Systems Thinking for Coherency

Abstract

This chapter begins by explaining why management of social responsibility requires a systematic approach to understand complexity and provide organizational-wide solutions. It then analyzes why such an approach is useful and necessary, but not sufficient unless it is accompanied by a genuine implementation of the coherency conditions. It then assesses the role of systems thinking in driving change in complex adaptive systems, overcoming resistance, and dealing with different types of cognitive bias .

1 The Days of Yore

The wide range of rapid and exponential changes of the past several decades (including, unprecedented levels of globalization of markets and production systems, mass customization of new technology, market liberalization policies, environmental destruction, climate change, and a significant increase in social inequality) has changed the very nature of the triangular relationship between business, society, and government. At one level, a range of civil society pressure groups, consumer associations, pan-governmental bodies, and NGO’s have emerged to pressure businesses to respond to these changes. At another level, the sheer growth of large corporation and the immense power they yield (Fuchs 2007) has itself shifted the parameters of this relationship and create pressure for new ways of managing these relationships.¹ If, in previous ages, business was a relevant political and social factor in this relationship, then today, it has become a key political and social actor (Nijhof et al. 2005).

This change in weight must be accompanied by a transformation in how the relationship with society is maintained, and as its role in society evolves, by changes inside each organization. Moreover, this transformation must be genuine, defined as ‘a change in character’, in ‘composition’, and in ‘outward form’ (Merriam-Webster). It must take place at the operational level and at the abstract level, in how the organization functions and in its reasons for existing. Unlike many change processes, usually announced and guided by a group of senior executives, focused in a linear manner on some functional or strategic aspect of the organization, and measured in a series of milestones and performance targets, this process is nonlinear, dynamic, and with a long-term perspective (Bolton et al. 2011).

Its goal will be nothing less than systematic change,² and doing business that is financially profitable, but without the current costs to society and the environment. After all, if responsible management is not about behaving in a way that reverses negative global trends, many of them created or extended by the same organizations who proclaim to advance it, what is its point? (Visser 2011). Unfortunately, this logic has been lost in the world of corporate thinking, where CSR is seen as little more than window-shopping and has demonstrably failed to generate changes to such thinking. It has had some success, but it is dwarfed by the scale of the problems and the resistance it has faced. Doing business in a responsible way cannot be achieved under current conditions, therefore a transformation in how the organization is visualized is required in parallel with more operational changes. The truth is that CSR , just like Total Quality Management , can only offer incremental gains (Visser 2011).

Regulation is not going to appear at any time in the near future (not in any form that could be considered adequate) which would create obligations to act sufficiently more responsibly to tackle the severe problems society faces today.³ Yet to continue with the same incoherent management approaches adopted until now is to ensure a continuation of irresponsible behavior and the worsening of the situation. Increasingly, business opportunities exist to support a transformation in how profit is generated, and this is now linked to an urgent need for change. As the power of the world’s large corporations grows, so does their responsibility. There exists an opportunity to change, in line with the need to do so, and the latter is not possible without the former (De Leede et al. 1999).

2 A Systematic Transformation

Systems thinking in this chapter refers to the idea that organizations are parts of a system, made up of many interrelated actions and unseen links, some of which take years to show the effects on each other. As it is part of a system, the organization has difficulty seeing the system holistically, as if from above, and understanding the myriad links that form it. Systems thinking tries to promote such holistic thinking, rather than the usual approach of assessing singular elements of the system, which fail to undercover the reality of the world of which the organization is a part (Senge 1990).

There is no longer much doubt that the complex environmental and social impacts of industrial activity demand ever greater collaboration and cooperation among a wide range of actors (Roome 2001). There is no single starting point at which these myriad issues can be tackled, no single actor to whom blame can be apportioned and corrective action addressed, no point at which to focus efforts to develop a coherent approach to responsible management. The picture is one of highly entwined social and ecological systems and an economic system that depends on both (Williams et al. 2017). To develop effective strategies to counter problems embedded in such complex networks requires approaching the issues with a systematic perspective as a guiding light (Marcus et al. 2010; Porter 2008). Moreover, this perspective must include a profound analysis of the current circumstances that sustain and support today’s economic models, as otherwise a transformation to more sustainable systems is unlikely (Kearins and Springett 2003).

