Systems thinking is a discipline that dates back several centuries and has been widespread in the business world for approximately fifty years, and fundamentally since the early 1990s due to the editorial success of Peter Senge's work, “The Fifth Discipline ”(systemic thinking, personal mastery, mental models, shared vision, and teamwork).
System
A system is defined as a set of elements that interact dynamically and are organized in relation to a purpose (including the company). As discipline, it is the effort made to acquire aptitudes or competences (it has to do with the person, individually and collectively).
The study of a system involves all its parts relating them to each other, which is to say that the properties of systems cannot be described only in terms of their separate elements. And even more so: systems exist within other systems (everything has to do with everything):
- In the human body the molecular system exists within the cellular system, cells within tissues, tissues within organs, and so on. The coordinated operation of all generates the conditions for the preservation of life. A car is a clear example: all its parts - mechanical, hydraulic, electrical, electronic - must work correctly to generate mobility, comfort and safety. The plane does not fly the wings, nor the turbines, nor the high-level equipment, neither the pilot nor the flight attendants, what flies is the plane as a whole: its structure and the interrelationships between its parts. Also: water on earth evaporates and turns into clouds that produce rain. This in turn benefits and enables work in the fields and the harvest of food.
When that systemic totality does not occur, there are problems. In humans, a drug to correct alterations in cardiac function - prescribed without this totalizing vision - could create the conditions for the appearance of diseases in other organs such as kidneys or liver. Excessive rainfall in the mountains, added to the lack of planning for the construction of dams, can lead to major floods, loss of crops and material and human goods.
In a recent film, The Sentinel, played by Michael Douglas, Kiefer Sutherland and Kim Bassinger, an example of a system provided by nature is discussed: in a certain inclement area of Canada there are periods in which there is an overpopulation of rabbits followed by others in which which almost disappeared. For a long time it was tried to elucidate these life cycles without finding an answer until it was observed from a systemic perspective. What is the cause? Rabbits are the only food for foxes and in the face of excess hunting, rabbit colonies decrease. It is then when the foxes hardly have to eat and in the absence of food they also begin to decrease in number. In those moments, taking advantage of the lack of its natural predator,rabbits reproduce easily until their abundance causes foxes to have food and quantitative growth… and the cycle begins again.
It should be clarified that systems thinking is not a "theory in use", nor is it an organizational fad, nor is it an infallible tool to achieve spectacular management results. As its name indicates, systemic thinking is a thinking model, which aims at totalizing vision, replacing the usually used partial gazes.
The company
Every company is an organization, a system, created by people and is made up of various parts (sectors) that are interrelated. These parts are usually called sections, departments, managements, operating units, etc. In them, people carry out activities that are often repetitive that are complemented by those carried out by others.
The company is dependent on its environment, which is often complex economically, politically, technologically, culturally and socially, an environment that often changes, affecting in different ways and intensities, which is why relationships with it must be careful to ensure continuity.
The people in the company
And how is the systemic vision transferred to the business world? To achieve goals and objectives (organizational and personal) each of the employees must be selected observing that their competencies are in accordance with the culture of the company, and join sectors (parts of the company) that work in harmony in their internal environment, and maintain dynamic interactions with other sectors.
As the company is a social system, it is of fundamental importance to establish an adequate level of communication and transmission of knowledge, in order that different sectors are managed based on similar criteria of thought and action. This is sometimes not achieved by the existence of regular interpersonal relationships and different views on the actions of the company or the progress of business. At the level of the leaders, the consequences are the feeling of being "putting out fires", repeated complaints due to lack of time and - even worse - due to the poor results of their collaborators or the work with errors carried out in other departments, situations that do not allow an orderly and efficient work in "MY management area".
From this we deduce that:
- Executives know that something is happening but sometimes they do not know the cause, Justifications are usually given with a sense of excuse Expressions are with a sense of property, not integrity That the quality of the resolutions depends on the quality of the analysis
These executives may need to change their thinking.
Ways of thinking
The ways of thinking determine the design and the way of managing the company. Every leader wants to lead a successful company made up of the best professionals in key positions. Something like "… in my company I don't want to have wagons, they must all be locomotives." But… what we want is what we need? Moreover, do we have defined the profile of the people we need?
