Homelessness

THE PREVAILING SYSTEM OF MANAGEMENT

In the spring of 1990, shortly after the writing and editing of the original edition of The Fifth Discipline was completed and publication was imminent, my editor at Doubleday asked me who I wanted to write a comment for the book jacket. As a first time author, I had never considered this. After thinking for a while I realized that there was no one I would rather have write something than Dr. W. Edwards Deming, revered around the world as a pioneer in the quality management revolution. I knew of no one who had had a greater impact on management practice. But I had never met Deming. I doubted that a letter with such a request from an unknown author, referring to work with which Deming was unfamiliar, would get a favorable response. Fortunately, through mutual friends at Ford, a copy of the manuscript did reach him. A few weeks later, to my surprise, a letter arrived at my home.

As I subsequently learned, Deming had almost completely stopped using the terminology of “Total Quality Management,” “TQM” or “TQ” because he believed it had become a superficial label for tools and techniques. The real work, which he simply called the “transformation of the prevailing system of management,” lay beyond the aims of managers seeking only short-term performance improvements. This transformation, he believed, required “profound knowledge” largely untapped in contemporary institutions. Only one element of this profound knowledge, “theory of variation” (statistical theory and method), was associated with the common understanding of TQM. The other three elements, to my amazement, mapped almost directly onto the five disciplines: “understanding a system,” “ theory of knowledge” (the importance of mental models), and “psychology,” especially “intrinsic motivation” (the importance of personal vision and genuine aspiration).

Even more important for me was Deming’s idea that a common “system of management” governed modern institutions, and in particular formed a deep connection between work and school. He would often say, “We will never transform the prevailing system of management without transforming our prevailing system of education. They are the same system.” So far as I know, his insight into this connection between work and school was original.

Today, most managers probably regard the “Quality Management revolution,” like the organizational learning fad of the early 1990s, as history, far from the frontiers of today’s challenges. But is that because we have achieved or abdicated the transformation Deming advocated? It is hard for me to contemplate a list like this one and not feel that these maladies still afflict most organizations today, and that it will take generations, not years, to change such deeply embedded beliefs and behaviors. Indeed, perhaps the most obvious question for many of us is: “Will this system of management ever change on a large scale?” Answering deep questions like this about the future requires looking carefully at the present.

A TIME OF CROSSCURRENTS

In the decade and a half since The Fifth Discipline was first published much has changed in the world. Our economies are more global than ever; consequently, so is business. Among businesses competing globally, cost and performance pressures are relentless. The time available for people to think and reflect is scarcer, if anything, and in many organizations, resources available for developing people are scarcer still. But there is more to think about than just accelerating change. The globalization of business and industrial development is raising the material standards of living for many, but also creating significant side effects in the form of a host of social and environmental sustainability challenges. All too often, the production of financial capital seems to occur at the expense of social and natural capital. Gaps between “haves” and “have-nots” are widening in many countries. Local environmental stresses, always a feature of industrial development, are now matched by problems on a larger scale, like global warming and weather instability. While the advocates for global industrial growth trumpet its benefits, people around the world are reacting, nonviolently and violently, to losses in traditional ways of living—and this shifting context is getting onto the strategic radar screen of many businesses.

In short, it is a time of dramatically conflicting forces. Things are getting better and things are getting worse. The comments of former Czech president Vaclav Havel’s to the U.S. Congress in the mid-1990s summarize these perilous times aptly:

The shape of Havel’s “something else” being born and the sorts of management and leadership skills it might require remain as fuzzy today as they were when he made these remarks a decade ago.

VOICES FROM THE FRONT

When I was invited by Doubleday to create this new edition of The Fifth Discipline, I was initially ambivalent but then became excited. One of the great joys of the past fifteen years has been getting to know countless gifted practitioners of organizational learning—managers, school principals, community organizers, police chiefs, business and social entrepreneurs, military leaders, teachers—people who have somehow found an infinite array of imaginative ways to work with and utilize the five disciplines, even if they had never heard of or read the original book. A few of these figured prominently in the first book, like Arie de Geus and the recently deceased Bill O’Brien. Since then, the worldwide growth of the Society for Organizational Learning (SoL) has brought me in touch with hundreds more such practitioners. In their own ways, each has created an alternative system of management based on love rather than fear, curiosity rather than an insistence on “right” answers, and learning rather than controlling. Now I could use the excuse of this revised edition to talk with many of them.

Those interviews and conversations led to my making many changes in the text of this book and to a new section, Part IV, “Reflections from Practice.” The interviews provided fresh insights into how master practitioners initiate change and deal creatively with the challenges of sustaining momentum. In addition to many business successes, people revealed a host of new possibilities in applying organizational learning tools and principles in areas few of us could have imagined fifteen years ago: from growing more environmentally sound businesses and industries to addressing societal problems like gang violence, transforming school systems, promoting economic development, undertaking the improvement of global food production, and reducing poverty. In all these settings, openness, reflection, deeper conversations, personal mastery, and shared visions uniquely energize change; and understanding the systemic causes of problems is crucial.

• There are ways of working together that are vastly more satisfying and more productive than the prevailing system of management. As one senior executive said, reflecting on her first learning experiment—“just getting people to talk to one another” as a way to rethink how their organization was structured—“… was the most fun I had ever had in business, and the ideas that emerged are still creating a competitive advantage for the company fifteen years later.”
• Organizations work the way they do because of how we work, how we think and interact; the changes required ahead are not only in our organizations but in ourselves as well. “The critical moment comes when people realize that this learning organization work is about each one of us,” commented a twenty-year veteran of corporate organizational learning projects. “Personal mastery is core. If you get the personal mastery element of these changes right, everything else falls into place.”
• In building learning organizations there is no ultimate destination or end state, only a lifelong journey. “This work requires great reservoirs of patience,” commented the president of a global NGO (nongovernmental organization), “but I believe the results we achieve are more sustainable because the people involved have really grown. It also prepares people for the ongoing journey. As we learn, grow, and tackle more systemic challenges, things do not get easier.”

I believe that, the prevailing system of management is, at its core, dedicated to mediocrity. It forces people to work harder and harder to compensate for failing to tap the spirit and collective intelligence that characterizes working together at their best. Deming saw this clearly, and I believe that now, so do a growing number of leaders committed to growing organizations capable of thriving in and contributing to the extraordinary challenges and possibilities of the world we are living into.

From a very early age, we are taught to break apart problems, to fragment the world. This apparently makes complex tasks and subjects more manageable, but we pay a hidden, enormous price. We can no longer see the consequences of our actions; we lose our intrinsic sense of connection to a larger whole. When we then try to “see the big picture,” we try to reassemble the fragments in our minds, to list and organize all the pieces. But, as physicist David Bohm says, the task is futile—similar to trying to reassemble the fragments of a broken mirror to see a true reflection. Thus, after a while we give up trying to see the whole altogether.

The tools and ideas presented in this book are for destroying the illusion that the world is created of separate, unrelated forces. When we give up this illusion—we can then build “learning organizations,” organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together.

Learning organizations are possible because, deep down, we are all learners. No one has to teach an infant to learn. In fact, no one has to teach infants anything. They are intrinsically inquisitive, masterful learners who learn to walk, speak, and pretty much run their households all on their own. Learning organizations are possible because not only is it our nature to learn but we love to learn. Most of us at one time or another have been part of a great team, a group of people who functioned together in an extraordinary way—who trusted one another, who complemented one anothers’s strengths and compensated for one another’s limitations, who had common goals that were larger than individual goals, and who produced extraordinary results. I have met many people who have experienced this sort of profound teamwork—in sports, or in the performing arts, or in business. Many say that they have spent much of their life looking for that experience again. What they experienced was a learning organization. The team that became great didn’t start off great—it learned how to produce extraordinary results.

