MHRM6900 WU Reinventing

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MHRM6900 WU Reinventing Strategic Planning Article Analysis

Professionals talk so much about being strategic and thinking strategically, yet how well do they understand what that really means? It is not enough for a strategy to be well designed. It must produce results. Thinking strategically about your HR role for the organization means assessing HR’s current state and planning for its future in support of the organization’s future direction in the year ahead. It also means planning ahead for potential obstacles and the HR strategies and action steps to overcome them.

For this Discussion, review this week’s Learning Resources, especially the article “Managing Complexity: Systems Thinking as a Catalyst of the Organization Performance,” and think about a workplace situation which you have experienced or have read about, where short-term (or short-sighted) thinking was turned successfully into strategic thinking, or strategic management, to really produce the best outcome. Quick fixes and short-sighted approaches are not always the best outcome in the long run.

Write an analysis of what you would have done to turn a case of short-term thinking into strategic thinking and management, and what you would need to do to get others to be willing to follow your lead on this shift in thinking and managing. What obstacles might you anticipate?

Managing complexity: systems thinking as a catalyst of the organization performance Aelita Skaržauskienė Aelita Skaržauskienė is Vice-Dean at the Mykolas Romeris University, Kaunas, Lithuania. Summary Purpose – The paper aims to analyse new management practices for addressing complexity, uncertainty and changes of today’s business landscape. In this context it is critical to understand the role of intellectual capital and particularly what are the key competencies to be developed in order to deal with the fluidity of business. Effective decision making and learning in a world of growing dynamic complexity requires leaders to become systems thinkers – to develop tools to understand the structures of complex systems. The paper aims to clarify the relationship between systems thinking and organization performance. Design/methodology/approach – The methodology of systems thinking is inseparable from the philosophy of systems thinking, thus, the first part of the paper presents the common theory of systems and the systems approach to the organization. The paper follows a quantitative research approach. Firstly, exploratory factor analysis was employed to assess dimensionality of scales. Secondly, relationships between variables were explored using Spearman’s correlation. Thirdly, multiple linear regression was run to test the hypothesized model of relationships. Finally, one-way ANOVA was employed to test the influence of intelligence competence level on mean of organization performance. Findings – Based on the analysis and synthesis of the scientific literature a conceptual model of the relationship between cognitive intelligence competencies (such as systems thinking) and organization performance was developed. The theoretical model was supported by empirical evidence. Correlational and regression analyses revealed that systems thinking was associated with higher organization performance. Research limitations/implications – Because of the chosen research approach, the research results may lack generalizability. The sample of this research was limited only to national level therefore it is not possible to compare results across different countries. In order to generalize the research findings, further research should include more companies from different industries. Secondly, the traditional self assessment method has been used for evaluation of competencies in this paper, but the results could be supplemented by adding 360-degree feedback or multisource assessment results. Practical implications – A systems thinking approach allows the realization of various interrelations and working schemes in the organization and helps to identify regularities of the organizational development. The application of systems thinking principles cannot guarantee success but may be a useful means or a permanent form of activity when solving conceptual problems. Originality/value – Rich insight to the systems thinking approach was provided at the conceptual level and meaning of systems thinking was developed. The paper discloses the effects of systems thinking on organization performance and includes implications for the development of systems thinking and other leadership competencies. Keywords Intellectual capital, Human capital, Intelligence, Organizational performance, Complexity theory Paper type Research paper Introduction Nowadays private and public organizations have to face crisis, change, turbulence, and high competitive pressure. In this context it is critical to understand the role of intellectual capital and particularly what are the key intangible and knowledge assets to be developed DOI 10.1108/13683041011093758 VOL. 14 NO. 4 2010, pp. 49-64, Q Emerald Group Publishing Limited, ISSN 1368-3047 j MEASURING BUSINESS EXCELLENCE j PAGE 49 and managed in order to deal with the fluidity of business. The circumstances in which most businesses today find themselves are complex, dynamic and uncertain (Stacey, 1993). The complex systems – organizations, markets, etc. – are difficult (sometimes even impossible) to forecast. The environment in organizations is becoming more complex and changes more often and suddenly (Tvede, 1997; Stacey, 1993; Goswami, 1993; Tetenbaum, 1998; Laszlo, 2002). The all those processes contribute to formation of new philosophical trends and initiate attempts to understand complexity of the world. An effect of systems thinking is relevant in the modern world which generates more information than it is possible to control and creates interrelations that are difficult to forecast. An the organization is a complicated ‘‘open system’’ it is necessary to consider the environmental influence to the system and the system influence the environment while planning changes, making decisions and solving problems inside the organization. Today’s businessmen, managers and leaders need not only skills to act in an unstable and unpredictable environment but also to understand the reasons of this. In the twenty-first century management science faces a dual shift of a paradigm. Due to the first shift the organization is perceived as a multiple sociocultural unit (different from mechanistic and biological view), which influences the environment and is influenced by the environment (the systems conception of the organization). Not only a conception towards the organization has changed but also an attitude to the method has shifted from analytical thinking (science, which operated independent variables) to systems or holistic thinking (science, which operates interrelated variables) (Gharajedaghi, 2006). The second shift, the method one, helps to better understand the intricacy and complexity of reality. The understanding of interrelations requires systems thinking as opposed to analytical thinking. The analytical thinking seeks to simplify complex phenomena while the language of systems thinking is based on the holism principle, i.e. a perception of the world as a whole (Ackoff, 1999). Recent theories of management stress the significance of holism, intuition and creativeness and systems conception of the world. Therefore into this conception we should look as into the way of thinking not just as the discipline or problem-solving methodology. The management of the organization is an object and space of human creative work. Managing organization is closely related to the conception: reflection, expertise and thinking. Thinking includes manipulation of information, formation of concepts and ways of problem solving, searching for reasons and making decisions. Thinking is necessary for every manager in his daily activity, therefore, with a sight to the future it is worth considering whether more efforts should be put to a study of thinking rather than of a substance or matter. One of the ways to improve the quality of results of an activity is to enhance the quality of thinking: how you think, is how you act, is how you are (Haines, 1998). The creators of systems thinking methodology Bertalanffy (1969), Beer (1975), Forrester (1961, 1975), Capra (2002), Senge (1990, 2007), Ackoff (1999), Haines (1998), Warren (2000), Sterman (2000), James (2003), Gharajedaghi (2006) apply widely systems thinking principles in management praxis. The paper aims to clarify the relationship between systems thinking and organization performance. The relevance of systems thinking as a competence was disclosed in the complex world. This paper aims to answer the question of how the principles of systems thinking help to find new productive forms and tools for improving organization