Between 2003 and 2004 the Spanish club Real Madrid, considered the most powerful in the world, under the leadership of its Sporting Director, Jorge Valdano, formed a team of stars, the best individual figures put by position who had stood out playing in the main teams from different leagues in the world, in the Eurocup and in the 2002 World Cup in Korea-Japan, something like a world team. He hired Zidane, Romario, Beckan, Figo, Raúl, Roberto Carlos, Samuel and others, their salaries were the highest in all of Europe.
The expectations were to achieve remarkable profitability with marketing actions of the Real Madrid “brand”, and to destroy any tournament or championship that participated. The economic-financial expectations were satisfied to a large extent, however, in sports the experience was traumatic: after a hopeful start, irregularity was the distinctive sign, questions and reproaches appeared, the defeats deepened the crisis and the team fell into a spiral underperforming. At the end of the second season Valdano resigned. Currently the team is practically dismantled and Real Madrid continues to hire players from abroad, but with less "cartel".
Soccer lovers have the answer to this problem: “If there were eleven Maradonas, they would not make up a team”, with which we can assure that having the best of everything is not enough.
A company can have the best products, the best accountant, the best financier, the best salesperson, the best publicist, the best system analyst, the best software, and yet not get the desired results.
It is that for the team, sports or business, to achieve success it is necessary that its staff is not only highly technical, it must also be human, and work in a coordinated, systematized, and interrelated way. Researchers in human sciences affirm that as important as talent is the “chemistry” among its members and that in every team there must be people who contribute to the collective understanding.
Partial visions
There is a “manual” question. How is it possible that a team of executives with an IQ of 110 collectively fail to reach 65?
In the textile company T, profitability decreases year after year. The general director affirms that the whole sector is doing badly because the economic policy promoted by the Ministry of Economy of the Nation is wrong. In Finance they affirm that the credits that can be obtained in the banking and non-banking circuits are expensive and that it is not convenient to continue taking them because the current indebtedness is very high. In marketing they justify themselves by stating that consumers prefer the modern design products of the competition, and that their efforts will be in vain if a policy is not adopted in line with market trends. In Costs they affirm that these are high because the company's technology is obsolete, it demands a lot of labor, and the productive capacity is low.Others question Purchases because they are made at very high prices and at the wrong time, and there are suspicions about the honesty of the sector's personnel. There are voices according to which the Sales people are useless and that they should all be fired, who in turn shout at the top of their throat that Quality Control is inefficient. Personnel Management that we must pay attention to excessive staff turnover due to leadership failures and that it is necessary to pay salaries at the market level, in addition to that employee morale is at deplorable levels which explains absenteeism and poor performance. Production says nothing (it's the wedding duck) but continues to do more of the same. Many say that the company does not have a competitive culture, or that we must start designing and producing new products, or that prices must be lowered,and until the company should deal with "doing something else or lowering the blind."
It is possible that everyone is partially right and until it is true that something else has to be done, but not only to change the area, also to try to think deeply to find solutions and not to provide partial explanations as if the company were a system closed.
A prepaid medicine company with national capitals with a presence in the main areas of Argentina, asked us for a budget to design motivational programs in one of its branches.
This need was defined by the branch manager, a public accountant with several years of experience in the company and with aspirations (later realized) to be a Patagonian regional manager, and the sales manager, a graduate in administration with a year in the role and in fact the second in hierarchy of the branch, and future manager of the same. How did they detect it? In a very simple way: observing interpersonal relationships. They also stated that operational results were good but considered that improving motivation would be better.
To verify this diagnosis, we interviewed all the bosses and employees for several days in individual meetings, some were re-interviewing them after speaking with their colleagues. The intention was to verify the accuracy of the consultants' comments, design the activity and adjust content.
After the analysis, we defined that the company's need was not the one expressed by its executives, which is why we advised to work on “Integration, Participation and Communication”, a program that was successfully implemented. The second stage was, as a way of achieving shared visions, holding group work meetings and discussing common problems. Subsequently, the rotation of employees by different sectors was implemented, and the new employees upon entering became fully aware of the activities of the company and the branch through induction programs.