One could argue that the entire global business community is learning to learn together, becoming a learning community. Whereas once many industries were dominated by a single, undisputed leader—one IBM, one Kodak, one Xerox—today industries, especially in manufacturing, have dozens of excellent companies. American, European, or Japanese corporations are pulled forward by innovators in China, Malaysia, or Brazil, and they in turn, are pulled by the Koreans and Indians. Dramatic improvements take place in corporations in Italy, Australia, Singapore—and quickly become influential around the world.

If a learning organization were an engineering innovation, such as the airplane or the personal computer, the components would be called “technologies.” For an innovation in human behavior, the components need to be seen as disciplines. By “discipline,” I do not mean an “enforced order” or “means of punishment,” but a body of theory and technique that must be studied and mastered to be put into practice. A discipline (from the Latin disciplina, to learn) is a developmental path for acquiring certain skills or competencies. As with any discipline, from playing the piano to electrical engineering, some people have an innate gift, but anyone can develop proficiency through practice.

To practice a discipline is to be a lifelong learner. You never arrive; you spend your life mastering disciplines. You can never say, “We are a learning organization,” any more than you can say, “I am an enlightened person.” The more you learn, the more acutely aware you become of your ignorance. Thus, a corporation cannot be “excellent” in the sense of having arrived at a permanent excellence; it is always in the state of practicing the disciplines of learning, of getting better or worse.

Practicing a discipline is different from emulating a model. All too often, new management innovations are described in terms of the “best practices” of so-called leading firms. I believe benchmarking best practices can open people’s eyes as to what is possible, but it can also do more harm than good, leading to piecemeal copying and playing catch-up. As one seasoned Toyota manager commented after hosting over a hundred tours for visiting executives, “They always say ‘Oh yes, you have a Kan-Ban system, we do also. You have quality circles, we do also. Your people fill out standard work descriptions, ours do also.’ They all see the parts and have copied the parts. What they do not see is the way all the parts work together.” I do not believe great organizations have ever been built by trying to emulate another, any more than individual greatness is achieved by trying to copy another “great person.”

When the five component technologies converged to create the DC-3 the commercial airline industry began. But the DC-3 was not the end of the process. Rather, it was the precursor of a new industry. Similarly, as the five component learning disciplines converge they will not create the learning organization but rather a new wave of experimentation and advancement.

THE FIFTH DISCIPLINE

It is vital that the five disciplines develop as an ensemble. This is challenging because it is much harder to integrate new tools than simply apply them separately. But the payoffs are immense.

For example, vision without systems thinking ends up painting lovely pictures of the future with no deep understanding of the forces that must be mastered to move from here to there. This is one of the reasons why many firms that have jumped on the “vision bandwagon” in recent years have found that lofty vision alone fails to turn around a firm’s fortunes. Without systems thinking, the seed of vision falls on harsh soil. If nonsystemic thinking predominates, the first condition for nurturing vision is not met: a genuine belief that we can make our vision real in the future. We may say “We can achieve our vision” (most American managers are conditioned to this belief), but our tacit view of current reality as a set of conditions created by somebody else betrays us.

But systems thinking also needs the disciplines of building shared vision, mental models, team learning, and personal mastery to realize its potential. Building shared vision fosters a commitment to the long term. Mental models focus on the openness needed to unearth shortcomings in our present ways of seeing the world. Team learning develops the skills of groups of people to look for the larger picture beyond individual perspectives. And personal mastery fosters the personal motivation to continually learn how our actions affect our world. Without personal mastery, people are so steeped in the reactive mindset (“someone/something else is creating my problems”) that they are deeply threatened by the systems perspective.

Lastly, systems thinking makes understandable the subtlest aspect of the learning organization—the new way individuals perceive themselves and their world. At the heart of a learning organization is a shift of mind—from seeing ourselves as separate from the world to connected to the world, from seeing problems as caused by someone or something “out there” to seeing how our own actions create the problems we experience. A learning organization is a place where people are continually discovering how they create their reality. And how they can change it. As Archimedes said, “Give me a lever long enough … and single-handed I can move the world.”

When you ask people about what it is like being part of a great team, what is most striking is the meaningfulness of the experience. People talk about being part of something larger than themselves, of being connected, of being generative. It becomes quite clear that, for many, their experiences as part of truly great teams stand out as singular periods of life lived to the fullest. Some spend the rest of their lives looking for ways to recapture that spirit.

The most accurate word in Western culture to describe what happens in a learning organization is one that hasn’t had much currency for the past several hundred years. It is a word we have used in our work with organizations for some ten years, but we always caution them, and ourselves, to use it sparingly in public. The word is “metanoia” and it means a shift of mind. The word has a rich history. For the Greeks, it meant a fundamental shift or change, or more literally transcendence (“meta”—above or beyond, as in “metaphysics”) of mind (“noia,” from the root “nous,” of mind). In the early (Gnostic) Christian tradition, it took on a special meaning of awakening shared intuition and direct knowing of the highest, of God. “Metanoia” was probably the key term of such early Christians as John the Baptist. In the Catholic corpus the word “metanoia” was eventually translated as “repent.”

To grasp the meaning of “metanoia” is to grasp the deeper meaning of “learning,” for learning also involves a fundamental shift or movement of mind. The problem with talking about “learning organizations” is that the “learning” has lost its central meaning in contemporary usage. Most people’s eyes glaze over if you talk to them about “learning” or “learning organizations.” The words tend to immediately evoke images of sitting passively in schoolrooms, listening, following directions, and pleasing the teacher by avoiding making mistakes. In effect, in everyday use, learning has come to be synonymous with “taking in information.” “Yes, I learned all about that at the training yesterday.” Yet, taking in information is only distantly related to real learning. It would be nonsensical to say, “I just read a great book about bicycle riding—I’ve now learned that.”

As I began my doctoral work, I began to meet business leaders who came to visit our MIT group to learn about systems thinking. These were thoughtful people, deeply aware of the inadequacies of prevailing ways of managing. Unlike most academics, they were engaged, not detached intellectuals, and many were working to build new types of organizations—decentralized, nonhierarchical organizations dedicated to the well-being and growth of employees as well as to success. Some had crafted radical corporate philosophies based on core values of freedom and responsibility. Others had developed innovative organization designs. All shared a commitment and a capacity to innovate that I found lacking in other sectors. Gradually, I came to realize why business is the locus of innovation in an open society. Despite whatever hold past thinking may have on the business mind, business has a freedom to experiment missing in the public and education sectors and, often, in nonprofit organizations. It also has a clear bottom line, so that experiments can be evaluated, at least in principle, by objective criteria.

But why were they interested in systems thinking? Too often, the most daring organizational experiments were foundering. Local autonomy produced business decisions that were disastrous for the organization as a whole. “Team building” exercises focused on better relationships among people who often still held radically different mental models of the business system. Companies pulled together during crises, and then lost all their inspiration when business improved. Organizations which started out as booming successes, with the best possible intentions toward customers and employees, found themselves trapped in downward spirals that got worse the harder they tried to fix them.

For over twenty-five years I have also been involved in developing and conducting leadership workshops, which have introduced people from all walks of life to the fifth discipline ideas that grew out of our work at MIT. These ideas combined initially with Innovation Associate’s path-breaking work on building shared vision and personal mastery and the workshops continue today as part of the global Society for Organizational Learning (SoL). When The Fifth Discipline was originally published, over four thousand managers had attended these workshops and they were in fact the “target audience” to whom the book was aimed. (When it became apparent that many more people were using the book as an introduction to organizational learning, we created The Fifth Discipline Fieldbook in 1994, thinking that a book of practical tools, stories, and tips might in fact be a better introduction.) Over the course of these experiences the initial focus on corporate senior executives broadened, as it became evident that the basic disciplines of systems thinking, personal mastery, mental models, team learning and shared vision were relevant for teachers, public administrators and elected officials, students, and parents. All were in leadership positions of importance. All were in “organizations” that had still untapped potential for creating their future. All felt that to tap that potential required developing their own capacities, that is, learning.