performance. In the first part of the paper, rich insight to the systems thinking approach was provided at the conceptual level and meaning of systems thinking was developed theoretical insight to the systems approach towards organization was provided at the conceptual level and meaning of systems thinking as intelligence competence was developed. In the second part, based on the analysis and synthesis of the scientific literature a conceptual model of relationship between intelligence competencies and organization performance was developed. In the third part, the results of empirical research are presented, which confirm the statements of theoretical analysis. The theoretical model was supported by empirical evidence: the impact of systems thinking on organization performance in Lithuanian enterprises. j j PAGE 50 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 The conception of systems thinking Systems thinking is a concept that contains scientific discoveries and instruments of the past 50 years that enable easier understanding of integrity of phenomena and achievement of the desired changes. Spruill et al. (2003) on reviewing the theories of the systems thinking draws conclusions that the major part of the systems thinking theories arise from mathematics, however, the application of the systems thinking and the related progress can be noticed in a variety of disciplines starting from medicine to engineering and psychology, political studies and even art as well. Thus, the systems thinking in the very roots of its historical birth can be called an integrated science, which enables the perception of reality from many different points instead of one: the concept of a ‘‘closed circle’’ thinking originates from mathematics, the principle of homeostasis (a tendency of biologic systems to resist changes and to maintain a balance) originates from biology while control and communication theories come from cybernetics. The main tools of a ‘‘machine age’’ were reductionism, analysis and mechanization, ‘‘system age’’ requires systems thinking and a holistic perception of the world (Sterman, 2000). From the classical viewpoint a system is a combination of two or more elements, when every element of the whole influences a behavior of other elements and the behavior of each element influences the behavior of the whole (Bertalanffy, 1969; Forrester, 1975). Traditional analysis focuses on separating the individual pieces of what is being studied; in fact, the word ‘‘analysis’ actually comes from the root meaning ‘‘to break into constituent parts’’. Systems thinking, in contrast, focuses on how the thing being studied interacts with the other constituents of the system – a set of elements that interact to produce behavior – of which it is a part. A thorough comparison between the traditional and systems thinking is provided by Richmond (2001) who identified seven critical thinking skills, which play an important role in improving the quality of our thinking (Table I). Each of these critical thinking skills serves a different purpose and brings something unique to a systems thinking analysis. Effective systems methodology lies at the intersection of the following four foundations of systems thinking (Ackoff, 1999; Gharajedaghi, 2006) (Figure 1): 1. Holistic thinking: focus on the whole, systems logic, process orientation. Seeing the whole requires understanding structure, function, process and context at the same time. The Table I Comparison between the traditional and systems thinking Systems thinking skills Traditional thinking skills Dynamic thinking: framing a problem in terms of pattern of behavior over time System-as-cause thinking: placing responsibility for a behavior on internal actors who manage the policies and plumbing of the system Forest thinking: believing that, to know something, one must understand the context of relationships Operational thinking: concentrating on getting at causality and understanding how a behavior is actually generated Closed-loop thinking: viewing causality as an ongoing process with the ‘‘effect’’ feeding back to influence the causes, and the causes affecting one another Quantitative thinking: accepting that one can always quantify, but not always measure Scientific thinking: recognizing that all models are working hypotheses that always have limited applicability Static thinking: focusing on particular events System-as-effect thinking: viewing behavior generated by a system as driven by external forces Tree-by-tree thinking: believing that really knowing something means focusing on the details Factors thinking: listing factors that influence or are correlated with some result Straight-line thinking: viewing causality as running one way, with each cause independent from all other causes Measurement thinking: searching for perfectly measured data Proving-truth thinking: seeking to prove models to be true by validating with historical data Source: Richmond (2001) j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 51 Figure 1 Four foundations of systems methodology Holistic Thinking System Logic Process Orientation Structure, function, process and context Operational Operational Thinking Thinking Self-Organisation Dynamics Dynamics of of multi-loop multi-loop feedback feedback systems systems Purposeful socio-cultural systems Chaos Chaos and and complexity complexity Interactive Design Redefining the future, critical assessment, continuous learning, mental models Source: Gharajedaghi (2006) systems approach enables the linking of objects of various types to a single whole, to organize different forms of activity into one whole. The basis of every successful system is a successful communication among separate parts. The effective development of the organization can be achieved when various strategies, strategic planning, team work and principles of organizational changes are applied. Technical aspects are combined with the aspects of behavior, personal (personal mastery and intellectual models) with conceptual ones. 2. Operational thinking (dynamic thinking) refers to the conception of the principles of systems dynamics, that is, evaluation of the multi-loop feedback systems, identification of the delay effect and barriers of growth, mapping stock and flow, etc. The conception of these principles creates an additional value for managing organization: business systems are seen as interdependent, reasons are searched both inside and outside the organization, the fact that an effect in one place of the system may cause an effect in another place causes neither fear nor surprise. 3. Interactivity is a design of the desirable future and a search for its implementation ways (Ackoff’s ‘‘interactive design’’). Interactive design is both the art of finding differences among things that seem similar and the science of finding similarities among things that seem different. To distinct outputs of interactive design are defining problems (Formulation the Mess), identifying the leverage point and designing solutions (Idealization). Interactivists, as opposed to those acting reactively or proactively, mainly pay attention to the problem, its formulation and the search for a solution. Interactive design is based on the principle of a critical thinking that is defined by these steps: defining a problem, gathering of information for problem solution, formulation of hypotheses, checking presumptions and correctness of findings, making a solution. Interactive design means a necessity of a constant critical assessment, continuous learning and understanding of mental models. This dimension of systems thinking is based in intuitive thinking, stimulates creativity and provides an organization with a conceptual foundation to create a unique competitive advantage: broadens the thinking area and develops the openness of mind which leads j j PAGE 52 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 to an opportunity to use the freedom of experimenting. Basically, this creative process can produce neither right nor wrong decisions, since the decision-making process becomes a unique one. The original seeing of the world creates preconditions for original decisions. 