Complexity Leadership Generates Innovation, Learning, and

Transcription

1 COMPLEXITY LEADERSHIP GENERATES INNOVATION, 1 Complexity Leadership Generates Innovation, Learning, and Adaptation of the Organization Today organizations come across situations where traditional methods no longer bring the preferred results. When organizations use complex adaptive systems in their strategy, it will lead to building systems that can quickly evolve solutions that are effective and adaptive (Anderson, 1999). These dynamic systems necessitate different leadership approaches. This paper will share how a leader would align the organization s strategy, structure, and processes with its external environment, as well as assess the relationships between organizational structure, performance, and dynamic environments, evaluate the relationship between environment, organizational performance, and the inter-organizational and intra-organizational fit, evaluates the application of paradox as a theoretical lens to understand and to lead contemporary organizations in dynamic environments, and evaluates how complexity leadership generates innovation, learning, and adaptation of the organization.

2 COMPLEXITY LEADERSHIP GENERATES INNOVATION, 1 Complexity Leadership Generates Innovation, Learning, and Adaptation of the Organization To lead an organization today, a leader must align the culture, structure, and strategies to the environments that it works within. Today organizations come across situations where traditional methods no longer bring the preferred results. Anderson (1999) asserted that when organizations use complex adaptive systems in their strategy it will lead to building systems that can quickly evolve solutions that are effective and adaptive. These dynamic systems necessitate different leadership approaches. This paper will share how a leader would align the organization s strategy, structure, and processes with its external environment, as well as assess the relationships between organizational structure, performance, and dynamic environments, evaluate the relationship between environment, organizational performance, and the interorganizational and intra-organizational fit, evaluates the application of paradox as a theoretical lens to understand and to lead contemporary organizations in dynamic environments, and evaluates how complexity leadership generates innovation, learning, and adaptation of the organization. Organizational Structure, Performance, and Dynamic Environments In order to remain competitive in the global business world, organizations need to change their systems which are run like machines where the top leaders decide everything important, to dynamic systems of interconnected associations that are able to change in ways that exceed the complex demands and expectations of today s organizations (Duin & Baer, 2010). These dynamic systems necessitate different leadership approaches. Today s leaders must change from the old hierarchical systems to dynamic systems, where leaders change the structure, culture, and

3 the strategy, to meet the dynamic environments they are in (Duin & Baer, 2010). The new approach is based on enabling people using more of a relational manner, with shared or dispersed control taking place at all levels and reliant on social exchanges and networks of power (Duin & Baer, 2010). Therefore, as a leader of a multinational organization, the job will be to transform the organization into one that is able to adapt, change, and learn as it grows in order to sustain. Taking the organization from the traditional structure to one that is an adaptive complex system requires the leader to acknowledge that the old system is flawed, old, and unable to produce the greatest outcomes. Richardson (2004a) argued that in a complex system one person cannot ever know it completely and therefore would always be in the shadow of the whole (p. 77). In traditional management the Chief Executive Officer s (CEO s) main emphasis is obsessed on holding on to the control of the organization in order to meet the expectations of stockholders, which would be the darkness principle (Weymes, 2004). The knowledge of one leader may possibly have of a specific organization, is inadequate, which means that no one leader has the vital diversity to control an organization as it is more diverse than that person could be (Richardson, 2004b). Today an organization s success is affected more by its social resources, like its business IQ and the ability of the organization to learn and adapt, than by its physical resources (Uhl-Bien, Marion, & McKelvey, 2007). This infers that it is necessity for a leader to give up his or her old ideas of leadership, and embrace the new ideas of leadership. In a traditional structure the leader is seen as knowing everything and is the only person that can make the right decision for the organization. For example, at Heartland, the CEO only meets with the division heads once a week to get an update and tell them what he would like done, thus retaining complete control. This leadership style is old and no longer meets the needs of the growing complex system it has become. The panel at IBM made some great suggestions

