Complexity theory point of view in explaining organizational change

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Introduction

The complexity theory can be defined as a set of concepts that attempts to explain complex phenomenon not explainable by traditional and mechanistic theories. It integrates ideas derived from chaos theory, cognitive psychology, computer science, evolutionary biology, general systems theory, fuzzy logic, information theory, and other related fields to deal with the natural and artificial systems as they are, and not by simplifying them. It recognizes that complex behaviour emerges from a few simple rules, and that all complex systems are networks of many interdependent parts which interact according to those rules. According to complexity theory, random events will settle into a complicated pattern rather than a simple one, if left to happen without interference. In a business context, it suggests that events within organizations and in the wider economic and social spheres cannot be predicted by simple models but will develop in a seemingly random and complex manner.

Indeed, although the complexity theory was originally developed in the context of physical and biological sciences, which is the study of nonlinear dynamic systems, it promises to be a useful conceptual framework that reconciles the essential unpredictability of industries with the emergence of distinctive patterns (Levy 2003).

Nowadays industries evolve in a dynamic, path dependent manner over time as a result of complex interactions among firms, government, labor, consumers, financial institutions, and other elements of the environment. Not only does industry structure influence firm behaviour, but also firm behaviour in turn can alter the structure of an industry and the contours of competition. Existing theoretical models, however, tend to assume relatively simple linear relationships without feedback. Many strategic frameworks attempt to classify firms and industries and to describe appropriate strategies for each class[1], even if according to some authors these models tend to be oversimplified and lack much explanatory or predictive value.

Nevertheless, complexity theory offers a number of new insights, analytical methods, and conceptual frameworks that have excited many scholars of management in recent years. Indeed, even if it suggests that simple deterministic functions can give rise to highly complex and often unpredictable behaviour, this complexity can still exhibit surprising order and patterns, and lead organizations to understand how systems can learn more effectively and spontaneously self organize into more structured and sophisticated forms that are better adapted to their environments.

Considering the complexity theory application to social systems, organization and business strategy, it can be said that, from single firms to the global economy, all involve a multitude of actors interacting in complex ways. These interactions are iterative, in the sense that the outcomes of one period become the starting point of the next, giving rise to path dependency. To understand the relevance of complexity to strategy is therefore necessary to conceptualize industries as dynamic, nonlinear systems. As Stacey (1995 p. 480) said, “Nonlinearity and positive feedback loops are fundamental properties of organizational life”. Much of the industrial organization aspect of strategy literature concerns itself with how firms interact with each other and with other actors in their environment, such as consumers, labor, the government, and financial institutions. These interactions are strategic in the sense that decisions by one actor take into account and anticipate reactions by others, and thus reflect a recognition of interdependence.

But in this context, one of the most relevant implications of complexity theory for organizational strategy is that long-term planning is impossible. Chaos theory has demonstrated how small disturbances multiply over time because of non-linear relationships and feedback effects. As a result, such systems are extremely sensitive to initial conditions, making their future states appear random. Networks, even when in the ordered regime, are subject to perturbations from external influences, which sometimes cause substantial, though unpredictable reconfigurations. Formulating a long-term plan is clearly a key strategic task facing any organization. People involved in planning know that models are simplified representations, that forecasts are uncertain, and that uncertainty grows over time. Similarly, as Levy argued (2003), it is not possible either learn much about the future by studying the past, since history is the sum of complex and nonlinear interactions among people and nations, then it does not repeat itself. Finally, even Stacey (1996 p.187) claimed that although short-term behaviour might be predictable, “members of an organization, no matter how intelligent and powerful, will be unable to predict the specific long-term outcomes of their actions”.

Rather than expend large amounts of resources on forecasting for unpredictable futures, many authors have suggested that businesses should emphasize flexibility, creativity, and innovation in response to the vagaries of the marketplace. Anyhow, though complexity theory suggests that organic networks might give rise to self-organization and emergent order that enable firms to prosper in an era of rapid change, Stacey (1996 p. 188) suggested that under conditions of complexity, “managers still need strategic plans, but they relate not to outcomes and actions to achieve them, but to methods of managing anxiety, power, difference, and connectivity”, arguing that, in chaotic change, adaptation and creativity are maximized by finding a balance between centralization and decentralization, between rigidity and disorder.