4. Self-organization: movement toward predefined order. ‘‘Biological systems self-organize through genetic codes, and social systems self-organize through cultural codes. The DNA of social systems is their culture’’ (Gharajedaghi, 2006). Self-organizing, purposeful, socio-cultural systems must be self-evolving in order to be viable. They cannot passively adapt to their environments but should co-evolve with them and be able to change the rules of interaction as they evolve over time. ‘‘Capitalism is by nature a form or method of economic change and not only never is but never can be stationary . . . It is not price competition within a static set of production methods and organizational forms which counts but the competition from the new technology, the new type of organization – competition . . . which strikes not at the margin of the profits and the outputs of the existing firms but at their foundations and their very lives‘‘ (Schumpeter, 1947). Success comes from a self-renewing capability to spontaneously create structures and functions that fit this moment. The ability to continuously match the portfolio of internal competencies with the portfolio of emerging market opportunities is a foundation of a concept of new business architecture. Generally the usage of systems thinking in practice can be defined by Senge: ‘‘it simplifies life by helping us see the deeper patterns lying behind the events and the details’’ (Senge, 1990). The essence of systems thinking is to: B understand interrelations but not linear cause-effect relations; B see processes of changes but not static states; and B see and understand context. Any problem must be solved starting from the whole, one component can not be affected separately from other components. Systems thinking may appear more complex and multilevel than analytic or reductionist thinking, it helps to detect the order in the complexity and is more accommodating to human understanding of reality. ‘‘Systems thinking is a discipline for seeing the ‘structure’ that underlie complex situations, and for discerning high from low leverage change’’ (Senge, 2007). Systems thinking approach in the organization science Contemporary supporters of the conception of systems thinking in organization science (Sterman, 2000; Haines, 1998; Richmond, 2001; Gharajedaghi, 2006) created a row of methods and means to develop the systems thinking principles in management. Three aspects are important for implementation of systems thinking approach in the organization: 1. ‘‘Awareness of systems‘‘. It should be noted that systems thinking theories are widely spread but they are not universally known and applied in management, since they require a deeper understanding of systems philosophy. How is it possible to learn thinking systemic? Ossimitz (2000) answers this question and states that one needs to start from ‘‘awareness of systems’’ – a conscious perception and philosophy of systems. Learning the systems methodology is very much like learning to play chess. The rules are relatively simple, but proficiency comes only with practice’’ (Gharajedaghi, 2006). 2. An attitude towards the organization as an open socio-cultural system. Creators of the systems methodology (Forrester, 1975; Ackoff, 1999; Senge, 1990, 2007) treat organizations as open socio-cultural systems that are capable of self-organization. Why is it important to treat the organization as a system in this age of changes (Palaima, 2010)?. The socio-cultural systems are characterized by dynamic complexity that ‘‘arises from the interactions of the agents over time‘‘(Sterman, 2000). Increasing complexity of the world requires new tools to interpret patterns and events in the organizations. Systems j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 53 thinking is a tool which helps to understand complexity and to see an order in chaos, to coordinate interrelations and understand choice possibilities. 3. The new role of leader as a constructor of the organization. The systems approach towards the organization conceptually changes the leader’s role in the organization. Theorist of systems thinking stress a new role of the leader as the architect, constructor or business designer in the organization (Vickers, 1970). Gharajedaghi (2006) gives a new philosophical sense to leadership by managing complexity: ‘‘The best way to understand the system is to construct it, to get a handle on emergent properties, . . . we need to understand the processes that produce them, . . . controlling, influencing, and appreciating the parameters affecting the system’’s existence’’. Kets de Vries (2001, 2004) claims that the leader performs two roles in the organization: charismatic and architectural. An efficient work requires both roles. When a charismatic leader inspires his followers to seek a vision, a leader-architect plans the whole politics, strategy and structure of the organization. ‘‘A manager needs multi systematic insight . . . a position of a manager-meta theorist or methodologist, only then a managed system can be consciously restructured by transforming the old order to the new one’’ (Kvedaravičius, 2006). Senge (2007) also accentuates the leader’s role as a constructor of the organization. In his recent article Senge (2007) describes new roles, skills for developing high-performing organization: ‘‘seeing interrelationships’’, ‘‘moving beyond blame’’, ‘‘distinguishing detail complexity from dynamic complexity’’, ‘‘focusing on areas of high leverage’’, ‘‘avoiding symptomatic solutions’’. Haines (1998) and Nadler et al. (1992) call systems thinking a platform for organization performance. ‘‘Every organization is ideally created to achieve certain results. If results are worse than expected then the design must be changed. This means changing structures, operational processes, information flow, interrelations in a way to meet the new needs’’ (Boland et al., 2006). Forrester (1975) emphasizes a fundamental difference between an enterprise operator and an enterprise designer . . . one is the airplane designer and the other is the airplane pilot. The designer creates an airplane that the ordinary pilot can fly successfully. Management education has tended to train operators of corporations, but . . . in the future will successful corporations rely on enterprise designers’’. If we want to artificially influence the system rather than to let it develop naturally, then we need to see and understand it systematically: separate processes, structure and material (Kvedaravicius, 2006). Many managers orient themselves to a maintenance of the system functioning and let the system live naturally, their task is to maintain the existing order. Specialization, lack of time, inability to develop a holistic perspective and traditional ways of thinking are reasons of this fragmentation. Current status of the theoretical and empirical investigation Literature linking organization performance and systems thinking is thematically widely developed but usually limits itself to a pragmatic or a model level (Ellis et al., 1995; Senge, 1990, 2007; Srinivas, 1995). Many authors emphasize the importance and relevance of Systems thinking in the organization management, however, theories are difficult to be summarized, since they are based on different attitudes to both systems thinking and meaning of organization performance. Although the attitudes of the authors of systems thinking are conceptually similar, they are difficult to compare because there is no unanimous methodological basis for comparing these attitudes. Different authors emphasize the importance of different factors, highlight different aspects, and use different terms for defining the role of the leader in the organization as a system (‘‘architect’’, ‘‘designer’’, ‘‘methodologist’’, ‘‘constructor’’). Despite a substantial amount of research (Kets de Vries, 2001, 2004; Mintzberg, 2001; Drucker, 2004; Finkelstein, 2004; Rosete and Ciarrochi, 2005), there is still much uncertainty about which competencies are required to be an effective leader and how is systems thinking related to organization performance. Boyatzis and Goleman (2007) defined system thinking as a cognitive intelligence competence – an ability to think or analyze information and situations that leads to or j j PAGE 54 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 causes effective or superior performance. Different authors or studies (Rosete and Ciarrochi, 2005; Spencer and Spencer, 1993; Kotter and John, 1999; Goleman, 1998, 2000) tend to include abilities from three clusters in a set of competencies that could cause or predict outstanding leader performance: 1. Cognitive competencies, such as systems thinking, pattern recognition. 2. Emotional intelligence competencies, including self-awareness and self-management competencies. 