23 February 1999
Human organisations show many of the features of complex adaptive systems. The ability of the interacting agents who collectively make up the system to influence its evolution has important implications for strategic business planning.Dr. Robert MacIntosh and Dr. Donald MacLean of Glasgow University together with Mr. Ian Arbon, Managing Director of Peter Brotherhood Ltd. showed how current complexity theory can be applied in bringing ailing companies back to life.
Research director : Eve Mitleton- Kelly
London School of Economics
London WC2A 2A
Compiled For The L.S.E. by Geoffrey J.C. Higgs 1/3/99
Inasmuch as a business organisation is a complex adaptive system it can be pushed to a far from equilibrium condition where self organisational patterns subsequently emerge. Such emergence can be seen as emanating from new order generating rules, which operate across a densely connected network of interacting elements and which amplify certain random events via positive feedback. This propels the system away from its current state towards a new order which was largely unpredictable at the outset.
From manufacturing steam engines and gas
turbines in the nineteenth century Peter Brotherhood Ltd. is now the last remaining
successful producer of process gas compressors and steam turbines (up to 20 MW) in the
United Kingdom and also supplies turnkey power stations and process plant. The company has
been through a period of severe decline from 1965 to 1997 and was taken over in 1983. This
decline was marked by falling profit which moving to a new location did not improve. It
also had a hierarchical management structure and could be described as accountant
dominated. The company also had a culture of low morale due to downsizing and a
share holder vision rather
Complexity theory has in the past tended to be descriptive rather than prescriptive but MacIntosh and MacLean were keen to not only bridge the gap between theory and practice driven research on complexity but also to establish a partnership between research and practice in Industry. Peter Brotherhood Ltd. was a good example of a traditional engineering business which at the time was in decline because of intense competition from abroad. At the same time the market seemed to offer scope for its adaptation an evolution.
Analysis of questions put to management and employees revealed certain stock responses such as:
(1a) The tendency to blame anything and everything for not getting orders.
(1b) You cant do that, weve tried it before and it didnt work.
(1c) Only innovate if it leads to cost reduction.
(1d) Hit soft targets first.
(1 e) I dont know that, nobody tells me anything.
Overview of complexity theory application
The natural sciences tend to describe complex adaptive systems either systemically or in terms of rules or algorithms. MacIntosh and MacClean see such systems as dissipative structures where one stable state can go through some kind of phase transition to another. Organisational culture which engenders an unsuccessful mind set can be transformed by what MacClean and MacIntosh term conditioned emergence. Such a transformation involves:
B. Creating far from equilibrium conditions.
C. Managing feedback processes.
(2a) Identifying time lags and stratified stable structures.
(2b) Surfacing defensive routines.
(2c) Making the current rule set explicit.
(2d) Glimpsing he future and creating the attractor.
(2e) Agreeing a new rule set.
2. Creating far from equilibrium conditions.
For Peter Brotherhood Ltd. this was effected by transporting the entire management team to a conference centre away from the day to day working and protocol (the Glenmore Event). This offered the possibility of team working and communication at all levels. Defensive routines were were discussed and the old rules by which the company was currently operating were made explicit. Dismantling of structures, configurations or routines which were deleterious was begun and negative feedback (the way in which these were sustained) was removed.
3. Managing feedback.
Assessment of the companies possible market position in terms of responsiveness rather than cost or technology leadership led to the establishment of the following new rules:
(3a) Better, faster, cheaper.
(3b) Mistakes are O.K. but learn from them.
(3c) Win business on responsiveness rather than price.
(3d) Stop selling a product and start providing solutions.
(3e) Balance the employees sense of rights with a sense of duty.
(3f) Separate the task from the process
Physical restructuring took the form of sub unit creation which engendered local accountability, responsibility, goal orientation, focus and team spirit. Management personnel were also changed to fit this new structure with a general manager responsible for the whole of each team. A three year pay deal was made with staff representatives without involving outside unions. Cognitive restructuring involved establishing a vision of the future and working towards this rather than the old firefighting culture. Glenmore was made a yearly event to reveal current thinking and to cascade this into strategy.
Peter Brotherhood Ltd. established three group strategy concept:
Monthly team briefings of all employees are held with feedback questions and written responses. Performance appraisals are made on a regular basis and employees are rewarded for good work. Representatives are employees representatives rather than those of the Union and a company council is operative. There is also a make a difference scheme (MAD) whereby employees suggestions for improvement are rewarded. Improvement of personal skills within the company is via learning programs rather than training programs.
Managing feedback involves:
(4a) Amplifying behaviours and routines consistent with the new rules.
(4b) Distinguishing negative feedback which is deleterious and substituting new modes of operation.
The decision as to when a state of
disequilibrium should be imposed on a system will affect the outcome and this may be at
variance with the idea of complex systems as self organising. Nevertheless any
comprehensive theory of complex systems must also explain those in
Positive feedback in terms of progress towards a new attractor may give rise to new rules but adjustment to such new rules may be seen as negative feedback. Not all parts of a system need to be in a state of disequilibrium though what takes place will affect the whole system to a greater or lesser degree. It was thought that conditioned emergence perhaps emphasised the formation of new rules and neglected intuitive approaches. In business however it may be important to go from one kind of ordered state to another rather than have sustained a far from equilibrium conditions.Conditioned emergence can also be understood in terms of multi-agent interaction between teams or groups rather than individual agents and success of a complex adaptive system may be either due to internal reorganisation or favourable change in the external environment.
Definitions given are as terms are used in this particular context and not intended to be exhaustive.
Complex Adaptive System: A system which evolves over time in largely unpredictable ways and adapts to a changing environment.
Emergence: The occurrence of new events or properties in an evolving system which could not be predicted from analysis of its constituents.
Far from equilibrium conditions: When a system is in an unstable state and able to undergo a phase transition.
Dissipative Structure: A system that is
open to an environment, imports and exports energy (or information) and may undergo phase
Mind Set: A vocabulary of stock responses.
Negative feedback: The maintenance of the status quo and thus old rules .
Positive feedback: The Amplification of developing attitudes, behaviour or routines which gives rise to new rules.
Attractor: A stable state towards which a system proceeds.
Rule Set: Implicit or explicit rules by which an organisation operates.