Changing the human interaction

Regarding to the chaotic change, many authors claim that change initiatives do not fail because of lack of grand visions or designs but because leaders do not understand the complexities they are facing. For istance, Karp and Tveteraas Helgø (2007) argue that managing people among chaos, uncertainty, and complexity has become the main challenge for organisations of every kind owing to the very nature of today’s economy. This management challenge has less to do with strategy or structures than with the nature of human beings and our instinctive reactions to change, and to those leading change. Therefore, in their opinion the solution is re-training not of skills but of mindset, emotions, values, and assumptions. In that regard, according to a recent IBM study, two-thirds of 765 corporate CEOs interviewed say they need to make fundamental changes to their business over the next two years (IBM, 2006), although a survey shows that less than ten percent of change programs have been successful in 2004 (IBM cited Karp and Tveteraas Helgø 2007).

In this context, systems thinkers seek essentially to understand organisations and their internal and external connections with the environment as a whole, for instance by analysis or diagnosis, a leader, a management team, a consultant or others may design appropriate interventions and manage change. Cognitive sciences are also important building blocks in mainstream management and organisational thinking, since, in terms of individual and collective learning they represent the basis for any type of organisational development. Moreover, many claim that the essential function of management is to direct and control, eliminating uncertainty and dealing with negative deviances from the grand plan. In their arcticle, Karp and Tveteraas Helgø, leaders then need to understand the whole system, see its connections, foresee the responses of people and, from this, design and execute appropriate change management interventions. A study by Stacey (2003 cited Karp 2009) showed that, in organisational complexity theory, organisations are regarded as responsive processes of relationship and communication between people, describing a psychology based on connections between people. Attention should therefore be focused not on some abstract system but on what people are actually doing in their relationships with each other on a micro-level.

On this basis, many authors have come to a series of conclusions that can be interpreted as a sort of guidelines to perform successfully in the chaotic change.            For istance, since private and public organisations operate in a complex external and internal environment, vital assumptions change continuously due to dynamic developments and events in the marketplace, in the industry, and so forth. Organisations are also rich in people diversity, structure, activities, processes and culture, and behave like ongoing reality construction entities, consequently  it is not possible for a management team or a single leader to understand cause-effect loops, as well as systemic connections. Communicating and interacting, people together construct a future and a case for change that is a function of their history, their identity, and their own agenda, but which is always open to further shaping. According to some authors (such as Stacey, Karp and Tveteraas Helgø), people construct their future in terms of what actions become possible and sensible for them given their circumstances, since they influence and affect each other, through loops of interaction that create individual and collective motivation, behaviour and identity. These influences arise in dynamic relationships between people in specific and changing contexts. Actually, people are constantly shaping and shifting their relationships within an organization, depending on the context: in fact, individuals are not the rational actors that leaders wish them to be, because they behave and react in a number of unpredictable ways (Stacey 2003).

Another interesting issue to be considered is the one that refers to the different change of leaders’ and employees’ view. According to the authors, leaders on the top level see change as an opportunity to strengthen, innovate, and renew the organisation, as a way to take on new professional challenges and risks, and to advance their careers. On the contrary, for many employees, including middle managers, change is considered disruptive and it upsets the organisational balance. Simplifying what authors mean, it can be said that change happens only when people’s own agendas overlap with the organisational agenda and that this way of changing is an identity question. According to Stacey (2003 cited Karp and Tveteraas Helgø 2007), this way of changing is an identity question, since organisations are reflections of our identities and the way we talk in the organisation reflects how we see ourselves in the organisation. Therefore, the real threat when a leader is designing and implementing a change program would be people’s identities more than economic wellbeing.

What is interesting is that the authors contend that people develop and sustain certain ways of relating to each other in their conversations, and then, from conversations, make sense of their surroundings and themselves. In this situations what matters are not so much the conclusions arrived at as the boundaries within which arguments are conducted but the new forms of relationships that they construct, and to construct new forms of relationships would be to construct new ways of being. The authors therefore contend that what is important is that leading people in change under such conditions requires alternative ways of leading and leaders, since it is not possible to design people’s responses to these and predict how people in the organisation will react to change, should instead lead by loosening control, and focus on forming identities and relationships in the changing organisation. According to Karp and Tveteraas Helgø (2009), when control, design, management interventions, and micro-management are loosened, phases of chaos and uncertainty will emerge and it would be exactly in these phases that important elements of self-organisation, self-governing, uncertainty, surfacing of new ideas, confusion related to making sense of a new context, frustration, disagreements, and diversity take shape. Thereby, influence the patterns of human interaction, which are governed by dynamic, social, cognitive, and coordination-related psychological processes, keeping at bay anxieties of not being in control, would be a way to utilise chaotic phases constructively. In fact, to reduce anxieties associated with disorder and unpredictability, leaders and employees in organisations want to believe that someone, somewhere, is in control (Griffin 2002 cited Karp and Tveteraas Helgø 2009), even if the notion of the leader as one who is in control is not consistent with reality. Instead, leaders should probably find that they have to live with the paradox of being in control and not in control simultaneously during an organization change. Therefore leaders, paying attention to issues that shape relationships in organizations, could influence the development and direction of change.