3. Social intelligence competencies, including social awareness and relationship management. Although systems thinking is treated as a very valuable managerial competence, it has not been investigated enough in the context of organization performance. Much has been written about the relationship between emotional and social intelligence and leadership/organization performance (Kets de Vries, 2004), however the role of systems thinking in management is not empirically disclosed (Ellis et al., 1995). There are few empirical studies of systems thinking while ‘‘theoretical and didactic reflections to develop systems thinking are on the whole difficult to find’’ (Ossmitz, 1996). German scholars Dörner (1989), Ossimitz (1990, 1996) contributed most significantly to the research of this phenomena. The research of Palaima (2010) evaluated competence of systems thinking in the context of leadership. A conceptual model of relationships between intelligence competencies and leadership performance was developed in order to explore how the latter construct is influenced by the former construct. By modeling the intelligence competences effect on leadership performance all hypotheses about impact of systems thinking competencies (dynamic thinking, interactivity, systems logic, process orientation, continuous learning and understanding of mental models) on all three levels (personal, relationship, organizational/strategic) of leadership were accepted. However, systems thinking is most important and valuable in organizational/strategic dimension of leadership. This dimension of leadership performance is explained exceptionally by competencies of systems thinking. The model was tested empirically in two industries. Both in retail trade and manufacturing industries systems thinking has effect on leadership performance. However, in manufacturing industry the model has more explanatory power and effect of systems thinking on leadership performance is stronger (Palaima, 2010). The model of relationships between intelligence competencies and leadership performance (see Figure 2) shows how the intelligence competencies impact organization performance indirectly through construct of leadership performance, for example, the better quality of interaction between a leader and follower influences the leadership performance, the leadership performance has impact of positive organization climate, which affects organization performance. The contribution of this research paper is to design a conceptual framework directly integrating systems thinking competencies and organization performance as a catalyst of organization performance by managing complexity. Systems thinking as a catalyst of organization performance: empirical evidence This part of the paper focuses on research methodology and the hypothesized model of relationships between cognitive intelligence competencies and organization performance. The research methodology section includes the following: development of survey instrument, description of data collection methods, sampling procedure and characteristics of respondents. Finally, research conclusions, limitations and discussion are presented. This part ends with a summary of both the theoretical and practical value of this dissertation. This paper follows a quantitative research approach and the predetermined questionnaire rests on the two research instruments: emotional and social competency inventory, self assessment questionnaire (ESCI-U SAQ) (Boyatzis and Goleman, 2007), and organization j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 55 Figure 2 The impact of intelligence competencies on leadership/organization performance Emotional Intelligence Competencies Personal Leadership Social Intelligence Competencies Relationship Leadership Cognitive Intelligence Competencies Organizational/Strategic Leadership Organization Performance Leadership dimensions Leadership Performance Intelligence competencies Systems Thinking Source: Palaima and Skaržauskienė (2010) performance instrument (OPI) (Haines, 1998). Intelligence competencies were measured using five-point Likert scales, while leadership performance were assessed using ten-point Likert scales. The questionnaire ends with demographic questions. The total sample of 210 respondents consists of two subsamples. The sample was selected randomly using the list of respondents formed by Lithuanian Department of Statistics. The two-stage procedure, recommended by Bartlett et al. (2001) was employed to determine sample size of every subsample. Firstly, sample size of 100 was determined using sample size table and having in mind that the population size is over 10,000 and data is continuous. Secondly, having collected 100 responses, the worst variances were identified in every subsample. Finally, the size of every subsample was calculated using formula recommended by Bartlett et al. (2001). In this survey respondents mainly from middle-size and large Lithuanian enterprises were surveyed using web-based questionnaire. Large enterprises (number of employees more than 250) account for 18.4 percent of total sample. Data were analyzed using statistical software package SPSS. Firstly, exploratory factor analysis was employed to assess dimensionality of scales (Table II). Scales of cognitive intelligence competencies organization performance were factor-analyzed separately (Table III). Secondly, Table II Factor-analysis scores of cognitive intelligence competencies j Clusters Scales Systems thinking as cognitive intelligence competencies Interactivity Systems logic Process orientation Understanding of mental models Continuous learning Dynamic thinking j PAGE 56 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 % A 6.19 5.45 3.99 3.94 3.67 3.25 0.683 0.633 0.545 0.605 0.506 0.353 Table III Factor-analysis scores of organization performance Organization performance International effectiveness Mastering strategic communications Positioning the organization Collaboration Organizing and designing Reinventing strategic planning Scanning the global environment Leading change Managing alliances Managing people processes Integrating business processes Networking Building effective teams L % a 0.818 0.813 0.777 0.758 0.749 0.707 0.619 0.662 0.602 0.624 0.620 0.609 0.530 17.75 0.84 Notes: L – factor loading; % – percentage of variance explained; a – Cronbach a; KMO (Kaiser-Meyer-Olkin measure of sampling adequacy) ¼ 0.68 relationships between variables were explored using Spearman’s correlation. Thirdly, multiple linear regression was run to test the hypothesized model of relationships. Finally, one-way ANOVA was employed to test the influence of intelligence competence level on mean of organization performance. The impact of systems thinking competencies on organization performance The research found out that systems thinking competencies have effect on organization performance. Multiple linear regression demonstrated that cognitive intelligence competencies explain 32 percent of organization results (adjusted R 2¼0.32). Process orientation (b ¼ 0.37, p ¼ 0.00; see Figure 3) and systems logic(b ¼ 0.22, p ¼ 0.00; see Figure 3) have the strongest effect on organization performance, while understanding of mental models (b ¼ 0.20, p ¼ 0.00; see Figure 3) and dynamic thinking (b ¼ 0.19, p ¼ 0.00; see Figure 3) are less strong antecedents (see Figure 4). The lowermost effect on organization performance have continuous learning (b ¼ 0.16, p ¼ 0.00; see Figure 3) and interactivity (b ¼ 0.16, p ¼ 0.00; see Figure 3). One-way ANOVA was employed to test the influence of organization performance level on mean of Systems thinking competencies. The results demonstrated that systems thinking competencies increase when level of organization performance increases and therefore there exists linear trend relationship (F ¼ 8.23, df ¼ 1, p ¼ 0.00). Multiple comparisons of means using Hochberg GT2 method (see Table IV) revealed that there exist statistically significant differences of systems thinking competencies between the following levels of organization performance: first and third, second and third. Correlation analysis demonstrated that the strongest relationship exists between systems thinking competencies and influence and change initiation. It can be concluded that the ability to initiate and realize changes are positively associated with the ability to see processes, understand systems logic and to overcome traditional limits of thinking. There exist positive correlations between competencies of systems thinking and the following competencies of emotional and social intelligence: empathy, emotional self-understanding and self-control, stress management, flexibility and tolerance. Development of these emotional and social competencies will result in improvement of cognitive intelligence competence. Conclusions This paper evaluated competence of systems thinking in the context of organization performance. A conceptual model of relationships between intelligence competencies and j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 57 Figure 3 Relationship between different intelligence comptencies Emotional intelligence competencies 0.265 Emotional selfawareness and selfcontrol Empathy 0.155 Systems thinking competencies Cognitive intelligence competencies 0.270 Optimism 0.172 Stress management Flexibility and tolerance Dynamic thinking 0.211 Interactivity Social intelligence competencies 0.233 0.290 System logic Conflict management Process orientation Continuous learning Understanding of mental models 0.267 Communication 0.184 Influence and change management 0.260 Trust Figure 4 The impact of systems thinking competencies on organization performance Understanding of mental models 0.20 H6 Competencies of Systems thinking 0.16 Continuous learning H5 0.37 Process orientation H4 0.22 Systems logic H3 0.16 Interactivity H2 0.19 Dynamic thinking j j PAGE 58 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 H1 Organization performance Table IV The increase of systems thinking competencies by different levels of organization performance Levels of organizational performance n 1 group 1. (OLR # 7) 2. (7 , OLR # 8) 3. (OLR . 