So, this book is for the learners, especially those of us interested in the art and practice of collective learning.

For managers, this book should help in identifying the specific practices, skills, and disciplines that can make building learning organizations less of an occult art (though an art nonetheless).

For parents, this book should help in letting our children be our teachers, as well as we are theirs—for they have much to teach us about learning as a way of life.

For citizens, the dialogue about why contemporary organizations are not especially good learners and about what is required to build learning organizations reveals some of the tools needed by communities and societies if they are to become more adept learners.

It is no accident that most organizations learn poorly. The way they are designed and managed, the way people’s jobs are defined, and, most importantly, the way we have all been taught to think and interact (not only in organizations but more broadly) create fundamental learning disabilities. These disabilities operate despite the best efforts of bright, committed people. Often the harder they try to solve problems, the worse the results. What learning does occur takes place despite these learning disabilities—for they pervade all organizations to some degree.

Learning disabilities are tragic in children, especially when they go undetected. They are no less tragic in organizations, where they also go largely undetected. The first step in curing them is to begin to identify the seven learning disabilities:

1. “I AM MY POSITION”

We are trained to be loyal to our jobs—so much so that we confuse them with our own identities. When a large American steel company began closing plants in the early 1980s, it offered to train the displaced steelworkers for new jobs. But the training never “took”; the workers drifted into unemployment and odd jobs instead. Psychologists came in to find out why, and found the steelworkers suffering from acute identity crises. “How could I do anything else?” asked the workers. “I am a lathe operator.”

When asked what they do for a living, most people describe the tasks they perform every day, not the purpose of the greater enterprise in which they take part. Most see themselves within a system over which they have little or no influence. They do their job, put in their time, and try to cope with the forces outside of their control. Consequently, they tend to see their responsibilities as limited to the boundaries of their position.

When people in organizations focus only on their position, they have little sense of responsibility for the results produced when all positions interact. Moreover, when results are disappointing, it can be very difficult to know why. All you can do is assume that “someone screwed up.”

2. “THE ENEMY IS OUT THERE”

A friend once told the story of a boy he coached in Little League, who after dropping three fly balls in right field, threw down his glove and marched into the dugout. “No one can catch a ball in that darn field,” he said.

There is in each of us a propensity to find someone or something outside ourselves to blame when things go wrong. Some organizations elevate this propensity to a commandment: “Thou shalt always find an external agent to blame.” Marketing blames manufacturing: “The reason we keep missing sales targets is that our quality is not competitive.” Manufacturing blames engineering. Engineering blames marketing: “If they’d only quit screwing up our designs and let us design the products we are capable of, we’d be an industry leader.”

The “Enemy Is Out There” syndrome is not limited to assigning blame within the organization. During its last years of operation, the once highly successful People Express Airlines slashed prices, boosted marketing, and bought Frontier Airlines—all in a frantic attempt to fight back against the perceived cause of its demise: increasingly aggressive competitors. Yet, none of these moves arrested the company’s mounting losses or corrected its core problem, service quality that had declined so far that low fares were its only remaining pull on customers.

For years American companies who had lost market share to foreign competitors blamed cheap foreign wages, labor unions, government regulators, or customers who “betrayed us” by buying products from someone else. “The enemy is out there,” however, is almost always an incomplete story. “Out there” and “in here” are usually part of a single system. This learning disability makes it almost impossible to detect the leverage we can use “in here” on problems that straddle the boundary between us and “out there.”

3. THE ILLUSION OF TAKING CHARGE

Being “proactive” is in vogue. Managers frequently proclaim the need for taking charge in facing difficult problems. What is typically meant by this is that we should face up to difficult issues, stop waiting for someone else to do something, and solve problems before they grow into crises. In particular, being proactive is frequently seen as an antidote to being “reactive”—waiting until a situation gets out of hand before taking a step. But is taking aggressive action against an external enemy really synonymous with being proactive?

Once, a management team in a leading property and liability insurance company with whom we were working got bitten by the proactiveness bug. The head of the team, a talented vice president for claims, was about to give a speech proclaiming that the company wasn’t going to get pushed around anymore by lawyers litigating more and more claims settlements. The firm would beef up its own legal staff so that it could take more cases through to trial by verdict, instead of settling them out of court.

All too often, proactiveness is reactiveness in disguise. Whether in business or politics, if we simply become more aggressive fighting the “enemy out there,” we are reacting—regardless of what we call it. True proactiveness comes from seeing how we contribute to our own problems. It is a product of our way of thinking, not our emotional state.

4. THE FIXATION ON EVENTS

Two children get into a scrap on the playground and you come over to untangle them. Lucy says, “I hit him because he took my ball.” Tommy says, “I took her ball because she won’t let me play with her airplane.” Lucy says, “He can’t play with my airplane because he broke the propeller.” Wise adults that we are, we say, “Now, now, children—just get along with each other.” But are we really any different in the way we explain the entanglements we find ourselves caught in? We are conditioned to see life as a series of events, and for every event, we think there is one obvious cause.

Conversations in organizations are dominated by concern with events: last month’s sales, the new budget cuts, last quarter’s earnings, who just got promoted or fired, the new product our competitors just announced, the delay that just was announced in our new product, and so on. The media reinforces an emphasis on short-term events—after all, if it’s more than two days old it’s no longer “news.” Focusing on events leads to “event” explanations: “The Dow Jones average dropped sixteen points today,” announces the newspaper, “because low fourth-quarter profits were announced yesterday.” Such explanations may be true, but they distract us from seeing the longer-term patterns of change that lie behind the events and from understanding the causes of those patterns.

Generative learning cannot be sustained in an organization if people’s thinking is dominated by short-term events. If we focus on events, the best we can ever do is predict an event before it happens so that we can react optimally. But we cannot learn to create.

5. THE PARABLE OF THE BOILED FROG

Maladaptation to gradually building threats to survival is so pervasive in systems studies of corporate failure that it has given rise to the parable of the “boiled frog.” If you place a frog in a pot of boiling water, it will immediately try to scramble out. But if you place the frog in room temperature water, and don’t scare him, he’ll stay put. Now, if the pot sits on a heat source, and if you gradually turn up the temperature, something very interesting happens. As the temperature rises from 70 to 80 degrees F., the frog will do nothing. In fact, he will show every sign of enjoying himself. As the temperature gradually increases, the frog will become groggier and groggier, until he is unable to climb out of the pot. Though there is nothing restraining him, the frog will sit there and boil. Why? Because the frog’s internal apparatus for sensing threats to survival is geared to sudden changes in his environment, not to slow, gradual changes.

In order to see the learning disabilities in action, it helps to start with a laboratory experiment—a microcosm of how real organizations function, where you can see the consequences of your decisions play out more clearly than is possible in real organizations. For this reason, we often invite people to take part in a simulation called the “beer game,” first developed in the 1960s at MIT’s Sloan School of Management. Because it is a laboratory replica of a real setting, rather than reality itself, we can isolate the disabilities and their causes more sharply than is possible in real organizations. This reveals that the problems originate in basic ways of thinking and interacting, more than in peculiarities of organization structure and policy.

To make sure you always have enough Lover’s Beer, you try to keep twelve cases in the store at any time. That means ordering four cases each Monday, when the beer truck comes. Week after week after week. By now, you take that four-case turnover for granted; it’s inextricably wedded to the image in your mind of the beer’s performance. You don’t even articulate it to yourself when placing the order: “Oh, yeah,” runs the automatic litany. “Lover’s Beer. Four cases.”

Week 2

Week 2: Without warning, one week in October (let’s call it Week 2), sales of the beer double. They jump from four cases to eight. That’s all right, you figure; you have an eight-case surplus in your store. You don’t know why they’ve sold so much more suddenly. Maybe someone is having a party. But to replace those extra cases, you raise your order to eight. That will bring your inventory back to normal.