4 on what leaders should be like and how they should collaborate instead of control. They include; (1) avoiding individual biases; (2) not giving into individual biases or limited knowledge; (3) thinking beyond the limited knowledge; (4) use the collative intelligences of the group; (5) no one person is in control; and (6) empowering people to get around biases (IBM, 2011). The key is to enable instead of control, which is a hard concept for traditional management and leadership to understand and embrace. A leader also must be aware of the dynamic environments, both internal and external, so that the organization can adapt. For instance, the two giant cola companies, PepsiCo and Coca- Cola, have always had a rivalry due to the nature of their organizations. However, they also have competitive interaction. Nair and Sclover (2012) explained the each of these two organizations have strategies that are not independent, but exhibit interdependent relationships. The relationship between the two suggest that neither one is consistently the leader (Nair & Sclover, 2012). There are times when Coca-Cola leads PepsiCo and times when PepsiCo leads Coca-Cola as they make their competitive moves (Nair & Sclover, 2012). This strategy does not weaken either organization; instead it shows that both are aware of the external dynamic environments in which they conduct business. Of course one person cannot understand and control all of these dynamic environments; the fact is it takes a team. Bajer (2009) asserted that today s leaders must attempt to develop leadership cultures where everyone in an organization is actively working together to create changes and add value (p. 38). Scharmer (2010) explained that leaders, who perceive the emergent future as the beginning of something intensely new, let go of the past, and look at the future probabilities, a future that may perhaps be very unlike the past. In a sense this means that chaos is vital to the development of evolution and adaptation because complex adaptive systems

5 are most adaptive when near the edge of chaos (Schneider & Somers, 2006, p. 355). Leaders who embrace a complex adaptive system will adjust through the evolving characteristic of selforganization, which comes from the inter-dependency of the sub-systems (Schneider & Somers, 2006). Uhl-Bien et al. (2007) explained, the old traditional management structure was designed to control behavior, whereas complex adaptive systems are changeable structures with numerous, intersecting hierarchies. These interdependent agents interact and are bonded in a supportive dynamic by shared goals, outlooks, and needs (Uhl-Bien et al., 2007). Again, HCL Technologies is one organization that a leader can look at to better understand how to redesign the organization into one that is able to adapt, change, and learn as it grows in order to sustain. The Inter-Organizational and Intra-Organizational As internal organizational methods become more complex, the external situations also have become more complex creating conflicting demands, that leaders must respond to, which can determine the organization s destiny (Smith & Lewis, 2011). In the study conducted by Mena, Humphries, and Wilding (2009), they found, in contradiction of past assumptions, interorganizational actually have higher levels of collaboration than intra-organizational relationships. This means that it is vital for the organization and its leader to understand the influence that takes place both inside and outside the organization. Bajer (2009) pointed out, Leadership is a competence that everyone in an organization should have and continuously develop (p. 38). A great example of an organization that is making the change away from the traditional leadership, to one that empowers everyone is PepsiCo. Indra Nooyi, CEO is working on shifting from a hierarchical structure to a dynamic, networked structure, acknowledging that PepsiCo has to change (Colvin, 2012). This organization aggressively supports leadership development and educational programs for all associates (PepsiCo, 2013). By developing all associates the

6 organization is able to make more globally responsible decisions that affect the interorganizational system in a positive way. Complex adaptive systems are changeable structures with numerous, intersecting hierarchies (Uhl-Bien et al., 2007). In a hierarchical system, the CEO is the only individual with an overall view, and decisions are made from the top/down (Schraagen, Veld, & de Koning, 2010). In contrast, complex adaptive systems operate using a bottom/up strategy. Most environments today are unpredictable, and therefore organizations cannot predict to a greater degree the nature of the demands they will be faced with (Schraagen et al., 2010). The old fixed organizational structure worked well when the environment was stable; however unstable environments require original structures (Schraagen et al., 2010). In response to this unpredictability, organizations are starting to adopt complex adaptive system structures, where the organization is decentralized, team-based, and has a distributed power structure (Schraagen et al., 2010). The interdependence of each agent creates success of the overall system (Smith & Lewis, 2011). Dering (1998) explained that a leader s behavior will help an organization get past the theory and recognize profound, lasting change. Leaders can apply network theory to assist in organizing the organization. Segre (2004) explained network theory from a sociological viewpoint centering on the structural examination of social networks, and looks at individuals, or actors, actions as controlled by these networks. Moliterno and Mahony (2011) stated that the actors in a network of an organization are individuals, groups, or the organizations they do business with. Kilduff and Brass (2010) expounded that there are main concepts that make up an organizational social network. These ideas are: embeddedness, social relations, utility of network connections, and structural patterning (Kilduff & Brass, 2010). The actors in the network are embedded in a relational

