Complexity and Structural Change

Complexity Management

through

Structural Change©

By Alfonso Cornejo

Author of the Book

Complexity and Chaos:

A Guide for XXI Century Management

Today s organization is being trapped within past paradigms that prevent it to be more flexible and dynamic.

In past years organizations have unsuccessfully sought the formulas that would allow them to survive in a competitive environment which is every day more dynamic and disorderly.

However, changes have been partial and organizations haven’t been able to adapt the business essence according to the new and incremental environmental demands. In spite of everything, we know the in the 21st

Century organizations should learn to evolve and adapt their structures in this new environment if they want to stay within the competition arena.

Old

paradigms

September 2007 Alfonso Cornejo CM~SC © 2

Environment pressures that

demands continual adaptation

Industry dynamics

Cost Control

Competitors

Technological change

Globalization

Customer

ever changing needs

Economical cycles

Profit Goals

Competitiveness standards

Required performance


Organizational

Complexity



New paradigm to understand the dynamic of organizational processes.

Powerful approach to ensure high performance and adaptation of corporation.

As a result of structural change, organizational behavior improves.


Complexity

Applications

Strategy

Organization

Processes

Metaphors Principles Applications

Arie de Geus

Living Company

James Moore

The Death of Competition

Margareth Wheatley

Leadership and New Science

Michael Mc Master

Intelligence Advantage

Peter Sengue

Stuart Kauffman

Kevin Kelly

Kees Van Der Heijden

Scenarios

Peter Schwartz

The Art of the Long View

SPM

Archetypes

Scenario Planning

Interactive

Management

Structural

Change

Genetic Algoritms

JOHN DEERE

CEMEX CaseBordering on Chaos

There are stranger places to see the latest in complexity theory in action, but

delivering cement in Mexico is a pretty good start.

By Peter Katel

CEMEX


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Complexity

Do we look desorder......?

...or the Order behind Desorder......?

• Conflict

• Lack of priority

• Flaws

• Misalignment

• Limited resources

• Entropy

• Structures

• Behaviors


Complexity

The complexity and chaos that live within the organization is not

a dice game, the situations leading to chaos are perfectly

predictable if we pay close attention to those variables that tend

either to increase or diminish them. We will mention a typical

situation: One company acquires a new and numerous standardized

truck fleet from only one supplier for the delivery of their

products. To accomplish the repairs, parts handling, and spare

parts control, it requires ability and learning development that

must be accumulated by the team of people that is in charge of the

product distribution technology.

Two years later, due to the obligations that a top executive has,

a great amount of units is bought again, but from a different

supplier. Comments are not needed to know that the required effort

within the organization for the management, tracking and control

of, although apparently two similar technologies, needs an

abundant waste of energy, an additional talent display and a more

complex management for a situation that had already been

stabilized.


¿How to deal with every day

Complexity ?

7 8 1 1 5

12 10 3 5 4

9 9 7 7 ......

?• Low sales...

• Rejected products...

• Production delays...

• Unsatisfied Customers....

• Fails on communication.....

• Demotivated people ....

• Hurries.....

• Etc....

?


Types of Complexity

a) Origin Complexity:

Due to original company characteristics, by example. 3M (innovation) vs Budweiser (logistics).

b) Residual Complexity:

Related with the everyday operation of the system, i.e. conflict, orders cancelation, lack of raw material, personnel, turnover, etc.

c)Provoked Complexity:

Generated by particular, political or ego center decisions instead of group consensus, i.e. to acquire wrong technology, to make inadequate executives selections, to launch to market new products based on incomplete analysis, etc.

May 2001 Alfonso Cornejo Alvarez CM~SC © 10

.

Effect of a bad decision


System Capacity to Manage

Complexity

Everything that happens within the organization consumes energyand it must be taken into account that the energy must be dosedand not be used indiscriminately. Making efficient and effectiveuse of the resources is translated in the capacity to properlymanage the complexity of the situation.

In order to manage complexity the proper capacity is required(Variety and Ability) from each element to attend the systemdemand.

The System Capacity is optimum when the emergent properties areproperly made use of.