That is to say that the vision of both executives was biased and erroneous, they had not taken into account that bosses and employees were almost completely locked in their work sector (Administration, Medical Audit, Sales, Professional Services, Customer Service, etc.), ignoring the importance of the activities of the other sectors and without taking into account the way in which their results affected the rest of the organization.
Now let's work on hypotheses:
1. A financial company works with two clearly defined products, a) credit card, its star product, b) personal loans. Each product is led by a boss and both report to the Commercial management.
The purpose of the company is to increase the market share of loans and at the request of its product manager a great effort is made to disseminate it to real and potential clients. Despite this, marketing remains stagnant. It is then that it is decided to carry out an intense training session for salespeople from all over the country at the central office and marketing activities are intensified. Ten days later, the results are mixed: loans remain on a plateau while credit card sales have increased.
The situation is clarified when a loan seller requests to change equipment, commenting that the commissions on the sale of cards were higher than those of loans, and that he would earn more selling cards than loans.
2. In the same company, the relationships between two bosses are not good: there are divergent criteria due to unclear differences in time and form. This situation is half known but it is considered that time will lessen the differences.
Simultaneously and as a way to increase profitability, organizational changes are designed with the participation of both executives that do not have the expected success.
In both cases, the results obtained were far from what was desired.
- In the first hypothesis, the fundamental cause is that executives and employees are circumscribed in their area, their department or sector, without having a general vision. In the second, there was no firmness in the decisions to overcome a situation, it should not exist or tolerate. Both the biased views plus the lack of foresight of the leadership were responsible for loss of time, efforts, misuse of economic resources and loss of confidence of the employees in their leaders.
The unfortunate thing is that probably everyone concerned thinks that those responsible for inefficiencies are always others. It is that it was not taken into account that it is necessary to have quality in the decision and efficiency in the implementation.
Joint work
Any collaborative action benefits the team members. The important thing is that everyone works together for the common benefit, not that they are the best separately.
When a forest fire occurs in the Andean region in the summer, several situations may arise: insufficient availability of water, intense winds and variable directions, areas of difficult access, igneous sources spread rapidly and in sectors far apart.
What do they do then? They work in a coordinated and synergistic manner with Civil Defense, Police, Municipalities, Hospitals and NGOs with preventive actions (disseminating measures for the alert, informing and advising the population what to do and what not to do), active (turning off some lights, sometimes from the air with hydrant planes), and proactive (creating barriers causing controlled fires so that when the fire reaches those sectors, having nothing to burn, it is extinguished naturally).
Which shows that a logical, obvious solution (in this case trying to extinguish the entire fire with water) can worsen the situation and the solution found - through the systemic vision with the use of scarce resources - gives effective results, despite go against the logical criteria.
Coordination of efforts
In the short or long the inconveniences become problems, and the non-resolution of these generates conflicts with often negative consequences for the company, if not internal struggles, the result? rabbit cycles vs. foxes, vast fires, or outright business failures.
It is that with technological advances what differentiates one company from another is the quality of their interactions.
Systems thinking promotes abandoning the tendency to hold others responsible for all our ills and to work in a coordinated manner. The existence of a good working environment improves efficiency, and consequently improves profitability.
Now, no one participates in what they do not know or understand, and few support what they do not participate in.
Participation is achieved by promoting a totalizing vision through which it is possible to eliminate the differences that may exist between members of the company's departments. This can be seen when measures for change are decided and the existence of resistance, although these are not totally avoidable, they can be reduced with preventive, active and proactive actions… but resistance to change is a fascinating subject and must be seen through vision. systemic.
To eliminate differences, executives must modify mental models, have coherence between saying and doing, responsibility that employees know how to do their work and that they do it very well, that they know how their work facilitates the work of others, that they notice the way you interact with others, and how they collaborate with the purposes of the company.
How is it achieved? Through personal mastery, with persuasion and example, with group work (when people learn to work together, they form teams that through synergy generate hitherto unthinkable results), with training and a lot, a lot, a lot of communication.