7 system (Rowley, 1997), which connects and divides them (Kilduff & Brass, 2010). A great example of this is when Nayar and his organization created the U & I portal, which produced transparency and built trust, with questions going both ways, thus creating a social network within the company that had an informal structure (Nayar, 2010). Kilduff and Brass (2010) explained that individuals rely on social networks to make essential choices that forge, and renew social ties. Cohesive networks offer chances for innovation, collaboration, execution, and the learning of complex information (Kilduff & Brass, 2010). Actor characteristics, agency, and cognition are all necessary parts of the value of social connections (Kilduff & Brass, 2010). Segre (2004) asserted that when actors are directly related to their society by means of robust ties creating a dense network, the consciousness of the actor is at such a degree that everyone may perhaps create strong ties with everyone else. In an organizational network, where actors have a wide variety of functions, they are aware of the importance of their social parts for the organization s society as a whole (Segre (2004). An example of this would be the over whelming responses Nayar (2010) received when he shared his problems. Nayar (2010) stated that it seemed that everybody in the company wanted to help their CEO and had an opinion on the problem. Organizations have nested organizational networks because the social network perspective entities are not separate, and instead they are entrenched in systems of social connections (Moliterno & Mahony, 2011). Rowley (1997) asserted that the interaction of interactions in an environment impacts an organization's actions and can affect the tendency to adopt new technologies. As in the case of HCL Technologies, the significance is in the fact that actors are well connected providing actors with an environment that offers many alternative sources of information and resources that would not otherwise be available (Rowley, 1997).

8 Nayar s sharing with his employees that no one person can have all the answers and every employee s suggestions or thoughts mattered, helped HCL Technologies develop a network that can be applied to any organization. In reality, other organizations could easily start adapting this concept by simply creating a Facebook page that all employees would have access to. From there anyone who had a problem could share that problem and have others help solve it. This would bring about a social network that would allow for greater transparency and build trust. Paradox as a Theoretical Lens As organizations transform from the traditional machine systems, to ones that are viewed as a natural open system with fewer defined limits within its external environment, leaders must embrace the paradox of organizing (Macey, 2011). Organizations were once viewed as selfcontained, today s organization are viewed as social structures that are influenced by dynamic systems of interconnected associations (Macey, 2011). Macey (2011) asserted that the paradox of organizing looks at organizations as open systems that react to the interdependence using strategies like enactment and deviation. There are two parts to the paradox; first the inflexible structures that are designed to solve issues have unintentional costs and the resolutions experience an uncomfortable dualism because they are designed to control, as well as are influenced by the organizational environment (Macey, 2011). This means that for organizing to transpire, predictable influence and dependent embeddedness must occur (Macey, 2011). Smith and Lewis (2011) proposed that the dynamic managerial equilibrium approach involves a paradox that uses complementary and intermingled strategies of approval and resolution. Leaders must accept that tensions must and can coexist; therefore, these tensions can be carefully explored (Smith & Lewis, 2011). If leaders can manage the organizational paradox, then a dynamic equilibrium will promote imagination and learning.

9 A paradox is conflicting, interconnected components that concurrently continues over time (Smith & Lewis, 2011). For example, organizational leaders should understand that both flexibility and stability is needed, thus creating the paradox. Today, organizations must have flexibility in order to create adaptability, innovation, collaboration, cost control and sustain a competitive advantage (Melin, 2010). Flexibility allows the organization to change or be changed effortlessly depending on a situation (Melin, 2010). Yet, stability is also needed because it creates predictability which reduces uncertainty (Melin, 2010). Melin (2010) explained that stability is about holding a permanent position that is not likely to move or change and sustain a competitive advantage. The goal is to find the balance between the two in order to produce practical outcomes (Melin, 2010). For instance, whenever a leader is looking at short term performance the leader has to take into account the long-term adaptability (Macey, 2011). Organizations are complex adaptive systems that continue to grow in complexity demanding an increase in shared interdependence. Each of the different sub-systems has a different way in which they function, which is limited by how its members experience and understand their environments (Macey, 2011). These different sub-systems cause underlying tensions. Some of these tensions are: collaboration and competition; learning and belonging; the need for change and the desire to stay the same; as well as become enablers and hurdles to change and development (Macey, p. 384). These tensions often cause agents to force an either/or decision instead of a both/and perspective, which is more productive (Smith & Lewis, 2011). With the overwhelming rate of change today, organizational paradox has become even more a part of everyday life because change makes conflicting demands on individuals. Organizational paradox is a natural consequence of change. For example, when a decision is made to adopt a new technology, tension is created. This tension takes place because the technology becomes