Finally, since people undergoing change have to overcome cognitive hurdles, they seek recognition that their ideas are sought after and reflect on and involvement as a way of finding opportunities to maximise their own individual potential. As explained previously this will lead to self-organising, tensions, disagreements, but also to important conversations about the “new” in the processes of involvement, in order to seek individual recognition as human beings treated with dignity and respect. Indeed, people are more easily motivated to adjust their behaviour if they have the opportunity to contribute in the making of common meaning, if they believe in the purpose, and if they understand the wider implications of their individual tasks. If this does not happen, people will, in authors’’ experiences, resist change regardless of any alignment tactics the leaders might use.

Maybe the economist John Maynard Keynes was right when he said that “the greatest difficulty in the world is not for people to accept new ideas, but to make them forget their old ideas” (Smith 2005 p. 90).

To conclude on this view of facing the organizational change it can be said that, since most organisations are experiencing an increased complexity, change management practices should take better account of unpredictability, uncertainty, self-governance, emergence, influencing the patterns of human interaction. In the same way, the change management under chaotic conditions should be centred on people, identity and relationships, and dealt with developing people’s ability to do thing in new ways. According to the authors, leaders necessitate to pay attention to how people communicate in organisations, reflecting on of how they form identities. This would be a leadership process of influencing the patterns of people’s interaction, avoiding design oriented command-and-control managerial interventions, and keeping at bay the anxiety caused by not being in control. Indeed, Karp and Tveteraas Helgø (2009) contend that leaders of chaotic change should accept the complexities of reality and pay attention to the forming of identity and relationships in organisations, seeking to influence, but not controlling, the development and direction of change by addressing and paying attention to issues affecting the way people talk in organisations.

As above, leaders should probably live with the paradox of being in control and not in control simultaneously. In fact, perhaps it is exactly the ability to live with this paradox and find the courage to continue changing that constitutes leading people in chaotic change.

Learning in change

Strictly related to the chaos and complexity topics, is the learning organization issue. Indeed, there are some interesting views on learning seen from an individual and a complexity point of view. First of all, as Stacey (2003 p. 325) argued, the distinction between individual, group, and organization is no longer meaningful. For instance, he defines learning as an activity of interdependent people that can only be understood in terms of self-organizing communicative interaction and power relating in which identities are potentially transformed, so that merging shifts in the thematic patterning of human action. Also according to Harkema (2003 cited van Eijnatten and Putnik 2004), learning can be defined as an emergent process in which knowledge is constructed through interaction and that seems to depend on a number of factors like who an individual met, which characteristics the individuals respectively had (such as motivation, trust, age, etc.).

In the light of this, it is useful to introduce the concept of learning organization, since it is an “organization, structure, process or network which is capable of thriving in a world of interdependency and change” and where people continually expand their capacity to create the results they truly desire, “where new and expansive patterns of thinking are nurtured, where collective aspirations are set free, and where people are continually learning to see the whole together” (Kofman and Senge 1993 cited van Eijnatten and Putnik 2004). Such an approach in a chaotic change may actually constitute a proactive way of managing the complexity of the variables.

Therefore, if it is true that, as explained previously, in organisational complexity theory, organisations are regarded as responsive processes of relationship and communication between people, and that neither leaders do not understand the complexities they are facing, collective and collaborative learning could be definitely a positive and pragmatic. The ability of a group to learn from experiences drawn by individuals while working, and thus, as a result of interactions between peers in the completion of a common task could ensure that the loss of control is managed by avoiding panic. A social system whose members have learned conscious collective processes for continually generating, retaining and leveraging individual and collective learning to improve performance of the organizational system in ways important to all stakeholders, and monitoring and improving performance. Learning moves an organization towards the desired state, since it should be transferred from the individual to group to organizational to inter-organizational, and vice-versa, and resulting in changes in behaviour. For instance, according to Huysman (1999 cited van Eijnatten and Putnik 2004) a learning organization is “a form of organization that enables the learning of its members in such a way, that it creates positively valued outcomes, such as innovation, efficiency, better alignment with the environment and competitive advantage”. A learning organization is an organization capable of adapting, changing, developing and transforming itself in response to needs, wishes, and aspirations of people, both inside and out, and of contingent changes. Moreover, both structural and cultural organization learning mechanisms are important to create and maintain the internal stability even when faced articulated and complexity dynamics. Many authors also think that one of the most important aspects of a complexity approach is that people act upon a system of which they themselves are an inseparable part. Consequently, since nowadays an organization is a complex, dynamical, non-linear, co-creative, far-from-equilibrium, inherently self-sustaining and ultimately self-transcending system, it can be seen not as a fixed structure, but as flow, like a framework for thinking, seeing and interpreting organizational patterns (van Eijnatten and Putnik 2004 p. 421).