Week 3: Strangely enough, you also sell eight cases of Lover’s Beer the next week. And it’s not even spring break. Every once in a while, in those rare moments between sales, you briefly ponder the reason why. There’s no advertising campaign for the beer; you would have received a mailing about it. Unless the mailing got lost, or you accidentally threw it out. Or maybe there’s another reason … but a customer comes in, and you lose your train of thought.

Week 4

Week 4: You find time on Tuesday to quiz one or two of your younger customers. It turns out that a new music video appeared a month or so back on the popular cable television channels. The video’s recording group, the Iconoclasts, closes their song with the line, “I take one last sip of Lover’s Beer and run into the sun.” You don’t know why they used that line, but your wholesaler would have told you if there was any new merchandising deal. You think of calling the wholesaler, but a delivery of potato chips arrives and the subject of Lover’s Beer slips your mind.

When your next delivery of beer comes in, only five cases of beer arrive. You’re chagrined now because you have only one case in stock. You’re almost sold out. And thanks to this video, demand might go up even further. Still, you know that you have some extra cases on order, but you’re not sure exactly how many. Better order at least sixteen more.

Week 5: Your one case sells out Monday morning. Fortunately, you receive a shipment for seven more cases of Lover’s (apparently your wholesaler is starting to respond to your higher orders). But all are sold by the end of the week, leaving you with absolutely zero inventory. Glumly, you stare at the empty shelf. Better order another sixteen. You don’t want to get a reputation for being out of stock of popular beers.

Only six cases arrive in the next shipment. You call your two “backlogged” customers. They stop in and buy their shares; the rest of the beer sells out before the end of the week. Again, two customers give you their names to call as soon as your next shipment arrives. You wonder how many more you could have sold had your shelves not been empty at the end of the week. Seems there’s been a run on the beer: none of the stores in the area have it. This beer is hot, and it’s apparently getting more popular all the time.

After two days of staring at the parched, empty shelf, it doesn’t feel right to order any less than another sixteen cases. You’re tempted to order more, but you restrain yourself because you know the big orders you’ve been placing will start to arrive soon. But when …?

Week 7: The delivery truck brings only five cases this week, which means that you’re facing another week of empty shelves. As soon as you fill your back orders, Lover’s Beer is sold out again, this time within two days. This week, amazingly, five customers give you their names. You order another sixteen and silently pray that your big orders will start arriving. You think of all the lost potato chip sales.

Week 8

Week 8: By now, you’re watching Lover’s Beer more closely than any other product you sell. The suspense is palpable: every time a customer buys a six-pack of that quiet beer, you notice it. People seem to be talking about the beer. Eagerly, you wait for the trucker to roll in the sixteen cases you expect…

You place an order for twenty-four more cases—twice as much as you had planned to order. What is that wholesaler doing to me, you wonder? Doesn’t he know what a ravenous market we have down here? What’s going through his mind, anyway?

THE WHOLESALER

As the manager of a wholesale distributing firm, beer is your life. You spend your days at a steel desk in a small warehouse stacked high with beer of every conceivable brand: Miller, Bud, Coors, Rolling Rock, a passel of imported beers—and, of course, regional beers such as Lover’s Beer. The region you serve includes one large city, several smaller satellite cities, a web of suburbs, and some outlying rural areas. You’re not the only beer wholesaler here, but you’re very well established. For several small brands, including Lover’s Beer, you are the only distributor in this area.

Mostly, you communicate with the brewery using the same method retailers use to reach you. You scribble numbers onto a form which you hand your driver each week. Four weeks later, on average, the beer arrives to fill that order. Instead of ordering by the case, however, you order by the gross. Each gross is about enough to fill a small truck, so you think of them as truckloads. Just as your typical retailer orders about four cases of Lover’s Beer from you, week after week after week, so you order four truckloads from the brewery, week after week after week. That’s enough to give you a typical accumulation of twelve truckloads’ worth in inventory at any given time.

By Week 8, you had become almost as frustrated and angry as your retailers. Lover’s Beer had always been a reliably steady brand. But a few weeks ago—in Week 4, actually—those orders had abruptly started rising sharply. The next week, orders from retailers had risen still further. By Week 8, most stores were ordering three or four times their regular amount of beer.

By Week 6, you had shipped out all the beer you had in inventory and entered the hellishness of backlog. Each week you sent out what you could, and sent the stores paperwork equivalents of IOUs to cover the rest. A few of the larger chain stores called you and got what preferential treatment you could offer, but the Lover’s Beer in your inventory was gone. At least you knew it would be only a couple of weeks more before the extra beer you ordered would begin to arrive.

In Week 8, when you called the brewery to ask if there was any way to speed up their deliveries (and to let them know that you were upping your order to thirty truckloads), you were dismayed to find out that they had only just stepped up production two weeks before. They were just learning of the increase in demand. How could they be so slow?

Week 9

However, only six truckloads arrive. Apparently the brewery is still backlogged, and the larger production runs are only now starting to get shipped out. You call some of your larger chains and assure them that the beer they ordered will be coming shortly.

Week 10 is infuriating. The extra beer you were expecting—at least twenty truckloads’ worth—doesn’t show. The brewery simply couldn’t ramp up production that fast. Or so you guess. They only send you eight truckloads. It’s impossible to reach anybody on the phone down there—they’re apparently all on the factory floor, manning the brewery apparatus.

The stores, meanwhile, are apparently selling the beer wildly. You’re getting unprecedented orders—for twenty-six truckloads this week. Or maybe they’re ordering so much because they can’t get any of the beer from you. Either way, you have to keep up. What if you can’t get any of the beer and they go to one of your competitors?

You order forty truckloads from the brewery.

In Week 11, you find yourself tempted to take extra-long lunches at the bar around the corner from your warehouse. Only twelve truckloads of Lover’s Beer arrive. You still can’t reach anybody at the brewery. And you have over a hundred truckloads’ worth of orders to fill: seventy-seven truckloads in backlog, and another twenty-eight truckloads’ worth of orders from the stores which you receive this week. Some of those backlog costs come due, and you’re afraid to tell your accountant what you expect.

You’ve got to get that beer: you order another forty truckloads from the brewery.

By Week 12, it’s clear. This new demand for Lover’s Beer is a far more major change than you expected. You sigh with resignation when you think of how much money you could make if you only had enough in stock. How could the brewery have done this to you? Why did demand have to rise so quickly? How are you ever expected to keep up? All you know is that you’re never going to get caught in this situation again. You order sixty more truckloads.

Week 14

You finally start receiving larger shipments from the brewery in Weeks 14 and 15. At the same time, orders from your stores drop off a bit. Maybe in the previous weeks, you figure, they overordered a bit. At this point, anything that helps work off your backlog is a welcome reprieve.

And now, in Week 16, you finally get almost all the beer you asked for weeks ago: fifty-five truckloads. It arrives early in the week, and you stroll back to that section of the warehouse to take a look at it, stacked on pallets. It’s as much beer as you keep for any major brand. And it will be moving out soon.

Throughout the week, you wait expectantly for the stores’ orders to roll in. You even stop by the intake desk to see the individual forms. But on form after form, you see the same number written: zero. Zero. Zero. Zero. Zero. What’s wrong with these people? Four weeks ago, they were screaming at you for the beer, now, they don’t even want any.

Suddenly, you feel a chill. Just as your trucker leaves for the run that includes the brewery, you catch up with him. You initial the form, and cross out the twenty-four truckloads you had ordered, replacing it with a zero of your own.

Week 17

Surely the stores will want more this week. After all, that video is still running. In your brooding thoughts, you consign every retailer to the deepest corner of hell; the corner reserved for people who don’t keep their promises.