10 both an obstacle one must learn and an enabler to those who find the technology easy to adapt to. Leaders must learn to understand that there will always be paradox within the organization and develop a way that everyone can understand it and use it as an advantage. Complexity Leadership Leaders today must shift away from viewing their organizations as machines, to viewing them as complex knowledge centers that can generate innovation, learning, and adaptation. This simply means that rules transpire as an unstructured order; they are not initiated intentionally by one scheming mind (Lee, 2011). Instead everyone in the organization plays a part in how rules are formed within the organizational system. Organizations, which are systems, are made up of an assortment of sub-systems and people with various freedoms for independent action (Wilson, 2009). These actions or patterns are not always predictable, yet they can impact other subsystems or people inside the complex system, possibly changing its circumstances (Wilson, 2009). Complexity from emergence of simplicity is complexity theory. Complexity theory uses the living system with its non-linear ability to adapt and is founded on two concepts, how sensitive the system is to its starting environments and the feedback from the system (Wilson, 2009). Lee (2011) explained that the emergence of patterns comes from local interactions. Complexity theory refers to relationships and patterns between the components, and the randomness connected with working with individuals in a dynamic organization or system (Wilson, 2009). The creation of non-formal and formal social structures and relationships, which comes from human beings bounded rational nature, affects the choice and usefulness of the action, as well as the outcomes of such actions (Lee, 2011). What takes place in the emergence of complex systems is evolutionary change that comes from adapting beyond the circumstances that gave

11 them birth (Lee, 2011, p. 516). Lee (2011) explained, What emerges is a form of social mind that solves complex organization problems without conscious cognition (p. 516). Consequently, what emerges is a social organization that performs as a united problem-solving unit, which occasionally supplements and replaces the decision and resolution procedures at the single level (Lee, 2011). One organization that has found a way to encourage its people to become part of the problem-solving unit is the Cheesecake Factory. The Cheesecake Factory has created a video learning portal, which is a YouTube-like learning portal that allows any member to upload a video showing themselves performing their job well (Bersin, 2012). The member can share any job that they have from making food to cleaning, which has let them share how they solved issues that they had on the job (Bersin, 2012). By creating a place where everyone can share and learn the organization has the ability to adapt and grow without looking for answers from the top. Uncertainty, diversity, and rapid technology changes are adding to complex organizational systems (Ilinitch, Aveni, & Lewin, 1996). The key is to enable instead of control, which is a hard concept for traditional management and leadership to understand and embrace. Great leaders make it easier for people to: connect, have different ideas, and have disagreements (Wagner, 2011). Bersin (2012) asserted that when a huge mistake takes place in an organization it creates the most learning; the key is to learn from these mistakes. Wal-Mart is a great example of an organization that helps its people look at their mistakes and learn from them so that they can share it with the entire organization. Whenever Wal-Mart puts out a new initiative they require the manager and supervisors to create a list of what could have been better and an action plan with best practices included in it (Frazier, 2008, personal experience). The goal of Wal-Mart is to create an environment that stresses the importance of honesty, respect, open communication and innovation (Walmart, 2013). This allows the entire organization to learn and adapt. By

12 embracing the complexity and working within it, organizations will succeed in today s complex market. Conclusion In order to remain competitive in the global business world, organizations need to change their systems which are run like machines where the top leaders decide everything important, to dynamic systems of interconnected associations that are able to change in ways that exceed the complex demands and expectations of today s organizations (Duin & Baer, 2010). Today s leaders must change to dynamic systems, where leaders change the structure, culture, the strategy, to meet the dynamic environments they are in (Duin & Baer, 2010). A leader also must be aware of the dynamic environments, both internal and external, so that the organization can adapt. As internal organizational methods become more complex, the external situations also have become more complex creating conflicting demands, that leaders must respond to, which can determine the organization s destiny (Smith & Lewis, 2011). Organizations were once viewed as self-contained; today s organizations are viewed as social structures that are influenced by dynamic systems of interconnected associations (Macey, 2011). The paradox of organizing looks at organizations as open systems that react to the interdependence using strategies like enactment and deviation (Macey, 2011). By shifting away from viewing their organizations as machines, leaders can turn their organizations into complex knowledge centers that can generate innovation, learning, and adaptation. By embracing the complexity and working within it, organizations will succeed in today s complex market.

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