Apart from this logical necessity to analyze interlocking systems with a systems thinking approach, there are a number of more specific reasons to do so. Firstly, such an approach offers a more suitable tool than those often used to analyze the business-society nexus, where most issues are analyzed in separation from each other (Jahdi and Acikdilli 2009), and the focus remains on a linear cause–effect relationship (Whiteman et al. 2013).

Secondly, addressing the issues through a systems approach helps to shed light on the complex relations within and between the systems under analysis (Williams et al. 2017). It also focuses attention on the often-overlooked impact any system has on its participants, and its unseen ability to shape actors’ mental models and strategic preferences (Porter 2008).

Thirdly, a systems approach emphasizes the need to adapt system-wide solutions, which can help reposition responsible management as a fundamental and centrally-located organizational concept, which infuses every aspect of organizational life, in contrast to current thinking, which sees it as an outer-tier add-on (Azapagic 2003).⁴

Only such an approach is likely to provide genuine solutions to the challenges of developing responsible management practices that tackle the grave damage our current economic models are creating (Marcus et al. 2010; Starik and Kanashiro 2013). In fact, versions of a systematic approach have been applied to some of these problems before, not always with the desired success. In the 1990s, a substantial number of leading companies began to apply systems thinking to their firm’s dependence on the natural world for many of their resources and materials. While this could be summarized under the heading ‘doing more with less’ or ‘eco-efficiency’, the ultimate outcome did nothing to reduce overall resource depletion (Young and Tilley 2006).

The interpretive approach to systems thinking sees the organization and its surroundings as an inclusive and holistic social construction (Hatch and Yanow 2003). The reality of each case must be constructed dialogue by dialogue, which has the benefit of adapting the analysis to each specific context, as well as incorporating more voices from across the system, in comparison with the linear approach mentioned above (Kira and van Eijnatten 2008). However, such an approach does suffer from many of the same problems that have traditionally dogged stakeholder theory, and permitting infinite approaches to responsible management is confusing for business, consumers, investors, and the public (Azapagic 2003). It would also complicate comparative analysis between different organizations and possibly hinder effective transfers of knowledge and best practice.

Two important issues must be noted in relation to the system’s ability to adapt and improve performance. One is the credit assignment problem , and the other is the rule discovery problem (Holland 2006). The first concerns performance, which comes about as a consequence of multiple subtle interactions over a period of time and space. It can be very difficult to identify which interactions, when, and with whom, are actually responsible for any proportion of the performance. The second, the rule discovery problem , deals with suboptimal performance in the system, due to ineffective components. Creating better performance is not a simple task, as the improved components must be compatible with the system. Although a complex adaptive system may be continually changing, and therefore, forever contain an element of novelty, the building blocks of subroutines that develop spontaneously across the system can be exploited and used to create patterns that guide and promote certain types of behavior.

3 A Coherent Systems Approach

There is little doubt that systems thinking proves a useful lens through which to view the tensions and complexity of sustainability issues and can provide a holistic perspective that draws together the multiple impacts that arise from the functioning of any organization (Reason 2007). In any modern organization, there will always be such tensions, with competing voices offering different, yet compelling strategic choices. In a modern organization trying to improve its responsible behavior, these tensions may only be compounded, for the simple reason that the organization now accepts that more voices have a right to be heard (even if the reality is that there remains a hierarchy concerning which of the ‘traditional’ voices hold greatest power, and the newcomers often have none). In fact, the systems thinking approach is somewhat flawed in that certain assumptions are often made regarding the system that may not accord to everyone’s reality, such as the scope of the system and its ultimate objectives (Porter and Córdoba 2009).

For these reasons, while a systems thinking approach is useful and necessary, it is not sufficient. There exists the risk that it will not lead to any noticeable change, if there is no common ground about how to describe and define the system, and what its aims are. A coherent approach helps to overcome these limitations, by providing an underlying philosophy upon which common ground can be constructed. To enable the construction of a systematic approach requires working to meet the four coherency conditions, which are explained throughout this book, in ways that can be readily understood by all stakeholders. Using these conditions allow both an identification of the limits of the system and a description of what its objectives are.