8) p 6 44 48 3.5397 3.6834 0.393 2 group 3.6834 3.8720 0.176 Note: Hochberg GT2 method organization performance was developed in order to explore how the latter construct is influenced by the former construct. Objective criteria are absent to measure organization performance. Organization performance assessment can be shown as a chain of various determinant variables. It depends on the subject of research and values of the researcher. The assessment instrument measures the outcome, current performance of organization, i.e. the degree of achievement of particular organizational performance indicators. The research has demonstrated that organization performance could be explained by competencies of systems thinking such as process orientation, interactivity, systems logic, dynamic thinking etc. Theoretical insights that systems thinking is important dealing with performance and effectiveness of an organization were confirmed empirically. One-way ANOVA was employed to test the influence of organization performance level on mean of cognitive intelligence competence. It was found that mean of cognitive intelligence competence significantly differs across the levels of organization performance. When level of organization performance increases, mean of cognitive intelligence competence also increases. It is possible to maintain that Lithuanian executives insufficiently uses the potential of systems thinking because more than half of respondents belong to a lower average group. It is possible to make an assumption that demand of competence of systems thinking is influenced by peculiarities of management in Lithuania. Possibly systems thinking competence development is impacted by work experience or nature of managerial activity. However, these assumptions require further empirical research. Following the result of empirical research, it can be concluded that development of systems thinking competence and retention of cognitive abilities can significantly improve both efficiency of leadership and efficiency of organization. In the first part of the research paper it was argued that competencies of a leader should be revised continuously therefore it is important not only to make list of competencies, but also to identify mix and schema of competencies and to orient towards ‘‘ideal leader’’. According to the insights of theory analysis and the results of empirical research, it can be concluded that it is possible to develop systems thinking in the following ways: B learning and improving knowledge of systems philosophy; B through work experience and influence of work specific; B formally and informally during learning process; and B developing other social and emotional competencies, which have positive relationship with systems thinking. The results of empirical research revealed the importance of systems thinking as a competence that is based on the causal relationship between systems thinking and leadership/organization performance. The formulation of relevant leadership conception was based on the assumption that intelligence competence helps to divide on paradigms of leadership and management. The research proved that systems thinking as a competence is as important as are social and emotional intelligence competencies. Moreover, systems thinking is at utmost determinant importance when dealing with solution of conceptual strategic problems in organization, managing processes and people, networking, j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 59 organizing and designing. Systems thinking could be valued as a competence which allows to identify more apparently differences between a leader and a manager. Practical implications/recommendations The ability to manage the organization as a system discloses the practical value of systems thinking. Two dimensions are essential in applying systems thinking approach in organization management: 1. Conceptual level means to understand the essence of systems thinking. 2. Operational level means to become a practitioner of systems thinking: to start treating problems in the organization as the problems of the system and start looking for system-integrated solutions. Systems thinking principles can become a valuable foundation for managing a high-performing organization. The possibilities provided by systems thinking include seeing interrelations, understanding system forces that form changes, identify sources of resistance, creating a perspective, influencing and changing. The systems theory provides the possibility of having a look at the organization from a wider perspective. Such an attitude allows generating totally different results. The typical action in traditional management is first to analyze one object and then move on to the other. Usually one department solves its internal problems without integrating a solution with other departments. The principles of systems thinking emphasize the interrelations and the effect of the feedback loop. ‘‘An effective management orients to a structure-determined behavior and events rather than mechanically reacting to past events. The structure determines the behavior that determines events’’ (Forrester, 1975). The structure of business systems determines the performance of its activity, a control of the system requires understanding that system. Summing up the results of empirical research it can be concluded that systems thinking has a number of far-reaching benefits in the following areas: j B Scanning the global environment, managing alliances. Taking an organization-wide, proactive approach to a changing global world. An the organization is a complicated ‘‘open system’’ it is necessary to consider the environmental influence to the system and the system influence the environment while planning changes, making decisions and solving problems inside the organization. Process orientation and systems logic develop ability to see, differentiate, manage, optimize and classify processes and to identify barriers of growth. B Positioning the organization. A better framework for diagramming, mapping, diagnosing, and analyzing any system – department, unit, organization, or otherwise. It improves problem solving and decision making for that system. B Organizing and designing. A new and better way to create strategies, and find leverage points – keeping the outcome/vision/goal in mind at all times. B Reinventing strategic planning. Treatment of an organization as a system gives possibility to decide on priorities and to concentrate attention to strategic aims and resources of utmost importance. Holistic understanding of system behavior instead of observation of separate events may result in radical change of attitude towards decision making. B Leading change. System approach towards the organization helps to understand systematic forces, which contributes to organizational changes. The possibilities provided by understanding of systems logic include seeing interrelations, understanding system forces that form changes, identify sources of resistance, creating a perspective, influencing and changing. B Integrating business processes. The essence of systems thinking is to see interrelations but not linear cause-effect relations, to see processes of changes but not static states (Senge, 2007). Process orientation and systems logic develop ability to see, differentiate, manage, optimize and classify processes and to identify barriers of growth. Holistic approach helps to integrate new ideas to a working system. j PAGE 60 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 B Networking. This frame work allows to detect patterns and relationships between systems and their levels, leading to better networking and problem solving. B Managing people processes, building effective teams. Focusing everyone in the organization on the same overall framework. Systems thinking is a way to engage teams and people in a deeper thought process, analysis, and definition of root causes, thus leading to longer-lasting results (Haines, 1998) and focusing everyone in the organization on the same overall framework. The model can be used practically and therefore it has practical value. Models of competencies are not prescription to warranted efficiency of leadership. However, they help to represent experience, knowledge and learned lessons, which can be useful milestones of organizational development. The model along with the conception of competence development can be used practically in the following ways: B as a tool which helps to evaluate and develop intelligence competencies relating them to organization performance; B as a tool of analysis which helps to identify ‘‘schemes’’, ‘‘combination’’ of competencies and orientation