Every company begins with a conversation, every company is strengthened with communication. When efficient results are sought and that employees have a sense of belonging to the Company and not only to the work sector, communication is never much.
That is when it becomes necessary "to develop a strategy so that what we want to happen to us happens to us and what we do not want to happen to us does not happen to us."
Strategy
«A Vision of the future without action is simply a dream.
Action without a vision of the future is meaningless.
A vision of the future put into practice can change the world »
Joel A. Barker
The state of the company today is a consequence, for better or for worse, of decisions taken years ago. The state of the company in a few years will be a direct consequence of the decisions taken today.
Strategic planning deals with defining a flexible and integrated system of objectives and means that contemplate the vision and mission of the company and its businesses.
The term strategy refers to adjusting the activities of the organization to the environment in which it operates. Consequently, it has to do with adjusting the activities of the organization to its resource capacity, for which it is necessary to know what to do, define objectives, and establish action plans.
The fundamental elements for the formulation of planning and strategy are:
- View. It is the idealization of the future of the company. What is the desired future? How do we want to be and how do we want to be seen in that future? Mission. It can be defined as the navigation guide, the principles and the mechanisms that will be used to fulfill the objectives. What do we do today? What is the object of the business? What do we do well?, Values: predetermined and habitual behaviors considered positive in the culture of the organization, Strategic actions: design of management control methods, and of the activities to achieve the objectives, Strategic objectives, defining indicators that define how much is missing to achieve the Vision
These elements are the basis of the strategic plan, the most successful companies are those that define them more adequately.
Strategic analysis studies the understanding of the strategic position (competitiveness) of the company by asking: What changes occur in the environment? What effects will they have on the organization and its activities? What do managers, shareholders, executives, entities aspire to? union, political, social?
Various tools are used for this study. Among them are the PEST, which establishes the importance of political, economic, social and technological influences. Another is the Life Cycle. One of the best known is the Boston Consulting Group's Market Growth / Company Share Matrix. Another is Porter's key factor analysis. And another is the SWOT analysis, known as SWOT (strengths-weaknesses-opportunities-threats) in English-speaking countries, and as SWOT in Spain.
After which the formulation of actions (strategic planning) is reached, which consists of designing tactics to achieve the proposed ends.
It is then about analyzing the real and possible changes in the environment, the capacities or resources that the company has, the expectations of growth and development of its managers, and the objectives that are set within the cultural, economic, political framework, which it defines. And according to these analyzes define the changes and modifications necessary within the company to adjust to the new realities.
Consequently, Strategic Planning is a process:
- Of the company as a whole (systemic), not of its parts or its functions, Of its continuity, survival and development, Of the decisions made with a vision of the future, Of the profit potential to be achieved and not only of the results obtained, From the best combination of resources and alternatives to achieve the objectives.
In this regard, it is of fundamental importance to consider that the Strategy belongs to the field of Strategic Planning, while the Dashboard comes after the strategy or strategies have been defined.
It is easier to have a good idea than to put it into practice as it was conceived. The success of the strategic plan is not due to the quality of its preparation but to the ability to take it to the realm of concrete facts, of the efficiency of its executives through thought and action actions to obtain the expected objectives or results.
Taking into account that all collaborators are employees, bosses and executives, it is vital that leaders form a homogeneous group in terms of the quality of their relationships. The vision of one is not necessarily that of another, but they can analyze and, respecting their knowledge, points of view, certainties and divergences, achieve consensus in the adoption of measures that go to the bottom of the problem.
Command board
Management control is of fundamental importance to guide systemic efforts aimed at achieving strategic objectives.
"Some companies are almost exclusively involved in the philosophical process when the reason for their existence is not to have well-formulated ideas but strong strategic actions that are reflected in success, prosperity and survival."
Managing a company only analyzing past results is something like "driving a car looking in the rear view mirror", which we assimilate with "managing a company based only on financial results is suicide."
That is why it is necessary to have information that reflects the existing relationships between financial, operational and organizational objectives, which allows analyzing trends and events, both internally and externally.