Firstly, to define the limits of the system means accepting the interdependence (condition #2) between what the organization draws from its stakeholders (one property), and what it produces (another property). If this interdependence exists, if the organization accepts that a priori, all inputs start from an equal baseline regarding their importance for the creation of the finished product, then there cannot be any a priori prioritization of anyone. Therefore, the limits of the system can be defined as incorporating those stakeholders who provide inputs used by the organization, as shown in Fig. 1. Naturally, these inputs must come from stakeholders who themselves are behaving responsibly, so that they each reflect (condition #3) the responsibility stance of the coherent organization. This is the common ground, upon which individual cases can then be constructed.

Fig. 1

(Source Author compiled)

The limits of a coherent system for responsible management

This stakeholder identification process does not throw up a different answer to that offered by multiple authors over the years (Clarke and Roome 1999; Donaldson and Preston 1995; Freeman and McVea 2001; Jamali 2008; Mitchell et al. 1997; Rasche and Esser 2006), but it has the advantage of being somewhat more operative than some approaches.⁵

Secondly, the objective of this system, as can be seen in Fig. 2, is to create value that reflects the mutually shared responsibility that exists between the properties (condition #4). This value, to be coherent, must be responsible value (in that it doesn’t generate negative impacts) and distributed among the different stakeholders according to the input they provide.

Fig. 2

(Source Author compiled)

A system of coherent responsible behavior

4 Coherent Change in Complex Adaptive Systems

To build a complex system that effectively supports coherent responsible behavior is no small matter, requiring as it does changes across all the pillars that support any responsible management approach. It is at this abstract level where change must take place, which can then be translated into operational specifics depending on the characteristics of each organization. These changes are not piecemeal, and there is no clear defining line between one pillar and another. A vision is required that supports an open and transparent structure, promotes interaction, which itself drives learning and the creation of new knowledge, done in a way that invites participation in decision-making, so that the organizational objectives—the creation of coherent value—are spread justly.

Such an undertaking should not be attempted alone.⁶ In line with stakeholder theory, studies on alliance-building and network creation argue that an organization’s actions and results are tightly bound up with the relationships they form, both with other organizations of a similar nature and non-market entities (McEvily and Zaheer 1999). Developing such networks are ever more important, given the increased importance of knowledge in modern organizations, and the limited ability that using purely internal resources offer to understand the dramatic social, technological, and ecological changes being faced (Wayne Gould 2012). The resulting environment is much more complex, which requires an increase in internal requisite variety (Ashby 1991). CSR was developed as a way to face this increased complexity (Bolton et al. 2011), but it tried to do so without changing the underlying purpose of the organization (creating primarily economic value and distributing it primarily upwards). A coherent approach must deal with this same complexity while also changing the purpose of the organization, the type of value created, and its distribution.

Interacting with others is a way to gain information, but it may not be useful information. Accessing new (non-redundant) information can require interacting with those with whom the organization doesn’t usually interact. Granovetter (1983) introduced this concept of weak ties, arguing that they provide more non-redundant, novel information than strong ties. This is because strong ties may be based substantially on personal feelings, and as a result are tightly clustered, leading to the same, redundant information being repeatedly transferred.⁷ This idea was extended upon by Burt (1992), who argued that it wasn’t so much the strength or weakness of the ties, rather if they bridge a structural hole, which connects distinct groups with complementary non-redundant information. Finally, McEvily and Zaheer (1999) differentiate between the structural hole and the ties that span it, with the former representing the opportunities to access new information, and the latter how these opportunities are exploited.

However, there are important differences in how complex organizations look to build such alliances, and what they do with any resources garnished from them (Phelps 2010). A carefully constructed vision is required, embedded in everything the organization does, and not simply an add-on as has so often been the case, so that the objectives of such information gathering and knowledge acquisition are clear (Azapagic 2003). This vision must promote creativity in using such knowledge, in the search for partners who share a similar desire to become truly responsible, in the search for ways to make decisions that are to the benefit of all stakeholders, and in the search to manage roles and provide leadership in a transparent manner (Nijhof et al. 2005).