And, in fact, the retailers once again order zero cases of Lover’s Beer from you. You, in turn, order zero truckloads from the brewery. And yet, the brewery continues to deliver beer. Sixty more truckloads appear on your dock this week. Why does that brewery have it in for you? When will it ever end?

THE BREWERY

Imagine that you were hired four months ago to manage distribution and marketing at the brewery, where Lover’s Beer is only one of several primary products. Yours is a small brewery, known for its quality, not its marketing savvy. That’s why you were hired.

Now, clearly, you have been doing something right. Because in only your second month (Week 6 of this game), new orders began to rise dramatically. By the end of your third month on the job, you felt the satisfaction of getting orders for forty gross of beer per week , up dramatically from the four when you started. And you shipped out… well, you shipped out thirty.

You had lucked out with that Iconoclasts video mentioning the beer. You had learned about the video in Week 3—from letters written by teenagers to the brewery. But it had taken until Week 6 to see that video translate into higher orders.

Even by Week 14, the factory had still not caught up with its backlogged orders. You had regularly requested brew batches of seventy gross or more. You had wondered how large your bonus would be that year. Maybe you could ask for a percentage of the profits, at least once you caught up with back orders. You had even idly pictured yourself on the cover of Marketing Week.

Finally, you had caught up with the backlog in Week 16. But the next week, your distributors had asked for only nineteen gross. And last week, Week 18, they had not asked for any more beer at all. Some of the order slips actually had orders crossed out on them.

Week 21

The same pattern continues for four more weeks: Weeks 20, 21, 22, and 23. Gradually your hopes of a resurgence slide, and your excuses come to sound flimsier and flimsier. Those distributors screwed us, you say. The retailers didn’t buy enough beer. The press and that rock video hyped up the beer and got everybody sick of it. At root, it’s the fickle kids—they have no loyalty whatsoever. How could they buy hundreds of cases one month, and nothing at all the next?

Week 24

Nobody misses you when you borrow the company car at the beginning of Week 24. Your first stop is the wholesaler’s office. Not only is it the first time you have ever met face to face, it’s only the second time you have ever spoken. There has never been anything to say until this crisis. You greet each other glumly, and then the wholesaler takes you out to the back warehouse. “We haven’t gotten an order for your brand in two months,” says the wholesaler. “I feel completely jerked around. Look! We still have 220 truckloads here.”

What must have happened, you decide together, is that demand rose rapidly, and then fell dramatically. Another example of the fickleness of the public. If the retailers had stayed on top of it and warned you, this would never have happened.

The retailer has brought along the shop’s inventory tally notebooks, and spreads them open across the table. “You don’t know how much I wanted to strangle you a few months ago.”

“Why?” you ask

“Look—we’re stuck with ninety-three cases in our back room. At this rate, it’s going to be another six weeks before we order any more.”

Six weeks, you think to yourself. And then you pull out a pocket calculator. If every retailer in this area waits six weeks before ordering any more beer, and then only orders a few cases a week, it’s going to be a year or more before they put a dent in those 220 truck-loads sitting at the wholesaler’s. “This is a tragedy,” you say. “Who let it happen—I mean, how can we keep it from happening again?”

“Well, it’s not our fault,” says the retailer, after sipping some coffee. “We were selling four cases of beer when that music video came out. Then, in Week 2, we sold eight cases.”

“And then it mushroomed,” you say. “But then why did it die down?”

“No, you don’t understand,” says the retailer. “The demand never mushroomed. And it never died out. We still sell eight cases of beer—week after week after week. But you didn’t send us the beer we wanted. So we had to keep ordering, just to make sure we had enough to keep up with our customers.”

“But we got the beer out as soon as it was necessary.”

“Then maybe the wholesaler screwed up somehow,” says the retailer. “I’ve been wondering if I should switch suppliers. Anyway, I wish you’d do a coupon promotion or something, so I could make back some of my costs. I’d like to unload some of those ninety-three cases.”

You pick up the tab for coffee. On your trip back, you plan the wording of your resignation notice. Obviously, you’ll be blamed for any layoffs or plant closings that come out of this crisis—just as the wholesaler blamed the retailer, and the retailer blamed the wholesaler, and both of them wanted to blame you. At least it’s early enough that you can quit with some dignity. If only you could come up with some explanation to show that it wasn’t your fault—to show that you were the victim, instead of the culprit …

• Structure Influences Behavior

  Different people in the same structure tend to produce qualitatively similar results. When there are problems, or performance fails to live up to what is intended, it is easy to find someone or something to blame. But, more often than we realize, systems cause their own crises, not external forces or individuals’ mistakes.

• Structure in Human Systems Is Subtle

  We tend to think of “structure” as external constraints on the individual. But, structure in complex living systems, such as the “structure” of the multiple “systems” in a human body (for example, the cardiovascular and neuromuscular) means the basic interrelationships that control behavior. In human systems, structure includes how people make decisions—the “operating policies” whereby we translate perceptions, goals, rules, and norms into actions.

• Leverage Often Comes from New Ways of Thinking

  In human systems, people often have potential leverage that they do not exercise because they focus only on their own decisions and ignore how their decisions affect others. In the beer game, players have it in their power to eliminate the extreme instabilities that invariably occur, but they fail to do so because they do not understand how they are creating the instability in the first place.

People in the business world love heroes. We lavish praise and promotion on those who achieve visible results. But if something goes wrong, we feel intuitively that somebody must have screwed up.

“Just before we came here,” he said, “my top management team had concluded a three-day review of operations. One of our divisions had tremendously unstable fluctuations in fleet usage. It seemed pretty obvious that the division president didn’t have what it took to get the job done. We automatically blamed the man, just as each of us in the experiment automatically blamed the brewery. It just hit me that the problems were probably structural, not personal. I just dashed out to call our corporate headquarters and cancel his termination process.”

Once they see that they can no longer blame one another, or the customer, the players have one last recourse— blame the system. “It’s an unmanageable system,” some say. “The problem is that we couldn’t communicate with each other.” Yet this too turns out to be an untenable position. In fact, given the “physical system” of inventories, shipping delays, and limited information, there is substantial room for improving most teams’ scores.

REDEFINING YOUR SCOPE OF INFLUENCE: HOW
TO IMPROVE PERFORMANCE IN THE BEER GAME

To begin to see the possibilities for improvement, consider the outcomes if each player did nothing to correct his or her inventory or backlog. Following the “no strategy” strategy, each player would simply place new orders equal to orders he or she received. This is about the simplest ordering policy possible. If you receive new incoming orders for four cases of beer, you place orders for four. If you receive incoming orders for eight, you place orders for eight. Given the pattern of consumer demand in this game, that means ordering four cases or truckloads every week—until you receive your first order of eight. Thereafter you order eight.

When this strategy is followed unswervingly by all three players, all three positions settle into a form of stability by Week 11. The retailer and wholesaler never quite catch up with their backlogs. Backlogs develop, as in the basic game, due to the delays in getting orders filled. Backlogs persist because the players make no effort to correct them—because the “no strategy” strategy precludes placing the orders in excess of orders received needed to correct backlogs.

What the typical “manage your position” view misses is the ways that your orders interact with others’ orders to influence the variables you perceive as “external.” The players are part of a larger system that most perceive only dimly. For example, if they place a large number of orders, they can wipe out their supplier’s inventory, thereby causing their supplier’s delivery delay to increase. If they, then, respond (as many do) by placing still more orders, they create a “vicious cycle” that increases problems throughout the system.

This vicious cycle can be set off by any player who panics, anywhere within the system—whether retailer, or wholesaler. Even factories can create the same effect, simply by failing to produce enough beer. Eventually, as one vicious cycle influences other vicious cycles, the resulting panic spreads up and down the entire production-distribution system. Once the panic builds momentum, I have seen players generate orders that are twenty to fifty times what is actually needed to correct real inventory imbalances.

