Complexity Theory Dominates The Narrative In Strategy Today - Essay Example

?Complexity theory dominates the narrative in strategy today- critically discuss this view of strategic management. Any organisation cannot remain ‘static’ and has to keep on evolving, changing and updating its strategies and functioning, based on various factors in its external environment. External environment in the sense, organisations’ strategies will be influenced by the parent or host country’s economy as well as by the world economy, in case of Multinational Corporations, and then it will also be influenced by its competitors’ strategies, by its consumers’ behaviours, by certain social issues, etc, etc. Thus, it is clear that organisations cannot carry on with preset strategies, and instead has to keep tab of all the happenings in its external environment and accordingly come up with strategies and reorient its organizational processes. This form of strategic management, where the organisation will keep on initiating new strategies according to its external environment, only comes under the Complexity theory. This theory views organisation mainly as part of a collection of structures, in which the organization could share some or maximum properties with other composite and adaptive environmental systems or structures. As the organisations share properties with these environmental systems, they will be able to adapt to that environment, reorient its strategies accordingly and emerge successful. So, this paper will critically discuss the strategic management view that Complexity theory dominates the narrative in strategy today, by first providing the background of the Complexity theory. Then, the paper will analyse with case examples how the theory is practiced in an organization and how the strategist or leader or manager will play a role in that practice. The paper will also provide counter perspectives, before drawing to a conclusion. When the Complexity theory is viewed from an overall perspective, or when one focuses on the science of complexity, it emerges that it is the study of an evolving and adapting order in an otherwise orderly systems. That is, certain action is carried out, or naturally carries out in a specific order, without changing of set patterns, for example, flocking and large scale migration of birds. However, even that set pattern have to be changed according to the constantly changing environment. So, the key is, the actions has to be operated at the vicinity of ‘edge’, without deeply getting involved in preset practices. That is, one has to be fully prepared for any changes that might occur in their action path, and so they should operate in that path of ‘prepared’ or ‘ready to adapt’ state. According to McElory (2000), the systems that operate in the vicinity of the edge or even chaos mainly exhibits strong bursts of creativity, thereby coming up with innovative behaviours and new patterns. These new patterns which enhances the ability of a system to “adapt successfully to its environment are stabilized and repeated” while those that performs below expectations and leads to failures “are rejected in favor of radically new ones, almost as if a cosmic game of trial-and-error were being played.” (McElory 2000, p.196). Many concepts of the Complexity theory got originated and were researched at the Sante Fe Institute, located in New Mexico, USA. The institute was found in 1984 by George A. Cowan as an independent research centre, where scientists from different disciplines including maths, physics, biology, information technology, psychology, physiology, etc, etc with their computing expertise, conducted “interdisciplinary work on the behaviour of complex adaptive systems”, coming up with various postulations of the Complexity theory. (Rosenhead 2008). The basic concept that resulted from this research under the Complexity theory is that, any collection of components as well as systems will evolve as well as organize itself, on the basis of changes in its external environment. The application of this concept in the field of business started due to the works of Howard Sherman and Ron Schultz. Both these experts believe that business of today is faster and nonlinear, and so the management team or leader of the company as well as "experts" may not be able to predict which products or which organizational strategy or which company will succeed. (Mason). Thus, the Complexity theory, which was originally analyzed from the perspective of math and sciences, slowly moved into the areas of social sciences and is making stronger applications in the world of business (Byrne 1998). Organisations are not ‘islands’ and cannot operate avoiding the influence of its environment, and so they have to carefully study how strong the environmental factors are, and accordingly come up with strategies. However, the issue is, the external environment of any organization will be very dynamic because so many intricate interactions happens in it, and so the number of possible reactions to any given interaction or change will also be infinite. (Mason). Even minor events could give rise to large scale consequences independently, as well as part of chain of reactions to a major problem. Thus, organisations cannot have control over its environment all the time, and so cannot hold on to a single strategy all the time. When one focuses on the economic part of the environment, the economy or economies in which the organization is operating could suffer slowdown, and it will have an direct impact on the organization. For example, the recent Recession negatively impacted many businesses, and the ones who are not able to adapt optimally on the lines of Complexity theory sank without any trace. “Complexity-based solutions are extremely applicable and people need to start using them or they’re going to lose out.” (Pathak et al 2007, p.549). Using figures from the Insolvency Service, the Tories had stated almost 17,500 more companies have gone bust than the numbers in the 1980s recession and 3,000 more than in the 1990s downturn. (The Telegraph 2009). In those scenarios, as part of Complexity theory, organisations has to accept the fact the certain large scale systems will have greater domination over it, and importantly should come up with strategies according to that system. British Airways did that to salvage its sinking fortunes at the height of recession. Until 2008, British Airways held the tag of UK’s largest airline, on basis of passenger numbers. However, its rival Easyjet carrier more passengers in the same year, and took the title away from the British Airways. With mounting financial losses and employees’ strike, BA as part of Complexity theory and also as part of change management, incorporated lean management practices in certain parts of its organizational process. They incorporated Lean processes at its storage warehouses, as those sections were hampered