Not developing both strong and weak ties is almost guaranteed to lead to failure. One argument often put forward for not doing so is that such network interaction carries the double risk of others discovering how an organization operates, as well as the outcomes generated (Mahr et al. 2010). However, in the case of coherent responsible behavior, a systematic approach to deal with increased complexity is not just useful, it is necessary (Azapagic 2003), and such an approach cannot limit interactions to the formal frontiers of the organization, for the simple reason that they do not reflect the reality of the organizations reach (Cilliers 2001). At the same time, creating coherent value requires greater understanding of the value of each input and the corresponding role of each stakeholder and this cannot be done without an open and transparent exchange of information, in many cases across structural holes to interact with stakeholders who provide non-redundant information. Additionally, weak ties spanning structural holes may also be cultivated with organizations in completely different fields, who share an interest in being more coherent. While every organization (even within the same sector and of a similar size) will have to assess and decide what coherent value means to them, it is highly probable that processes and methodologies for doing so will emerge in different places and be transferable either in their entirety or as a guide to be adapted to each set of conditions. That said, two organizations in the same industry, with broadly similar characteristics, are always going to share many traits, even as they retain some important differences (Azapagic 2003; Senge 2006). Therefore, strong ties should not be ignored as they may also provide important sources of non-redundant information, as well as moral support and inspiration, from those pursuing their own coherent responsibility strategy.

Any change process in a complex organization requires a context, to avoid becoming submerged and lost in the day-to-day operational activity (Uhl-Bien et al. 2007). The initial context for a coherent approach is the prominent involvement of corporate organizations in generating many of the worst problems facing society today. An additional context, build upon the first, is the clear failure of corporate responsibility programs to make any real headway in tackling these problems. It is this context that can drive mindful change, where there is a continual focus on developing a collective concentration among all organizational actors (Rerup and Levinthal 2014). This mindfulness should combine a set of characteristics which may initially seem contradictory, but which in fact are an innate part of the fabric of a coherent approach. It must combine a top-down approach, where guidelines are set to promote certain types of behavior (Schulman 1993), and a bottom-up approach, where the context is continually refreshed and updated (Vogus and Sutcliffe 2012). Another way of saying the same thing is that the organization must combine inertia and adaptability (Rerup and Levinthal 2014). The inertia in a coherent organization corresponds to defined parameters of how the organization should behave, inscribed in the vision and continually overseen by a leadership group. The adaptability corresponds to creating participatory decision-making structures and an adaptive leadership process. This last process should not be confused with hierarchy or positions of authority. Rather it is essentially about encouraging the flexibility to deal with issues as they arise and providing the means by which the ideas and knowledge generated are able to flow back into the more formal hierarchical structure (Uhl-Bien et al. 2007).

5 Barriers to Change and Overcoming Bias

There are a number of issues, which need to be understood when embarking on a coherent journey, as each one carries the potential to derail the process. Any organizational change process, implemented by management, runs a high risk of failure, with a number of studies suggesting that the number is around 70% (Wall 2005; Werkman 2009). There are varied reasons offered as to why this may be the case, but they can be summed in into three groupings—the organizational structure in terms of size, hierarchy, formality, and lines of authority; the context in which the process is explained and managed; and the attitudes, behaviors, and assumptions of those managing the change (Werkman 2009). Kotter (1995) identified three general problems that often lead organizations to commit specific errors. The first is not to have a long enough time perspective, the second is not to understand the ability of the system to fight back, and a third is an overall lack of experience. He then went on to detail the errors that are most likely to arise, which include not creating a sufficient sense of urgency, not identifying and removing obstacles, not generating momentum, not communicating effectively, and declaring victory too soon.⁸