And a systemic methodology, fundamental to integrate different realities is the implementation of the Dashboard (also called management control, scorecard, BSC Balance Score Card) relating a set of indicators (faithful and quantitative expression of the behavior or performance of the organization) that, having the vision of the company as the north, allows "to see" how the strategy is transferred to action and to monitor in real time making decisions that help to preserve and / or improve management.
As the dashboard is strategically oriented, in fact it implies a new way of analyzing the company from large dimensions or perspectives, linked through cause and effect relationships. Originally, these perspectives were four:
- Financial, considering the business profitability in the short and long term, budgetary control, satisfaction of owners or shareholders, etc. Clients, strengthening the relationship with the traditional ones, improving satisfaction and retention rates, Internal processes, identifying critical processes in order to ensure quality, improve efficiency and reduce costs, and Growth and learning, monitoring the work environment, increasing strategic competencies, achieving employee satisfaction as a way to reduce turnover and increase productivity.
Experience indicates the need to add other perspectives such as
- Suppliers, (ahem) in distribution companies, Shops in the case of credit cards, or Ecology in the chemical industry. (Perhaps and only perhaps, the inconveniences with the inhabitants of Gualeguaychú and other towns in the province of Entre Ríos as a result of the installation of the Botnia pastry plant in the Uruguayan area of Fray Bentos would be less if the company defined indicators or, if there were any defined, would have communicated them in a timely manner)
The dashboard provides information in real time through PC screens, which is why managers, executives and middle managers can make agile and effective decisions. It also provides an objective measurement of the contribution of each of the executives to the achievement of the strategic objectives of the company.
In this order, what should the Human Resources Department do? Today all companies are service companies, which is why they must inevitably provide quality service and customer service. Human Resource Management, within its strategic role, has the challenge of instilling the concept of customer service both internally and externally, and permanently maintaining the focus on the development of the intellectual capital of the company, understanding as such to the "possession of knowledge, practical experience, customer relationships, business technology, and professional skills that give the company competitive advantages."
Management success will be achieved by practicing transformative leadership, developing the skills of all members of the organization.
- Employees must have accurate information systems about customers, processes and consequences of their work, Leaders must have real-time information on the capabilities of employees, develop their leadership skills, practice delegation of tasks, have full capacity to provide training and, among others, to be results-oriented. And fundamentally everyone, bosses and employees, want and know how to work as a team.
Conclusions
Since systemic thinking is a thinking model that aims to achieve a comprehensive vision, it is necessary to articulate the competencies of the employees with the dashboard, in order to generate innovative ideas that allow the company to achieve and sustain competitive advantages.
Main bibliography
- Enrique Herrscher. “Systemic Thought”, in which in a novel and entertaining way the chance encounter is recounted on a trip to the Argentine and Chilean Patagonia of a professional with an industrialist who leads -in the framework of beautiful landscapes- to reel realities and analyze forms to think, understand and communicate. Ed. 2006 Ramón Beltrán Costa et al., "Create Health or Cure Disease", chapter Labor Consulting, in which he advocates that creativity be one of the characteristics in solving problems and making decisions. Ed. Holos 1993Ferry Johnson and Kevan Acholes, "Strategic Management", aimed at the formulation and implementation of strategies by company managers. Ed. Prentice Hall, 1997Robert Kaplan and David Norton “Balanced Scorecard”, masterpiece of the Balance Score Card. Ed. Management, 2000
Further reading
- Hugo F. González, "The Change and Management of Human Resources", which describes forms of behavior of company leaders to enhance their efficiency. Ed. Salido, 1997Eduardo Press, “Organizational Psychology”, where organizational aspects of the company and the way to solve the problematic situations that occur in it are explained. Ed. Macchi, 2005 Fernando Gosso, "Hyper Customer Satisfaction", which proposes optimizing the pillars that sustain excellence in the provision of services: service as a product, customers, and company management. Ed. El Emporio, 2005Hugo F. González, "Transformative leadership, confidence generator", Leadership, Motivation and Productivity Chapter of the book "Human Resources in Argentina". Ed. Estrada, 2000.