by poor flow as well as general confusion among the employees. After initiation, the work flow in the storage warehouses got better and that resulted in sizable cost savings. “The introduction of Lean development brought about a new layout with clearer processes, and a more integrated team…The situation before had been costing us a lot of money.” (King 2009). Although, UK economy is showing signs of recovery with the growth of 0.8 to 1 per cent last year, double the market expectations, organisations has to be very aware of these eventualities in the environment, and be ready to change. (Brown 2010). The basic premise is, organisation should be prepared and even be ‘game’ to all the negative impacts it could face from the environment. Rosenhead (2008) states that organisations should welcome any ‘disorders’ in its environment as a partner, and use those disorders positively by formulating apt strategies. As part of Complexity theory, leaders or managers as should provide an optimal environment for the employees to come up with ideas during the strategy formulation, when the organizations start adapting to the environment. This is, they should not take a dominant role and impose their will, and should allow the employees to play a primary role. Stacey (1993 qtd. in Sebastian 2010) validates this point by stating the strategic role of senior management is to largely facilitate the processes which can lead to innovation, rather than playing the role of final arbiters, who preside over an elaborate analytical decision making process. In that direction, as part of Complexity theory and the resultant strategy formulation, managers should put for discussion the key factors of the changing environment and the organizational goals among the employees, and ask them to give their ideas or feedback. Strategic planning is mainly about ideas development and implementation, and minimally about forecasts and projections (Simpson 1998). As pointed out in the website, HR Zone (2008), during the decision making process for strategy formulation, the managers should give the employees a clear sense of purpose, as well as an clear explanation about their personal importance in the functioning of the organisation, particularly in the changing environment, and finally regular communication about the direction of the organization towards their set targets. If this is done, the employees will come up valuable strategies, which will aid the organizations in their functioning, and more importantly it will also make the employees more committed to the changes that are taking place. That is, it is normally human nature to contribute more to a process, if they are given major responsibility in that process. As specified by the Cooper model, when the employees keep on participating in all the important decision making process, they will start to understand all the intricacies of organizational functioning particularly in relation to the changing environment. (Scott 2002). At the same time, leaders should be careful to avoid committing large amount human resources to create strategies, when that strategy could have been developed with less number of human resources and in less time. (Linn 2008). This aspect of how Complexity theory expects the leaders or managers or practitioners to allow the employees to play a major part during key strategies formulation can be seen in the functioning of American Coffee chain, Starbucks. As part of strategic management, Starbucks’ Chairman, Howard Schultz always adopts their organisational Mission Statement with contributions from its workers. That is, Schultz will normally introduce a tentative mission statement among the employees particularly the new employees, and will elicit their suggestions. Based on their ideas only, a final Mission Statement will be formulated. “New employees discuss the Starbucks mission statement and do customer-service role-playing.” (Schultz qtd. inc.com). Thus, Schultz gave the employees prominent roles, and made them even more committed to that mission statement. As Mason states rather than following more linear approaches during the strategy formulation process, Complexity theory provides the organizations an avenue to encourage innovative thinking and ability to self-organize, thereby thriving on the ambiguities and unpredictability, which normally characterize the modern day businesses. Another key concept in Complexity theory that is related to the roles of leaders and managers is that there should be “no master controller of any system” (Mason). That is, as an extension of allowing employees primary roles in the decision making process, leaders should also give them more autonomy in other processes related to strategy formulation and implementation. That is, as stated by Mehta (2009) in order to effectively put Complexity theory to work, top management team need to give up or even loosen their rigid control over their systems. When this is done, it creates opportunities for the employees themselves to act and interact independently with each other in multiple ways, thereby constantly adapting to the changing environment. Curlee and Gordon (2000), states that in line with the Complexity theory, seasoned project managers will realize early that all the parts of the project cannot be personally controlled by them, and importantly understand that creativity will mainly happen on the fringes of Complexity or chaos. Curlee and Gordon (2000), further adds up to this perspective by stating that employees who work on the fringes of Complexity, without manager’s intervention, will be able to face any catastrophic failures, and will be able to resolve it on their own more quickly and efficiently. However, at the same time, managers should know “how and where to push to keep the system from neither descending into chaos nor becoming rigidly ordered.” (Mason). In addition, they should watch for some emergent properties and organizational patterns, which provides optimal solutions to the organizational problems, and should take steps to preserve them for future applications. Although, the Complexity theory concept of organisation aptly adapting to the external environment without holding on to preset cultures and practices and allowing the employees to play a major role, can provide best results, Complexity theory cannot be a panacea for all type of organizations and for all organizational scenarios. That is, the Complexity theory is not without major drawbacks, and so it cannot be used during all types of strategy formulation. The main assumption is that employees working in the companies, that follow Complexity theory, are enthusiastic, intelligent, and can effectively work as part of teams, without the need for constant management by the managers, when compared to the employees who work in “more traditional, hierarchical, rigidly-controlled environments.” (Mehta 2009, p.55). However, it is not the case