There are two key guidelines for players in the game.

First, keep in mind the beer you ordered but that, because of the delay, has not yet arrived. I call this the “take two aspirin and wait” rule. If you have a headache and need to take aspirin, you don’t keep taking aspirin every five minutes until your headache goes away. You wait patiently for the aspirin to take effect because you know that aspirin operates with a delay. Many players keep ordering beer every week until their inventory discrepancy goes away.

These guidelines are consistently missed by most players because they are evident only if you understand the interactions that cross the boundaries between different positions. The “take two aspirin and wait” guideline comes from understanding the delay embedded in the response of your supplier’s shipments to changes in your orders placed. The “don’t panic” guideline comes from understanding the vicious cycle created when the orders you place exacerbate your supplier’s delivery delay.

How well can players do if they follow these guidelines?

It is not possible to totally eliminate all overshoots in orders and all inventory/backlog cycles. It is possible to hold these instabilities to a very modest level, a small fraction of what occurred in Lover’s Beer. It is possible to achieve total costs that are one-fifth of the “do nothing” strategy, or about one-tenth the typical costs achieved by teams. In other words, substantial improvements are possible.

THE LEARNING DISABILITIES AND
OUR WAYS OF THINKING

Police enforcement officials will recognize their own version of this law: arresting narcotics dealers on 30th Street, they find that they have simply transferred the crime center to 40th Street. Or, even more insidiously, they learn that a new citywide outbreak of drug-related crime is the result of federal officials intercepting a large shipment of narcotics—which reduced the drug supply, drove up the price, and caused more crime by addicts desperate to maintain their habit.

Solutions that merely shift problems from one part of a system to another often go undetected because, unlike the rug merchant, those who “solved” the first problem are different from those who inherit the new problem.

2. The harder you push, the harder the system pushes back.

Similar compensating feedback processes have operated to thwart food and agricultural assistance to developing countries. More food available has been “compensated for” by reduced deaths due to malnutrition, higher net population growth, and eventually more malnutrition.

Similarly, periodic efforts to correct the U.S. trade imbalance by letting the value of the dollar fall are often compensated for by foreign competitors who let prices of their goods fall in parallel (for countries whose currency is “pegged to the dollar,” prices adjust automatically). Efforts by foreign powers to suppress indigenous guerrilla fighters often lead to further legitimacy for the guerrillas’ cause, thereby strengthening their resolve and support, and leading to still more resistance.

Many companies experience compensating feedback when one of their products suddenly starts to lose its attractiveness in the market. They push for more aggressive marketing; that’s what always worked in the past, isn’t it? They spend more on advertising, and drop the price; these methods may bring customers back temporarily, but they also draw money away from the company, so it cuts corners to compensate. The quality of its service (say, its delivery speed or care in inspection) starts to decline. In the long run, the more fervently the company markets, the more customers it loses.

Nor is compensating feedback limited to large systems—there are plenty of personal examples. Take the person who quits smoking only to find himself gaining weight and suffering such a loss in self-image that he takes up smoking again to relieve the stress. Or the protective mother who wants so much for her young son to get along with his schoolmates that she repeatedly steps in to resolve problems and ends up with a child who never learns to settle differences by himself. Or the enthusiastic newcomer so eager to be liked that she never responds to subtle criticisms of her work and ends up embittered and labeled “a difficult person to work with.”

3. Behavior grows better before it grows worse.

Low-leverage interventions would be much less alluring if it were not for the fact that many actually work, in the short term. New houses get built. The unemployed are trained. Starving children are spared. Lagging orders turn upward. We stop smoking, relieve our child’s stress, and avoid a confrontation with a new coworker. Compensating feedback usually involves a “delay,” a time lag between the short-term benefit and the long-term disbenefit. The New Yorker once published a cartoon in which a man sitting in an armchair pushes over a giant domino encroaching upon him from the left. “At last, I can relax,” he’s obviously telling himself in the cartoon. Of course, he doesn’t see that the domino is toppling another domino, which in turn is about to topple another, and another, and that the chain of dominoes behind him will eventually circle around his chair and strike him from the right.

The “better before worse” response to many management interventions is what makes political decision making so counterproductive. By “political decision making,” I mean situations where factors other than the intrinsic merits of alternative courses of action weigh in making decisions—factors such as building one’s own power base, or “looking good,” or “pleasing the boss.” In complex human systems there are always many ways to make things look better in the short run. Only eventually does the compensating feedback come back to haunt you.

The key word is “eventually.” The delay in, for example, the circle of dominoes, explains why systemic problems are so hard to recognize. A typical solution feels wonderful, when it first cures the symptoms. Now there’s improvement; or maybe even the problem has gone away. It may be two, three, or four years before the problem returns, or some new, worse problem arrives. By that time, given how rapidly most people move from job to job, someone new is sitting in the chair.

4. The easy way out usually leads back in.

We all find comfort applying familiar solutions to problems, sticking to what we know best. Sometimes the keys are indeed under the street lamp; but very often they are off in the darkness. After all, if the solution were easy to see or obvious to everyone, it probably would already have been found. Pushing harder and harder on familiar solutions, while fundamental problems persist or worsen, is a reliable indicator of nonsystemic thinking—what we often call the “what we need here is a bigger hammer” syndrome.

5. The cure can be worse than the disease.

Sometimes the easy or familiar solution is not only ineffective; sometimes it is addictive and dangerous. Alcoholism, for instance, may start as simple social drinking—a solution to the problem of low self-esteem or work-related stress. Gradually, the cure becomes worse than the disease; among its other problems it makes self-esteem and stress even worse than they were to begin with.

The long-term, most insidious consequence of applying nonsystemic solutions is increased need for more and more of the solution. This is why ill-conceived government interventions are not just ineffective, they are “addictive” in the sense of fostering increased dependency and lessened abilities of local people to solve their own problems. The phenomenon of short-term improvements leading to long-term dependency is so common, it has its own name among systems thinkers—it’s called “shifting the burden to the intervenor.” The intervenor may be federal assistance to cities, food relief agencies, or welfare programs. All “help” a host system, only to leave the system fundamentally weaker than before and more in need of further help.

“Shifting the burden” structures show that any long-term solution must, as Meadows says, “strengthen the ability of the system to shoulder its own burdens.” Sometimes that is difficult; other times it is surprisingly easy. A manager who has shifted the burden of his personnel problems onto a human relations specialist may find that the hard part is deciding to take the burden back; once that happens, learning how to handle people is mainly a matter of time and commitment.

6. Faster is slower.

This, too, is an old story: the tortoise may be slower, but he wins the race. For most American business people the best rate of growth is fast, faster, fastest. Yet, virtually all natural systems, from ecosystems to animals to organizations, have intrinsically optimal rates of growth. The optimal rate is far less than the fastest possible growth. When growth becomes excessive—as it does in cancer—the system itself will seek to compensate by slowing down; perhaps putting the organization’s survival at risk in the process. The story of People Express airlines offers a good example of how faster can lead to slower—or even full stop—in the long run.

7. Cause and effect are not closely related in time and space.

Underlying all of the above problems is a fundamental characteristic of complex human systems: cause and effect are not close in time and space. By “effects,” I mean the obvious symptoms that indicate that there are problems—drug abuse, unemployment, starving children, falling orders, and sagging profits. By “cause” I mean the interaction of the underlying system that is most responsible for generating the symptoms, and which, if recognized, could lead to changes producing lasting improvement. Why is this a problem? Because most of us assume they are—most of us assume, most of the time, that cause and effect are close in time and space.

When we play as children, problems are never far away from their solutions—as long, at least, as we confine our play to one group of toys. Years later, as managers, we tend to believe that the world works the same way. If there is a problem on the manufacturing line, we look for a cause in manufacturing. If salespeople can’t meet targets, we think we need new sales incentives or promotions. If there is inadequate housing, we build more houses. If there is inadequate food, the solution must be more food.