When the system components do not fulfill their roles and theirfunctional expectations about them excess pressure is generatedin the system which manifests itself in an efficiency andeffectiveness loss, reducing the parts’ orientation because ofthe secondary effects that are provoked.

Complexity is a very particular situation reality that we mustunderstand and manage. Its proper management requires severalobservers (which form part of the complexity) that share the“Shared Map” reality in order to understand and manage it.


System Capacity to Manage

Complexity


Structure–Process Model

“SPM”


Need of alternative

perspectives

Improvement approaches have come and gone and still it seems that

we are unaware of the possible effects of our acts, we don’t have

identified levering points nor the key variables to manage the

organization conduct. All of this is due to the fact that many

tools have been developed (with great improvement potential) to

attack in an isolated and independent way parts of the system.

Nevertheless, as any other strong drug, we forget the lateral

effects when applying the antidote, and all this in non

controlled situations may be delicate for the organization.

In fact it is still common practice to attack the symptoms of the

problematic in the organizations without properly questioning if

we have reached the bottom of the situation. We haven’t realized

that everything that happens within the organization is

interconnected and when we attack one variable it generates

effects in other parts of the system. If this is not taken care

of, we can lose control of the system.


Need of alternative

perspectives

Also, it has been common practice to try to improve an

organization from within its processes and not from its

structure, when the latter is the one who generates the rules for

possible actions to the processes. We had mistakenly searched

attacking the chaos and organizational complexity through

improvement processes without questioning which structures were

generating the disorder.

After all, what is the organization?, but a chess board where the

figures live through events under certain rules and a squared

board. On one hand, the board and the game rules are at the same

time the structure that defines the game to be played and its

possibilities, and on the other hand, the processes are the place

that are gradually generating the system’s dynamic. And here is

where the cycle ends because when the processes occur gradually

they modify little by little the structure of the system, just

like the water drop that graves the hardest rock as time goes by,

and deforms it by the effect of a repetitive event.

.


The Need for a Model of


Organizational

Behavior and Conducts...

...are the result of

different interacting

structures, forms,

patterns

Relations, paradigms,

principles, etc.

We can separate

current situations

that we observe and

live in a model of

polarities:

1.- Complex conducts

2.- The variables that

generate these complex

behaviors


Structure – Process Model

and Chess...

Board

Rules of the Game

Characteristics

of pieces

Relationships

between pieces

Plays &

Possibilities


Which set of structures

generate the processes?

S1

S2

S3

S4

S5

S6

S7

P1

P2

P3

Structures Processes


Structure – Process Model (SPM)


System Frontier

Environment Environment

Struct Proc


Structure – Process Model (SPM)

Structure and Processes is a universal duality; it is the form and

function. Is the dancing relation of two virtual poles with dynamic

movement for any system at any level of the universe, from the atom

up to galactic cumulus. One requires from the other to exist, and

since there are no processes if there is no structure, nor

structure without processes. We can imagine the structure-processes

model as two separate entities but united through bonds which

connect both and are used to feedback their effects and modify

their form through time.


System Frontier


Struct Proc



(SPM)

On how many repeated occasions we were faced trying to implant a change in an organization, whether is called quality program, leadership, productivity, team work, etc. (processes). The problem is that we never were aware that we were trying to change the organization.

Now it is clear that in the majority of cases is not possible to modify processes attacking the processes. It is necessary to adjust, create or modify the structure (may be policies, procedures, game rules, roles, etc.) in order to provoke the emergence of processes required by the organization. This is why it is important to discover the system natural levering points, that is, places where we can stimulate the variable with a minimum effort and great results can be achieved.



(SPM)

Chaos, complexity, lack of control, are concepts which we have been exposed to without

knowing what produces them. Understanding the organizational dynamic seems to be

unreachable because the quantity of dynamic variables involved and the quantity of

possible states that are generated. Nevertheless, The Structure-Process Model allows us

to see things from a different viewpoint, it allows us to step further into the Chaos

and Complexity Management, in a world where the multiplicity of states darkens our

vision and hinders our way to the predictability of future events.

Some of the most important principles and properties of The Structure-Process Model are

the following:

•The system’s structure generates its own processes

•The processes through time modify the system’s structure, rising this way another

structure... which generates another kind of processes...and so on.