towards ‘‘ideal leader’’; B as a tool in leadership assessment center to identify level or leadership and to build an individual competence development plan; B as a key conception for creating managerial competencies development programs oriented towards organizational efficiency improvement; and B as a self-analysis tool of a leader for better self-knowledge. References Ackoff, R.L. (1999), Ackoff’s Best: His Classic Writings on Management, Jonn Wiley & Sons, New York, NY. Bartlett, J.E., Kotrlik, J.W. and Higgins, Ch.C. (2001), ‘‘Organizational research: determining appropriate sample size in survey research’’, Information Technology, Learning and Performance Journal, Vol. 19 No. 1, pp. 43-50. Beer, S. (1975), Brain of the Firm, Penguin Press, Harmondsworth. Bertalanffy, L.V. (1969), General System Theory, Braziller, New York, NY. Boland, R., Jelinek, M. and Romme, G. (2006), ‘‘Organization studies as a science of design’’, Organization Studies, Vol. 28, pp. 1269-71. Boyatzis, R.E. and Goleman, D. (2007), Emotional and Social Competency Inventory, Hay Group Transforming Learning, Boston, MA. Capra, F. (2002), The Hidden Connections, Doubleday, New York, NY. Dörner, D. (1989), Die Logik des Misslingens. Strategisches Denken in komplexen Situationen, Reinbek, Rowohlt. Drucker, P. (2004), ‘‘What makes an effective executive’’, Harvard Business Review, June. Ellis, K., Gregory, A., Mears-Young, B.R. and Ragsdell, G. (1995), Critical Issues in Systems Theory and Practise, Plenum Press, New York, NY. Finkelstein, S. (2004), Why Smart Executives Fail, Penguin Books, New York, NY. Forrester, J.W. (1961), Industrial Dynamics, MIT Press, Cambridge, MA. Forrester, J.W. (1975), Collected Papers of Jay W. Forrester, Productivity Press, Norwalk, CT. Gharajedaghi, J. (2006), Systems Thinking: Managing Chaos and Complexity, Elsevier, San Diego, CA. Goleman, D. (1998), Working with Emotional Intelligence, Bantam, New York, NY. Goleman, D. (2000), ‘‘Leadership that gets results’’, Harvard Business Review, Vol. 78. j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 61 Goswami, A. (1993), The Self-aware Universe: How Consciousness Creates the Material World, Penguin Putnam, New York, NY. Haines, S.G. (1998), Systems Thinking and Learning, HRD Press, Amherst, MA. James, C.R. (2003), ‘‘Designing the learning organizations’’, Organizational Dynamics, Vol. 32, pp. 46-62. Kets de Vries, M.F.R. (2001), The Leadership Mystique, Pearson Education, London. Kets de Vries, M.F.R. (2004), ‘‘What makes the leader great?’’, Strategic Directions, Vol. 8, pp. 4-9. Kotter, J. and John, P. (1999), Kotter on what Leaders Really Do, Harward Business School Press, Boston, MA. Kvedaravičius, J. (2006), Organizaciju˛ vystimosi vadyba, Vytauto Didžiojo universitetas, Kaunas. Laszlo, E. (2002), The Systems View of the World, Hempton Press, Broadway. Mintzberg, H. (2001), ‘‘The yin and the yang of managing’’, Organizational Dynamics, Vol. 29, pp. 306-12. Nadler, D.A., Gerstein, M.S. and Shaw, R.B. (1992), Organizational Architecture: Designs for Changing Organizations, Jossey-Bass Publishers, San Francisco, CA. Ossimitz, G. (1990), Materialien zur Systemdynamik, HPT, Wien. Ossmitz, G. (1996), Stand und Perspektiven der Forschung zum systemischen Denken, Holder-Pichler, Tempsky, Wien. Ossimitz, G. (2000), Entwicklung systemischen Denkens, Profil, München. Palaima, S. (2010), ‘‘Systems thinking as a platform for leadership performance in a complex world’’, Baltic Journal of Management, MMRC2009. Richmond, B. (2001), ‘‘An introduction to systems thinking’’, The Systems Thinker, Vol. 8 No. 2. Rosete, D. and Ciarrochi, J. (2005), ‘‘Emotional intelligence and its relationship to workplace performance outcomes of leadership effectiveness’’, Leadership & Organization Development Journal, Vol. 26 No. 5, pp. 388-99. Schumpeter, J.A. (1947), ‘‘The creative response in economic history’’, Journal of Economic History, Vol. 7 No. 2, pp. 149-59. Senge, P. (1990), The Fifth Discipline, Currency Doubleday, New York, NY. Senge, P. (2007), ‘‘Collaborating for systemic change’’, MIT Sloan Management Review, Vol. 48 No. 2, pp. 44-53. Spencer, L.M. and Spencer, S.J. (1993), Competencies at Work: Models of Superior Performance, John Wiley & Sons, New York, NY. Spruill, N., Kenney, C. and Kaplan, L. (2003), ‘‘Community development and systems thinking: theory and practice’’, National Civic Review, Vol. 90, pp. 105-16. Srinivas, K.M. (1995), ‘‘Globalization of business and the third world’’, Journal of Management Development, Vol. 14 No. 3, pp. 26-49. Stacey, R. (1993), The Chaos Frontier, Redwood Press Limited, London. Sterman, J.D. (2000), Business Dynamics: Systems Thinking and Modelling for a Complex World, Irwin McGraw-Hill, Boston, MA. Stout, L. (2001), Leadership: From Mistery to Mastery, Dobraja Kniga, Ryga. Tetenbaum, T.J. (1998), ‘‘Shifting paradigms: from Newton to chaos’’, Organizational Dynamics, Spring, pp. 21-34. Tvede, L. (1997), Business Cycles, Harwood Academic Publishers, Amsterdam. Warren, K. (2000), ‘‘The softer side of strategy dynamics’’, Business Strategy Review, Vol. 11 No. 1, pp. 45-58. Vickers, G. (1970), A Classification of Systems, Yearbook of the Society, Washington, DC. j j PAGE 62 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 Further reading Argyris, C. and Schon, D. (1996), Organizational Learning, Addison-Wesley, Reading, MA. Boyatzis, R.E. (2007), ‘‘Competencies in the 21st century’’, Journal of Management Development, Vol. 27 No. 1, pp. 7-11. Cherniss, C. (2000), ‘‘Emotional intelligence: what it is and why it matters’’, paper presented at the Annual Meeting of the Society for Industrial and Organizational Psychology, New Orleans, LA. Checkland, P. (1981), Systems Thinking, Systems Practise, Chichester, Wiley. Churchmann, C.W. (1979), The System Approach and its Enemies, Basic Books, New York, NY. Csikszentmihalyi, M. (2003), Good Business. Leadership, Flow, and The Making Meaning, Penguin Books, New York, NY. Daum, J. (2001), ‘‘How systems thinking/systems dynamics helps to identify limits to growth to boost innovation value’’, available at: www.juergendaum.com/news Delahoussaye, M. (1999), ‘‘Interview with Richard Boyatzis’’, Journal of Operations Management, Vol. 23 No. 2, pp. 371-88. Depree, M. (2004), Leadership Is an Art, Dell Publishing, Portland, OR. Fesit, G.J. and Barron, F. (1996), ‘‘Emotional intelligence and academic intelligence in career and life success’’, paper presented at the Annual Convention of the American Psychological Society, San Francisco, CA. Field, A. (2006), Discovering Statistics Using SPSS, Sage Publications, London, p. 779. Fry, L.W. (2003), ‘‘Toward a theory of spiritual leadership’’, The Leadership Quarterly, Vol. 14 No. 6, pp. 693-727. Funke, J. (1989), Komplexes Problemlösen, Springer, Berlin. Glass, L. and Mackey, M.C. (1988), From Clocks to Chaos, Princeton University Press, Princeton, NJ. Gomez, P. and Probst, G.B.J. (1987), Vernetztes Denken im Management, Die Orientierung, Bern. Jokinen, T. (2005), ‘‘Global leadership competencies: a review and discussion’’, European Industrial Training, Vol. 29 No. 3. Makridakis, S., Hogarth, R. and Gaba, A. (2009), Dance with Chance, One World Publications, Oxford. Midgley, G. (2000), Systemic Intervention: Philosophy, Methodology, and Practise, Plenum Publishers, New York, NY. Netemeyer, R.G., Williams, O.B. and Subhash, S. (2003), Scaling Procedures: Issues and Applications, Sage Publications, Thousand Oaks, CA, p. 206. Nickols, F. (2000), ‘‘Don’t design your company’s performance appraisal system, scrap it!’’, People Today, October. Prati, L.M. (2004), ‘‘Emotional intelligence as a fascilitator of the emotional labor process’’, Doctoral dissertation, Florida State University, Tallahassee, FL. Prewitt, V. (2004), ‘‘Leadership development’’, Leadership & Organization Development Journal, Vol. 24 No. 1, pp. 50-5. Rapoport, A. (1986), General System Theory: Essential Concepts and Applications, Abacus Press, Tunbridge Wells. Schumpeter, J.A. (1950), ‘‘The creative response in economic history’’, Journal of Economic History, Vol. 7 No. 2, pp. 149-59. Skaržauskiene˛, A. (2009), ‘‘Sisteminis me˛stymas kaip kompetencija lyderyste˛s paradigmoje’’, doctoral dissertation, ISM, Vilnius. Sokol, J. (2001), ‘‘Idealaus vadybininko portretas’’, Vadovo pasaulis, Vol. 9, pp. 4-10. Warren, K. (2002), Competitive Strategy Dynamics, John Wiley & Sons, Chichester. Zohar, D. and Marshall, I. (2004), Spiritual Capital, Clays, London. j j VOL. 14 NO. 4 2010 MEASURING BUSINESS EXCELLENCE PAGE 63 About the author Aelita Skaržauskienė provides services in organizational needs assessment/evaluation and training of employees in mid to large size Lithuanian and international companies as an independent leadership development consultant. In her work Aelita Skaržauskienė applies both knowledge of management and modern leadership-correlated disciplines such as psychology and philosophy. She received a doctoral degree at