and off-shoring, the growing use of call
centres and IT are emerging — eg, web based, networked and virtual organizations.
Improving global economic performance is likely to accelerate the pace of change.
Events post 11 September 2001 have made Western Governments more inclined to
share intelligence in order to counter terrorism and make structural adjustments to
their organizations in order to respond better. We have seen the collapse of
organizations such as Enron and Parmalait and the rise of topics such as corporate
governance. How can managers develop a better appreciation of the complexity to be
managed? How can models capture the necessary complexity for better decision
taking by managers? Managing complexity in an ever changing world is central to
good management and tools such as spreadsheets and matrices are totally inadequate.
This poster presentation draws on the author’s research now nearing completion. In
essence, this triangulated approach for modelling change considers the resource
based view of the firm from the strategy domain, system dynamics (SD) for
revealing dynamic complexity and the Viable System Model linked to deployment
flow charting to capture detail complexity.
By virtue of the topic, the approach of necessity has to be transdisciplinary to capture
key dimensions of the issues affecting change. Depending on the reasons or need to
appreciate the nature of change, an ‘onion layered’ approach to modelling may be
undertaken. Getting close to the inner core will tend to reveal a ‘very rich picture’.
The richer the picture required the greater the resource that needs to be brought to
reveal the various layers of complexity. As we progress, we need to discuss
methodological implications — multimethodology.
Modelling Organizational Change
In essence, SD models how stocks accumulate and/or deplete over time for the
system-in-focus. Thus all SD modellers appreciate the fact that structure determines
behaviour which in turn results in the events we witness day by day. But the issue of
organizational change often results in changing the structure of the organization itself
eg, the creation of new strategic business units, mergers and acquisitions etc. This
can only be modelled by moving to a meta-level.
The work from the Organization Development community is informative for this
meta-level modelling. Beckhard and Harris (1987) propose a useful model for
managing complex change. Key variables in their model are the ‘present state’ and
the ‘desired future state’ of the organization or system-in-focus. There are many
other variables (and actions) offered as part of the model. The critical feature though
is the ‘gap’ to be managed in moving from the ‘present state’ to the “desired future
state’. This gap tells us we are dealing with a goal seeking system.
The poster presentation explores a model on meta-level change that consists of two
interconnected negative feedback loops. The one loop is about resource building —
evolutionary change — while the second loop concerns revolutionary change where
structural changes in the system-in-focus are likely. This model is the first layer of
the onion.
Strategy and the Resource Based View of the Firm
There are many definitions offered for Strategy. Many make reference to the
achievement of competitive advantage. The implication of this is the placement or
development of the firm relative to its competitors. Porter’s seminal work looks at
strategy from an economic perspective both at the macro level — the five forces
industry model — and at the micro level — Value Chain Analysis. Wolstenholme and
Stevenson have done work in relating SD to Value Chain Analysis and presented this
material at previous SD Conferences.
The Resource Based View of the Firm, a subset of the strategy domain, is focused at
the micro level and looks at how resources and firm capabilities can be developed for
competitive advantage. Warren (1999,2000, 2002) draws attention to the weaknesses
of this static approach and has done much to develop the ideas behind the ‘dynamic
resource based view of the firm’ — or strategy dynamics. Warren has identified the
link between the development of the firm’s resources (tangible and intangible) and
the accumulation and depletion of stocks in SD.
With links to the resource based view of the firm, the Balanced Scorecard (Kaplan
and Norton 1996, 2001, 2004) is gathering momentum as a system for management
rather than a performance management framework. Again a feature of the Balanced
Scorecard is its goal seeking nature: the Financial Objective for private sector
organizations; and the Customer Objective for public and voluntary sector
organizations. The link between SD and the Balanced Scorecard is now well
established. Ferneau and a team from High Performance Systems together with
Kaplan and Norton were responsible for developing an interactive simulation
published by Harvard Business School: Balancing the Corporate Scorecard. The
poster presentation will use the Scorecard with SD to illustrate early stage capture of
dynamic complexity in a private sector organization.
Capturing Detail Complexity
The VSM (Beer 1979, 1981, 1985) has been around for some 30 years. Underpinned
by Ashby’s Law of Requisite Variety, it establishes a recursive structure, rather than
an hierarchical structure, for all types of organizations based on essential
relationships that need to exist for the organization to remain viable — ie, to have an
autonomous existence over time. This systemic framework can be used in the
diagnostic as well as the design mode (Espejo and Hardnen 1989).