Tackling a difficult problem is often a matter of seeing where the high leverage lies, a change which—with a minimum of effort—would lead to lasting, significant improvement.

The only problem is that high-leverage changes are usually highly nonobvious to most participants in the system. They are not “close in time and space” to obvious problem symptoms. This is what makes life interesting.

Buckminster Fuller had a wonderful illustration of leverage that also served as his metaphor for the principle of leverage—the “trim tab.” A trim tab is a small “rudder on the rudder” of a ship. It is only a fraction the size of the rudder. Its function is to make it easier to turn the rudder, which, then, makes it easier to turn the ship. The larger the ship, the more important is the trim tab because a large volume of water flowing around the rudder can make it difficult to turn.

But what makes the trim tab such a marvelous metaphor for leverage is not just its effectiveness, but its nonobviousness. If you knew absolutely nothing about hydrodynamics and you saw a large oil tanker plowing through the high seas, where would you push if you wanted the tanker to turn left? You would probably go to the bow and try to push it to the left. Do you have any idea how much force it requires to turn an oil tanker going fifteen knots by pushing on its bow? The leverage lies in going to the stern and pushing the tail end of the tanker to the right, in order to turn the front to the left. This, of course, is the job of the rudder. But in what direction does the rudder turn in order to get the ship’s stern to turn to the right? Why, to the left, of course.

You see, ships turn because their rear end is “sucked around.” The rudder, by being turned into the oncoming water, compresses the water flow and creates a pressure differential. The pressure differential pulls the stern in the opposite direction as the rudder is turned. This is exactly the same way that an airplane flies: the airplane’s wing creates a pressure differential and the airplane is “sucked” upward.

The entire system—the ship, the rudder, and the trim tab—is marvelously engineered through the principle of leverage. Yet, its functioning is totally nonobvious if you do not understand the force of hydrodynamics.

So, too, are the high-leverage changes in human systems nonobvious until we understand the forces at play in those systems.

There are no simple rules for finding high-leverage changes, but there are ways of thinking that make it more likely. Learning to see underlying structures rather than events is a starting point; each of the systems archetypes developed below suggests areas of high-and low-leverage change.

Thinking in terms of processes of change rather than snapshots is another.

9. You can have your cake and eat it too—but not at once.

Sometimes, the knottiest dilemmas, when seen from the systems point of view, aren’t dilemmas at all. They are artifacts of “snapshot” rather than “process” thinking, and appear in a whole new light once you think consciously of change over time.

Incidentally, sometimes people go ahead and divide an elephant in half anyway. You don’t have two small elephants then; you have a mess. By a “mess,” I mean a complicated problem where there is no leverage to be found because the leverage lies in interactions that cannot be seen from looking only at the piece you are holding.

11. There is no blame.

We all tend to blame someone else—the competitors, the press, the changing mood of the marketplace, the government—for our problems. Systems thinking shows us that there is no separate “other”; that you and the someone else are part of a single system. The cure lies in your relationship with your “enemy.”

SEEING THE WORLD ANEW

There is something in all of us that loves to put together a puzzle, that loves to see the image of the whole emerge. The beauty of a person, or a flower, or a poem lies in seeing all of it. It is interesting that the words “whole” and “health” come from the same root (the Old English hal, as in “hale and hearty”). So it should come as no surprise that the unhealthiness of our world today is in direct proportion to our inability to see it as a whole.

The roots of the war on terrorism, like the US-Soviet arms race, lie not in rival political ideologies, nor in particular arms, but in a way of thinking both sides shared. The United States establishment, for example, has been governed by a viewpoint that essentially resembled the following:

The terrorists’ view of their situation resembles this:

From the American viewpoint, terrorists networks like Al Qaeda have been the aggressor, and U.S. military expansion has been a defensive response to the threat. From the terrorist viewpoint, the United States, both economically and militarily, has been the aggressor, and the expansion of recruits bears evidence that many share this view.

But the two straight lines form a circle. The two antagonists’ individual, “linear,” or nonsystemic viewpoints interact to create a “system,” a set of variables that influence one another:

The real leverage in most management situations lies in understanding dynamic complexity, not detail complexity. Balancing market growth and capacity expansion is a dynamic problem. Developing a profitable mix of price, product (or service) quality, design, and availability that make a strong market position is a dynamic problem. Improving quality, lowering total costs, and satisfying customers in a sustainable manner is a dynamic problem.

Unfortunately, most systems analyses focus on detail complexity not dynamic complexity. Simulations with thousands of variables and complex arrays of details can actually distract us from seeing patterns and major interrelationships. In fact, sadly, for most people “systems thinking” means “fighting complexity with complexity,” devising increasingly “complex” (we should really say “detailed”) solutions to increasingly “complex” problems. In fact, this is the antithesis of real systems thinking.

The war on terrorism is, most fundamentally, a problem of dynamic complexity. Insight into the causes and possible cures requires seeing the interrelationships, such as between U.S. actions to become more secure and the perceived image of aggression. It requires seeing the delays between action and consequence, such as the delay between a U.S. decision to intervene militarily and the growth in terrorist recruits. And it requires seeing patterns of change, not just snapshots, such as the continuing escalation.

The essence of the discipline of systems thinking lies in a shift of mind:

• seeing interrelationships rather than linear cause-effect chains, and
• seeing processes of change rather than snapshots

The practice of systems thinking starts with understanding a simple concept called “feedback” that shows how actions can reinforce or counteract (balance) each other. It builds to learning to recognize types of “structures” that recur again and again: an arms race is a generic or archetypal pattern of escalation, at its heart no different from turf warfare between two street gangs, the demise of a marriage, or the advertising battles of two companies fighting a price war for market share. Eventually, systems thinking forms a rich language for describing a vast array of interrelationships and patterns of change. Ultimately, it simplifies life by helping us see the deeper patterns lying behind the events and the details.

To illustrate the rudiments of the new language, consider a very simple system—filling a glass of water. You might think, “That’s not a system—it’s too simple.” But think again.

From the linear viewpoint, we say, “I am filling a glass of water.” What most of us have in mind looks pretty much like the following picture:

But, in fact, as we fill the glass, we are watching the water level rise. We monitor the “gap” between the level and our goal, the desired water level. As the water approaches the desired level, we adjust the faucet position to slow the flow of water, until it is turned off when the glass is full. In fact, when we fill a glass of water we operate in a water-regulation system involving five variables: our desired water level, the glass’s current water level, the gap between the two, the faucet position, and the water flow. These variables are organized in a circle or loop of cause-effect relationships which is called a “feedback process.” The process operates continuously to bring the water level to its desired level.

But it would be just as true to describe only the other half of the process: “The level of water in the glass is controlling my hand.”

All this takes some getting used to. We are steeped in a linear language for describing our experience. We find simple statements about causality and responsibility familiar and comfortable. It is not that they must be given up, any more than you give up English to learn French. There are many situations where simple linear descriptions suffice and looking for feedback processes would be a waste of time. But not when dealing with problems of dynamic complexity.

REINFORCING AND BALANCING FEEDBACK AND
DELAYS: THE BUILDING BLOCKS OF
SYSTEMS THINKING

There are two distinct types of feedback processes: reinforcing and balancing. Reinforcing (or amplifying) feedback processes are the engines of growth. Whenever you are in a situation where things are growing, you can be sure that reinforcing feedback is at work. Reinforcing feedback can also generate accelerating decline—a pattern of decline where small drops amplify themselves into larger and larger drops, such as the decline in bank assets when there is a financial panic.