ISM, University of Management and Economics in Kaunas, Lithuania. Her research field is systems thinking as a competence in the leadership paradigm. Aelita Skaržauskienė can be contacted at: aelita@mruni.lt To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints j j PAGE 64 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 4 2010 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 9 780977 978618 Reinventing strategic Planning The Systems Thinking Approach® Stephen Haines with James McKinlay Systems Thinking Press™ Systems Thinking Press San Diego, CA Copyright © 2007 by Systems Thinking Press Systems Thinking Press is a division of the Haines Centre for Strategic Management All rights reserved. Printed in the United States of America Haines Centre Book Series on Business Excellence The Haines Centre Book Series on Business Excellence is based on the Systems Thinking Approach® to Strategic Management; Our Only Business. It is based on 50+ years of Scientific Research on Systems Thinking, the “Natural Way the World Works”. The Haines Centre does not do original research, but are world-class experts on the interpretation and translation of this Best Practices Research of others into the simple, common sense, and pratical applications that come from Systems Thinking. The framework for this Series is built on the Malcolm Baldridge National Quality Award: Criteria for Performance Excellence as analyzed and extended by the Haines Centre into the 21st Century Systems Thinking Organizing Framework of Seven Hexagons of Organization Functioning. It includes the following books – and continues to grow: Hexagon 1: Strategic and Systems Thinking (The Winning Formula) Hexagon 2: Reinventing Strategic Planning (Strategic Management: The Systems Thinking Approach®) Hexagon #3: Leading Strategic and Cultural Change (The Systems Thinking Approach®) Hexagon #6: Enhancing Your Strategic IQ™ (Winning Strategies: From A to Z) Publisher’s Cataloging-in-Publication Haines, Stephen G. Reinventing strategic planning / Stephen Haines ; with James McKinlay. p. cm. Includes bibliographical references and index. LCCN 2007905125 ISBN-13: 978-0-9779786-1-8 ISBN-10: 0-9779786-1-3 1. Strategic planning. 2. System theory. I. McKinlay, James, MHRD. II. Title HD30.28.H33345 2007 658.4’012 QBI07-600213  This book contains information from reliable and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable efforts have been made to publish reliable data and information, but the authors and the publisher cannot assume responsibility for the validity of all materials or for the consequences of their use. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming, and recording, or by any information storage or retrieval system, without prior permission in writing from the publisher. The consent of Systems Thinking Press does not extend to copying for general distribution, for promotion, for creating new works, or for resale. Specific permission must be obtained in writing from Systems Thinking Press for such copying. Direct all inquiries to Systems Thinking Press, 1420 Monitor Road, San Diego, California 92110. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation, without intent to infringe. Visit Systems Thinking Press at www.SystemsThinkingPress.com Cover Design by Jennifer Des Rosiers Designed and Edited by LJ Davis Testimonials “I have used the strategic planning and change management methodologies of the Haines Centre for Strategic Management since the early 1990’s and applied them in different organizational settings and cultures, in both Australia and Canada. The methodology is easy to understand and apply. It works well and provides for positive and engaging results for staff – which is CRITICAL to successful implementation of the plan.” Dr. Vicki Williamson, Dean, University of Saskatchewan Library I had the opportunity to work with Steve Haines utilizing the Systems Thinking Approach® for over 10 years. It is clear, based upon actual experience and results, that this approach gives an organization a great opportunity to achieve its desired mission, if the organization commits itself and continuously follows through with the systems process. We had periods where we had real commitment and the results were outstanding. We also had periods when the commitment wavered, and our results were lacking. If your idea of Strategic Planning is to hire a consultant to tell you what you need to do, this is not for you. However, if you are looking for a guide and a process that will help you and your entire organization to collectively develop that vision and develop a path to achieve it, I highly recommend Steve and his approach. Fred Holliger, Former Chairman and CEO, Giant Industries, Inc. A Systems approach to Strategic Planning and Management was one of the most important decisions we made that transformed our performance from marginal to best in class. This book provides you with a step-by-step approach to applying systems thinking to strategic planning and the potential of transforming your company in the same way it did ours! A must read for CEOs and Executives! Richard Condit, Senior Vice President and CAO, Sundt Corporation The introduction of the Systems Thinking Approach® with Strategic Planning has changed the landscape within our organization. The system is as natural to us as our daily jobs and has become an integral part of our culture. ALL staff has fully embraced our plan and the system by which we get there. Lori White, Executive VP, Valley Credit Union, San Jose, CA Dedication To all my clients who have helped refine this Systems Thinking Approach® with trial by fire in the practical business world. I learn as much from you as you do from me. Together, we make a difference in this world… To my co-founder and Canadian Managing Partner, Jim McKinlay of British Columbia, who was the first person willing to try out my radically different ideas on Reinventing Strategic Planning into Strategic Management (Planning and Change). At the time, Jim was Staff Development Director for the Province of Saskatchewan and was willing to pilot this process. He soon became my Partner and close friend and has been involved with the evolution and refinement of this reinventing model ever since. Stephen Haines Founder, Haines Centre for Strategic Management San Diego, California October 2007 To Colleen, my wife of many years. As my best friend, and partner in business, life, and love, this life journey would not have been nearly as much fun and probably not nearly as successful. Thanks for every day! James McKinlay Co-founder, Haines Centre for Strategic Management White Rock, British Columbia October 2007 Preface Welcome to Reinventing Strategic Planning: The Systems Thinking Approach®– our revolutionary new approach to designing, building, and sustaining customer-focused high-performance organizations that thrive in the dynamically changing 21st century. Reinventing Strategic Planning: The Systems Thinking Approach® is the second book in the four-part Business Excellence Series produced by Systems Thinking Press, the publishing division of the Haines Centre for Strategic Management. Built upon the Baldridge criteria for high-performing organizations, the Business Excellence Series provides thoughtprovoking applications and innovative insights based on over 50 years of Strategic Thinking research and best practices as applied to strategic management. The Haines Centre is the world leader in interpreting and translating systems thinking research and applications to strategic management – providing you with the best universal and integrated organizing framework and language available today to create superior results and business excellence. In the mid-1990s, Stephen Haines was at the Annual Conference of what was then the International Planning Forum in New York City. The Planning Forum, as many of you know, was the premier association in western society focused on improving the practice of Strategic Planning. While this book claims to have “reinvented” strategic planning, Steve had wondered if that claim was just so much hype. However, after attending this conference, Steve was more convinced than ever that we were actually inventing a new paradigm for strategic planning. We have Reinvented Strategic Planning into Strategic Management (Planning-People-Leadership-Change) – a better way for managing strategically day to day, month to month, and year to year. You can’t separate planning from change or from management and leadership, as planning is the first function of management. The only reason to do planning is to change something for the better. Planning is actually planning for change. Unfortunately, this “state-of-the-art” conference featured numerous well-known concurrent session speakers, each armed with color PowerPoint slides, big screens, darkened rooms, and the latest jargon piece of strategic planning. BORING! Typically, when the lights were raised at the end of the one-hour