Apart from the general change problems mentioned above, there are other issues more specifically related to a change process when the objective is to become more coherently responsible. Any company attempting to move along a spectrum from acting responsibly (or saying they are acting responsibly) to acting responsibly in a coherent manner will have to come to terms with its past.⁹ It will probably have been through multiple initiatives, where responsibility was heralded as a new beginning, and the concerns of stakeholders fretted over, while speeches and in-house brochures spoke of a better future for all. Although some token (and some important) changes were made, finance performance and all the related indicators permeated throughout the organization remained the only true indicator of success, and companies continued to grow their carbon emissions, fired employees when only moderate profits were made, and didn’t concern themselves too much with analyzing the material and labor inputs further upstream. These are repeated patterns of behavior, the norm for practically every organization who proclaims a responsibility stance, and history matters (Cilliers 2001).¹⁰

Embarking on the coherency journey requires owning up to this past, a past based on genuine effort by those involved, but undermined by corporate goals of economic efficiency, and the uneven distribution of rewards. It also requires owning up to the reality of where organizations stand today. There has been a strong trend in recent years toward increased non-financial reporting, but much of the focus has been on the development of the guidelines, rather than the actual impact on corporate behavior (Brown et al. 2009). This focus distorts the objectives of the exercise (Bell and Morse 2008) and far greater emphasis has to be placed on a true analysis of the negative impacts being generated (Balmer et al. 2007; Rees 2002). Not adopting an honest posture at the outset of the change process is sure to damage, if not doom the effort, and will at the very least, be a waste of resources. It is a mistake to think that the change process can simply be relaunched and rerun, for several reasons. The system reacts of its own accord and will have changed anyway, although not in the ways hoped for (Dooley 1996). This means that apart from the added difficulty of encouraging different actors to support yet another set of changes that seem to lead nowhere, the starting line will have moved and the whole idea will need to be rethought.

Despite these challenges, deep and wide change is clearly needed for any organization considering seriously its varied responsibilities. This change should be underpinned by wholesale awareness building, which must permeate every aspect of the organization and reach everyone within it (Azapagic 2003). This awareness campaign is necessary to overcome the inherent cognitive bias related to issues of organizational responsibility and sustainability, as well as to demonstrate the seriousness of the attempted change, by highlighting the scale of the problems and the organizations role in them.¹¹ It will begin as tacit knowledge acquisition, based on subjective insights and intuition to shift the concept of the organizations role in society, before moving on to more explicit knowledge acquisition, based on real data and specifications regarding the organizations real impacts on the world around it.

Perception bias (due to the use of vague or overly scientific descriptions, which complicates understanding) would be reduced by the generating and sharing of explicit knowledge, to show first-hand the role of the organization in generating negative impacts. Such an approach would also have the advantage of creating knowledge in a context that could be understood by employees, as it directly relates to what the organization does, where its materials come from, how they are used, what is produced, and who benefits. It has the advantage of tackling the other problem associated with perception bias, which is the lack of personal experience of the problems.

Optimism bias (playing down the problem and/or playing up the potential to fix it) would benefit from the same approach, in that it would provide an element of honesty about the impacts being generated. An additional step would be the concurrent explanation of a coherent approach, which would demonstrate prior failure to fix such problems (being realistic about the potential to fix things under current conditions), as well as reducing the sense of being able to go it alone, by emphasizing the shared relationship between the organizational properties—shareholders and coherent value.

The relevance bias (oversimplifying the problem by use of simple data and postponing sacrifice) would be reduced by a coherent approach, in reframing organizational purpose away from simplistic financial performance indicators, and toward the creation of more complex coherent value. Considering what coherent value means in each individual case is itself an exercise in relevance bias reduction, as it forces those involved to look beyond the normal operational parameters. It is an example of the generation of tacit knowledge, which then serves as a driver to the initiation of measures to create such a reality.

Volition bias (others must fix the problem, and one’s hands are tied by outside forces) would be weakened by emphasizing the interdependent nature of different organizational properties in a coherent approach, and the fact that responsibility is shared. It would require a combination of explicit and tacit knowledge generation and sharing. The former would come from close ties, working with other like-minded organizations of a similar type who face similar technical problems in impact generation, and reaching across structural holes to those whose only similarity is the desire to be more coherent, and with whom more conceptual ideas can be exchanged.