In this context, also Stacey (2002) describes an enterprise as a complex adaptive dynamical system, consisting of a great number of frequently interacting heterogeneous people, which is governed by generative learning[2]. This definition to the model built on the concept of “chaord”, originally developed by Dee Hock, former CEO of the VISA credit-card company who combined the words “order” and “chaos” into one single term “cha-ord” in order to emphasize the simultaneous presence of both of them even more. Thereby, a “chaordic system” would have a behaviour that is both unpredictable and patterned at the same time. A good example of a chaordic enterprise is the credit card company VISA that, even if in 1968, was no more than a set of beliefs and a vague concept, today, 29 years later, its products are created by 22,000 owner-member financial institutions and accepted at 15 million merchant locations in more than 200 countries and territories. according to Hock (1999 p. 189), nowadays three-quarters of a billion people use VISA products to make 14 billion transactions producing annual volume of $ 1.25 trillion, which represents the single largest block of consumer purchasing power in the global economy. VISA would have grown a minimum of 20 per cent, and as much as 50 per cent compounded annually for three decades, through the best and the worst of times, with no end in sight. Therefore, chaordic companies, intended as a complex adaptive system of highly-interacting communities of commitment, might be the final states towards which an actual company, seen as a learning organization capable of self-organization and transformative change under hyper-turbulent conditions, might evolve.

Indeed, in this century companies are faced with yet another paradigm shift including, for example, issues like extended globalization, heavy time-based competition, extreme pressures on flexibility, but also excessive energy consumption, considerable climate change, and other problematic social issues. Therefore, companies and their markets, increasingly characterized by hyper-complexity, unpredictability and uncertainty, have conceived organizational models and management approaches based on the idea of inter-organizational networking to deal with those challenges.

Conclusion

The new perspective that complex responsive process brings is that the organization is not designed; it emerges as patterns of coherence from the iterative interactions of all of its participants. The ability of people in groups, organisations and societies to exercise foresight depends upon the dynamics of these groups, organisations and societies. Such systems are not deterministic systems but rather complex adaptive systems, since they learn their way into an open-ended evolutionary space and through such co-evolution they create their own futures. The future of creative adaptive systems is thus not determinate, inasmuch leaders cannot design and control organizational process (not standing many common expectations of, projections on to and fantasies about leaders), but they can influence the process by the nature of their own participation in it, and by their ability to help raise the skill and awareness of others (Suchman 2002).

Ultimately, it is the capacity of the consultants and leaders to not know and to be open to being changed themselves that allows them to hold open the space for transformation and emergence in their organizations. Thus, embracing a complexity perspective should involve focusing less on trying to assert control and attending instead to improving relational process. Indeed, by reducing anxiety, enhancing awareness of context and relationships and fostering greater receptivity and openness to being changed, a complexity perspective could help to increase the resourcefulness, flexibility and adaptability of an organization, that are nothing more than the characteristics that have enhanced survival and success of organisms and species throughout the ages. This spontaneous self-organising activity, with its emergent order, is vital for the continuing evolution of a system and its ability to produce novelty, even if, as Stacey affirmed (2003), the evolution of life in the universe, and in organisations, does not occur primarily through random mutations selected for survival by the forces of competition, but primarily through an internal, spontaneously self-organising, cooperative process that presents orderly forms for selection by the forces of competition.


[1] For examples the Boston Consulting Group matrix for resource allocation and Bartlett’s classification of international strategies (Levy 2003 cited Bartlett and Ghoshal 1989).

[2] Higher-level learning that enhances the capacity to create, developing individual and organizational cognitive schemas to better manage a business (Senge 1990 cited van Eijnatten and Putnik 2004).

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