in all those companies because like five fingers in one’s hand, each employee will have different skill set, attitude, etc., so expecting all of them to work as a team and adapt to changes independently, in line with organizational goals, without manager’s guidance, will be too much to ask for. Helms (2000) lists out some more factors that may impede Complexity theory concept of self-organised teamwork - they are nonperforming or even underperforming team members, personality conflicts, opposing business styles, stress, etc. These impediments could prevent the organisations from making the adaptations quickly and effectively, thereby failing the Complexity theory. On the other hand, these employee centric problems, contrary to the tenet of Complexity theory, could necessitate much more involvement from the management or manager. While the Complexity theory states that during strategy formulation and adaptation process, leaders can step back and allow the employees to play the primary role, the above mentioned employees’ problems would make them more actively involved. That is, leaders have to constantly manage the employees, coming up with regular and apt rewards or incentives, and then develop ‘external’ processes to foster teamwork. In addition, they have to resolve the conflicts that may arise because of the changing environment, and even remove the non-performers who may be “holding the company back from adapting well to emerging trends and technologies.” (Mehta 2009, p.56). Thus, it is clear that organisations following tenets of Complexity theory may not get expected results all the time. Another critical point against the strategic management view that Complexity theory dominates the narrative in strategy formulation today is that, it ‘uproots’ certain long evolved and established organisational cultures and related conventions. Organisational cultures are set of key values, beliefs, practices, etc shared by employees, which is often created by company founders. This culture would have been formed and made mandatory by the leader, as it would been accepted fully by the employees, also as it would have yielded good benefits and importantly after it would have been practiced for quite a long time. So, when an organisation based on the tenets of Complexity theory starts to shape and reshape on a frequent basis to adapt to a changing environment, it will lose some of the stability in its organisational process, which has been gained because of a common organizational culture. Although this is a valid argument against Complexity theory, when viewed from another perspective it has faults. That is, if an organisation in the guise of holding on to a culture which is working for them, avoids adapting to a changing environment, it will not be able to elevate its position or even survive. Mason validates this point by stating, if an organisation strictly holds on to its preset cultures, which were formed based on the conditions that were previously in place, it sort of becomes non-adaptive to the continuously-evolving market conditions, leading to problems. Even when viewed from the perspective of organisational culture, it is clear that optimal organisational culture is one, which evolves to the changing environment. DeSimone, Werner & Harris (2002) validates this point by stating that formulation of organisational culture involves more than just simply restating values, beliefs, or norms and making the employees follow them, instead it involves a complex process of replacing an existing paradigm with another optimal one. Thus, the best possible scenario is to hold on to certain optimally working cultural conventions, and importantly on the lines of Complexity theory formulate new strategies, so it effectively adapts to the changing environment. This was aptly followed by the American footwear maker, Nike in its UK operations. As part of its organisational culture and also as part of its ethical responsibility, Nike adopted a Diversity Program, through which it recruited qualified employees from various minority sections. However, when recession set in, on the lines of Complexity theory and to adapt to the changing economy, Nike cut 1,750 jobs, equal to around 5 per cent of its global workforce, in an attempt to reduce costs. (Stiff 2009). When this was done, there was a view that it would become difficult for Nike to recruit new employees, let alone through the Diversity Program. However, in such a tight situation, Nike recruited more than 200 employees for its Umbro operations. With acquisition of Umbro, Nike went for an expansion of the workforce in its Cheadle-based national headquarters, and recruited people from diverse backgrounds as well in the Stockport region. (Williams and Dawson 2009). Nike, even while adapting to the recession, was able to hold to the working aspects of its organisational culture, thus validating that Complexity theory can be aptly used during strategy formulation. Although, organisations are ‘specific’ physical structures, within which employees will do their allocated work, various factors in its external environment will impact that functioning. Thus, Complexity theory mainly focuses on the point, that organisations without holding on to the preset cultures, should study its external environment, and should adapt its strategies and its functioning. The economic environment will be a constantly changing and so the organisations have to be ready to adapt to that by coming up with optimal strategies. In addition, organizations during the adaptation process should give primary role to the employees, with the managers stepping back. However, certain organizations are following long evolved cultures as well as preset practices without introducing maximum changes, and are ‘reaping’ many benefits because of that, without necessitating the need for the application of Complexity theory. At the same time, the widespread view is, if the organisation does not undertake key strategic changes at appropriate times, they will not be able to compete and survive, leading to loss of market share, customer base and financial losses. So, organisation can retain ‘best of both the worlds’. Through this way, organisations can emerge out of the controlled fermentation of ideas, and instead come up with innovative ideas and strategies, thereby developing many feasible opportunities to grow further. References Brown, R 2010, Double-dip recession fears ease in UK, viewed on October 15, 2011 http://au.finance.yahoo.com/news/Double-dip-recession-fears-abc-4170798429.html?x=0 Byrne, DS 1998, Complexity theory and the social sciences: an introduction, Rutledge, New York. Curlee, W and Gordon, RL 2000, Complexity Theory and Project Management, John Wiley and Sons, New York. DeSimone, RL, Werner, JH and Harris, DM 2002, Human resource development. Harcourt College Publishers, Orlando. 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