Balancing (or stabilizing) feedback operates whenever there is a goal-oriented behavior. If the goal is to be not moving, then balancing feedback will act the way the brakes in a car do. If the goal is to be moving at sixty miles per hour, then balancing feedback will cause you to accelerate to sixty but no faster. The goal can be an explicit target, as when a firm seeks a desired market share, or it can be implicit, such as a bad habit, which despite disavowing, we stick to nevertheless.

In addition, many feedback processes contain “delays,” interruptions in the flow of influence which make the consequences of actions occur gradually.

All ideas in the language of systems thinking are built up from these elements, just as English sentences are built up from nouns and verbs. Once we have learned the building blocks, we can begin constructing stories: the systems archetypes of the next chapter.

If you are in a reinforcing feedback system, you may be blind to how small actions can grow into large consequences—for better or for worse. Seeing the system often allows you to influence how it works.

For example, managers frequently fail to appreciate the extent to which their own expectations influence subordinates’ performance. If I see a person as having high potential, I give him special attention to develop that potential. When he flowers, I feel that my original assessment was correct and I help him still further. Conversely, those I regard as having lower potential languish in disregard and inattention, perform in a disinterested manner, and further justify, in my mind, the lack of attention I give them.

But there’s nothing inherently bad about reinforcing loops. There are also virtuous cycles—processes that reinforce in desired directions. For instance, physical exercise can lead to a reinforcing spiral; you feel better, thus you exercise more, thus you’re rewarded by feeling better and exercise still more. The war on terrorism run in reverse, if it can be sustained, would make another virtuous cycle. The growth of any new product involves reinforcing spirals. For example, many products grow from “word of mouth.” Word of mouth about a product can reinforce a snowballing demand (as occurred with the Volkswagen Beetle and the ipod) as satisfied customers tell others who then become satisfied customers, who tell still others. With today’s network devices the physical act of sharing information (or songs) adds another reinforcing dynamic: once one person has such a device, the information can only be shared with others with similar devices.

Here is how you might diagram the positive word-of-mouth process that drives growth in sales and satisfaction:

The behavior that results from a reinforcing loop is either accelerating growth or accelerating decline. For example, the nuclear-arms race has produced an accelerating growth of arms stockpiles over the past half century. But a bank run produces an accelerating decline in a bank’s deposits.

Both good news and bad news reinforcing loops accelerate so quickly that they often take people by surprise. A French school-children’s jingle illustrates the process. First there is just one lily pad in a corner of a pond. But every day the number of lily pads doubles. It takes thirty days to fill the pond, but for the first twenty-eight days, no one even notices. Suddenly, on the twenty-ninth day, the pond is half full of lily pads and the villagers become concerned. But by this time there is little that can be done. The next day their worst fears come true. That’s why environmental dangers are so worrisome, especially those that follow reinforcing patterns. By the time the problem is noticed, it may be too late. Extinctions of species often follow patterns of slow, gradually accelerating decline over long time periods, then rapid collapse. So do extinctions of corporations.

But pure accelerating growth or decline rarely continues unchecked in nature, because reinforcing processes rarely occur in isolation. Eventually, limits are encountered—which can slow growth, stop it, divert it, or even reverse it. Even the lily pads stop growing when the limit of the pond’s perimeter is encountered. These limits are one form of balancing feedback, which, after reinforcing processes, is the second basic element of systems thinking.

BALANCING PROCESSES: DISCOVERING THE
SOURCES OF STABILITY AND RESISTANCE

If you are in a balancing system, you are in a system that is seeking stability. If the system’s goal is one you like, you will be happy. If it is not, you will find all your efforts to change matters frustrated—until you can either change the goal or weaken its influence.

In a balancing (stabilizing) system, there is a self-correction that attempts to maintain some goal or target. Filling the glass of water is a balancing process with the goal of a full glass. Hiring new employees is a balancing process with the goal of having a target work force size or rate of growth. Steering a car and staying upright on a bicycle are also examples of balancing processes, where the goal is heading in a desired direction.

Balancing feedback processes are everywhere. They underlie all goal-oriented behavior. Complex organisms such as the human body contain thousands of balancing feedback processes that maintain temperature and balance, heal our wounds, adjust our eyesight to the amount of light, and alert us to threat. A biologist would say that all of these processes are the mechanisms by which our body achieves homeostasis—its ability to maintain conditions for survival in a changing environment. Balancing feedback prompts us to eat when we need food, and to sleep when we need rest, or to put on a sweater when we are cold.

As in all balancing processes, the crucial element—our body temperature—gradually adjusts itself toward its desired level:

Planning creates longer-term balancing processes. A human resource plan might establish long-term growth targets in head count and in skill profile of the work force to match anticipated needs. Market research and R&D plans shape new product development and investments in people, technologies, and capital plant to build competitive advantage.

What makes balancing processes so difficult in management is that the goals are often implicit, and no one recognizes that the balancing process exists at all. I recall a good friend who tried, fruitlessly, to reduce burnout among professionals in his rapidly growing training business. He wrote memos, shortened working hours, even closed and locked offices earlier—all attempts to get people to stop overworking. But all these actions were offset—people ignored the memos, disobeyed the shortened hours, and took their work home with them when the offices were locked. Why? Because an unwritten norm in the organization stated that the real heroes, the people who really cared and who got ahead in the organization, worked seventy hours a week—a norm that my friend had established himself by his own prodigious energy and long hours.

Whenever there is resistance to change, you can count on there being one or more “hidden” balancing processes. Resistance to change is neither capricious nor mysterious. It almost always arises from threats to traditional norms and ways of doing things. Often these norms are woven into the fabric of established power relationships. The norm is entrenched because the distribution of authority and control is entrenched. Rather than pushing harder to overcome resistance to change, artful leaders discern the source of the resistance. They focus directly on the implicit norms and power relationships within which the norms are embedded.

DELAYS: WHEN THINGS HAPPEN … EVENTUALLY

As we’ve seen, systems seem to have minds of their own. Nowhere is this more evident than in delays—interruptions between your actions and their consequences. Delays can make you badly overshoot your mark, or they can have a positive effect if you recognize them and work with them.

Delays, when the effect of one variable on another takes time, constitute the third basic building block for a systems language. Virtually all feedback processes have some form of delay. But often the delays are either unrecognized or not well understood. This can result in “overshoot,” going further than needed to achieve a desired result. The delay between eating and feeling full has been the nemesis of many a happy diner; we don’t yet feel full when we should stop eating, so we keep going until we are over stuffed. The delay between starting a new construction project and its completion results in overbuilding real estate markets and an eventual shakeout. In the beer game, the delay between placing and receiving orders for beer regularly results in overordering.

Unrecognized delays can also lead to instability and breakdown, especially when they are long. Adjusting the shower temperature, for instance, is far more difficult when there is a ten-second delay before the water temperature adjusts, then when the delay takes only a second or two.

During that ten seconds after you turn up the heat, the water remains cold. You receive no response to your action; so you perceive that your act has had no effect. You respond by continuing to turn up the heat. When the hot water finally arrives, a 190-degree water gusher erupts from the faucet. You jump out and turn it back; and, after another delay, it’s frigid again. On and on you go, through the balancing loop process. Each cycle of adjustments compensates somewhat for the cycle before. A diagram would look like this:

Delays are no less problematic in reinforcing loops. In the war on terrorism example, each side perceives itself as gaining advantage from expanding its activities because of the delay in the other side’s response. This delay may span from days to months and even years because of the time required to gather resources for the next cycle of attacks. In part it is this temporary perceived advantage that keeps the escalation process going. If each side were able to respond instantly to buildups of its adversary, incentives to keep building would be nil.

The systems viewpoint is generally oriented toward the long-term view. That’s why delays and feedback loops are so important. In the short term, you can often ignore them; they’re inconsequential. They only come back to haunt you in the long term.

Reinforcing feedback, balancing feedback, and delays are all fairly simple. They come into their own as building blocks for the “systems archetypes”—more elaborate structures that recur in our personal and work lives again and again.