At each level of recursion there are five systems (Espejo refers to them as Policy,
Intelligence, Monitoring-Cohesion, Co-ordination and Implementation). These five
systems are there for the management of the organization internally and the
management of the relationship with the environment ie, customers, suppliers,
regulators etc. Thus at one level you could have a Strategic Business Unit (SBU) as
the system-in-focus while at the meta-level there would be the Corporation for a
private sector organization. Depending on the modelling purpose, the detail required
to unravel the complexity needed to make sense of how the organization functions as
a whole, based on the parts and the interaction between the parts, is context
dependent. The understanding of the organization is built up though the development
of ‘variety balance diagrams’. The higher the level of complexity the analyst wishes
to understand the greater will be the number of variety balance diagrams. In effect
organizational processes are being articulated — a way of capturing organizational
detail complexity.
Much has been written about business processes or process management under the
topics of TQM and BPR (Davenport, Hammer and Champy, Harrington).
Deployment (or matrix) flow charting (DFC) provides a way of capturing detail
complexity in the business processes. A feature of DFC is linking each process to an
organizational unit or team.
One of the difficulties of process management has been the issue of organization
structure. Initially in the early 1990s the notion of flattening the organization
prevailed ie, no hierarchical structure. Thereafter a limited form of hierarchy was
advocated. Combining business and organizational processes (ie, DFC plus VSM)
has been proposed as a way around this problem (Gill 1998).
A key benefit for developing an understanding of detail complexity is in the area of
process improvement. The capture (and development) of organizational routines and
procedures is fundamental to this endeavour if the capabilities of the firm are to be
enhanced.
Strategy over the past two decades has been subjected to considerable fragmentation
— perhaps a series of management fads and fashions. There is a stream of literature
now emerging on the need for strategy integration (Volberda and Elfring 2001). The
VSM is well suited to be this ‘container’ for strategy integration. The poster
presentation will elaborate further on this point particularly on the VSM and the
resource based view of the firm.
Additionally, the VSM is proposed as a ‘route map’ or navigational aid for SD
modelling in complex organizational contexts. Diagnostic points resulting from a
VSM analysis signal issues of concern for further investigation using SD. In a similar
way, the VSM is used to develop and capture the organizational units for Balanced
Scorecards implementation and execution ie, the Corporate Unit, Strategy Business
Units (SBUs) and Service Support Units as defined by Kaplan and Norton. These
aspects are explored in the poster presentation.
Capturing Dynamic Complexity
Much has been written about system dynamics (Forrester 1961, Richardson and Pugh
1981, Sterman 2000) and the field is well established. Supporting the theory there are
easy to use software packages from High Performance Systems, Powersim and
Vensim. The SD community is thus well endowed with theory and software tools to
support its modelling and simulation initiatives.
The poster presentation will focus on the Strategy Dynamics approach to developing
a Balanced Scorecard as the way of capturing dynamic complexity at the strategic
level. This will link to the VSM and the Scorecards for Corporate, SBUs and Service
Support Units.
Multimethodology
This poster presentation explores a pragmatic way of using detail and dynamic
complexity in the same study. Whether we like it or not, people are beginning to
combine detail and dynamic complexity within the same intervention in order to gain
additional insights on the workings of their organization in a competitive
environment. Critically important is the need to address the associated problems (eg,
the potential for paradigm incommensurability). In essence, this is at the heart of
what has been defined as multimethodology (Mingers and Gill, 1997).
Another consideration is the philosophical domain that can underpin the combined
approaches. How does this relate to the statement made in the SD Conference
Programme: “.... system dynamics is based on what are observed, deduced or
presumed to be true causal interrelationships....’”"? Under what conditions can SD “...
offer the opportunity to support open debate and serve as an ‘honest broker’ of
ideas...””?
Case study
A single case study based on an IT services company will be used to demonstrate and
test this framework. The case study organization is undergoing significant change
due to the significant growth that is altering work practices. The presentation will
touch on some of the growing pains of small organizations as they move from “gifted
amateurs to gifted professionals”. This case study will also be used to illustrate the
use of the methods outlined in this abstract.
Conclusions
A review of the benefits and negative aspects of this approach to studying
organizations will be presented with recommendations for further research.
2 April 2004
Back to the Top
CC BY-NC-SA 4.0