•Changes in the Structure modify the processes and in the same way even the minimal

change in processes has an effect on the structure.

•Solid and aligned structures allow controlled processes. If the structural elements

lack solidity then it will be easier that the processes modify the structure.

•The greater influence actors can modify the structure and the processes in order to

achieve the stability level that satisfies the interests of the groups with greater

influence on the system.



3 Levels (organization)

Organizational

Cultual

Individual

Structure Process

Process

Process

Structure

Structure


Structure-Process Model

Organization level

S P

Organization

Culture

Individual

S P

P

P

S

S


Culture

One of the most important phenomena yet not definedbut which we can understand under the Structure-Process Model is that of the Organizational Culture.

This variable has always been extremely complex tocomprehend and because of that there is a greatnumber of definitions trying to structure it underdifferent criteria and viewpoints, all of them validand rich in possibilities for its analysis.

However, I’m convinced that the organizationalculture contains both elements of duality and fromthis perspective it may be perfectly understandablefor managing it within the organization, and in thisway it may not be seen as a caprice of human groupswho exchange ideas, values and conduct codes to rulethe behavior which characterize it.



Cultural level

S P

Organization

Culture

Individual

S P

P

P

S

S



Individual level

S P

Organization

Culture

Individual

S P

P

P

S

S


Structural

Change


Design

One crucial point for any system its

his own design, because it is

precisely at this moment in which its

structure is molded and defined and

so, the capacity to trigger the

possibilities in its processes are

created.

The possibilities from whether the

organization will be successful or not

depend from now on. In fact a badly

designed system is a costly system to

manage, because it is a system where

the entropy starts to grow without

measure and eventually it may make the

organization lose its capacity to

create positive cycles.


I. Current Situation

Diagnostic of current

observed processes.

Structures that

generate the current

processes Current situation

Observed environment: competitive

environment characteristics that

affect organizational dynamics.


II. Desired Situation

Profile of required

processes in order to

maintain competitive

edge.

Structures required

are identified to

support the new

organizational

processes.

Desired situation

Change Perspectives: Environmental

Trends and new Change Perspectives

that trigger new organizational

atitudes and behaviors


III. Structural Change

May 2001 Alfonso Cornejo Alvarez CM~SC ©

Required changes are implemented

to ensure the appearing of new

organizational process, and as a

consequence, desired behaviors and

patterns emerge.

Detailed action plan in order to

implement Structural Changes

required, involving different

organizational areas (Technological,

Administrative, Cultural and Human).

S P

33

Structural Change

IV. Learning

A learning about the performance

of processes is carried out,

Structural adjustments are made,

and a new stage for organizational

adaptation is established..

New processes and behaviors are

observed and measured in operation in

order to detect effectiveness of

Structural Change previously planned.

Learning


Organizational Complexity

Among other things, the Structure- Process Model may support the

organization with:

– Environment Analysis and its repercussion on the Organization

– The diagnostic of the organization as a whole, as an Open

System and exchanging energy and information with its

Environment.

– Its capacity to adapt to its Environment.

– Evaluate its structures vs. its “the must be” state

– Evaluate its fundamental processes.

– Evaluate the Organization Chronological Age as a function of

the rigidity of its Structures.

– Detect the greater influence Structures within the

Organizational Culture.

– Detect how the Culture influences different Processes types

within the Organization and how it affects the Organization

Structures.

– The Organization Attractor effect: Vision


The importance of Design

“All the organizations are perfectly

designed to obtain the results that they generate”


If there is not Structural Change

there won’t be significant and lasting change.......


System frontier


Struct Proc


The Book

Complejidad y Caos: Guía para la

Administración del Siglo XXI

Complexity and Chaos: Guide for XXI Century

Management

You can download or read the book here:

www.structural-change.com

http://www.eumed.net/cursecon/libreria/2004/aca/aca.htm


http://www.structural-change.com/





http://www.eumed.net/cursecon/libreria/2004/aca/aca.htm

Alfonso Cornejo

[email protected]

www.structural-change.com

www.structural-change.jimdo.com


Complexity and Structural Change

Business

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