of one-way passive communications, and questions finally were invited, it was too late. People rarely had much to ask about or comment on. Instead, many left the sessions early prior to this late attempt by the speakers to be “participative” and meet their “customers” needs. Having come to the meetings to learn and, in effect, to change, these speakers had no idea how to stimulate learning or help their participants’ effect change in their organizations. Is it any wonder the International Planning Forum went bankrupt in the late 1990s? We thought by 2007 their old narrow way of thinking about strategic planning was gone along with the International Planning Forum, the trade association for the planning field. However, a few months ago Steve was invited to meet with the CEO and Executive VP of a medium-size, yet well-known company. They wanted to discuss how he could help them with strategic planning. It took him all of five minutes to uncover the fact that they had been spending many days and hours defining and analyzing their current state (the old SWOT Assessment). However, they were unhappy with their process, so he quickly pointed out that they had no future-oriented vision (or purpose/goals). You’d have thought we’d discovered the atom, such was their immediate recognition of what they had been doing wrong; focusing on today, not the future. Sadly, this old way of planning by starting with today and extrapolating forward is also still alive and well today. Part of our reason for writing this book is to help stamp out this outmoded way of planning, which no longer works in today’s dynamic, changing world. Instead, our research found three main premises that form the foundation for this book and our consulting practices. Our first main premise is that there is no “Holy Grail” to be found in strategic management, only an understanding that planning and change are the responsibility of senior management. In fact, it is now their primary job in today’s world of constant change. Excellent organizations don’t just have a budgeting cycle each year; they have a “strategic management” cycle led by senior management as they work on the organization, rather than just in the organization. As planning is just the first function of management, and strategic planning is just the highest order of planning and the purview of senior management, then every organization has three basic Strategic Management goals: Goal 1 Goal 2 Goal 3 Develop the strategic, business, and annual plans and documents. Ensure their successful rollout, implementation, and change. Build and sustain high performance over the long term. Our second main premise to planning and implementation is a basic truism that people support what they help create, thus requiring extensive interactions, dialogue, debate, change, facilitation, and participation with all the key organizational stakeholders (and especially customers), if we care about implementation and Goals 2 and 3. Remember, it is not just about the strategic planning document! Our third main premise in writing this book, and in our consulting practice with CEOs and organizations, is the need for a systems methodology and integrated organizing framework around which to build the strategic planning and strategic change management process. Hence, our Systems Thinking Approach® to Strategic Management explained in Chapter 3. In it, our number one systems question to answer is “What is your purpose, goal, end product, or, in planning terms, vision.” Our Systems Thinking Approach® is a revolutionary concept, introducing a disciplined and integrated organizing framework that can be applied, not only to strategic planning and change management within organizations, but also to planning and change within government, society, and in your own personal life. This approach has dramatic implications for the way we plan and achieve change. The Systems Thinking Approach® is the best framework and language of Strategic Management for the 21st century. Needless to say, that medium-size company mentioned earlier now has reinvented its strategic planning process with our help into a continuous three-year Business Plan and yearly Strategic Management System and Cycle. They are well on the way to effective implementation of some badly needed and long delayed strategies as a way to achieve their new vision. Unfortunately, we continue to find conferences, books, and companies similar in many ways to those described above. The same has been true in our extensive literature research of 14 different and popular strategic planning models. We continue to see that every one ii of the popular planning models in use is an analytic, left-to-right, piecemeal solution to a systems or organization-wide problem. You see, organizations are systems, no matter how good or how poorly they function. Peter Senge, author of the 1990s book, The Fifth Discipline, was right. His fifth discipline was systems thinking – and as a Western business society we have yet to understand, embrace, and develop skills in this type of systems or strategic thinking. While the awareness of systems thinking is growing, it seems hard to grasp the basic concepts and specific tools. This is not surprising, since most of us were brought up and educated in scientific (analytic) disciplines such as engineering (Steve), law, accounting, computers, medicine, etc. Out of 14 models we researched to develop our Ten-Step Reinventing Strategic Planning into Strategic Management (Planning and Change) model, there were four key steps no one else had addressed: our Parallel Involvement Process, our Smart Start: Plan-toImplement step, our In-Depth Change Management step, and our Annual Strategic Review and Update. In addition, only four models had a beginning “educating and organizing” step we call “Smart Start: Plan-to-Plan,” and only 2 out of 14 had a measurement step (our Step 3, Key Success Measures). Worse yet, only 4 of 14 tied strategic planning to business unit planning and only 7 of 14 further tied it to annual planning and budgets. Again, these other popular models are analytic approaches to the systems problem of getting the entire organization to link and function together, working (or operating) synergistically in support of the customer. And we wonder why Henry Mintzberg, one of the most respected professors in the field of strategic management, published a book on The Rise and Fall of Strategic Planning (Prentice Hall, 2000). Even worse, Mintzberg also later published a brilliant critique of ten schools of strategic planning entitled Strategy Safari (Free Press, 2005). We say “even worse” because when the most astute person in the strategic management field never even mentions systems thinking or our approach as one of the ten, he shows himself to be bound by the world of traditional analytic thinking (not systems thinking). He even says, “We are blind people and strategy formulation is our elephant” from the old story of ten people touching different parts of the elephant in order to identify it and coming to ten different answers, all of which were wrong (and also right from their limited perspective). His only concession to systems thinking in the book is that “the field of strategic management may itself be moving toward synthesis” vs. these ten different views. This book is, of course, all about the synthesis of these ten models (and more) within the framework of systems thinking. Our experiences and observations of this field have clearly shown why planners are an endangered species, while at the same time, the amount of strategic planning in companies is increasing dramatically. Planners and their theories are obsolete despite the fact that the American Management Association (AMA) and the American Society for Training and Development (ASTD) still teach planning in this wrong left-to-right manner. The increasing rate of change in the business world has caused a corresponding increase in the rate of strategic planning as CEOs try to figure out ways to survive and thrive in iii this uncertain environment. However, much of the strategic planning currently in practice has been inadequate, causing what we term the “SPOTS Syndrome”: Strategic Plans On Top Shelves … gathering dust! We have reinvented the field of strategic planning into Strategic Management (Planning and Change) using our copyrighted Systems Thinking Approach® in this book. This new approach has achieved widespread acclaim for its better and more practical use on a daily, weekly, monthly, and yearly basis. Further, this is a book about carefully researched “best practices,” not only of a successful process on “how to” do strategic planning and strategic change, but also of the selection of successful strategies that give companies and organizations a competitive advantage over the long term. Yes, there are some right answers – just not singular, analytic ones – in today’s global, integrated, ever-changing world. We see that systems thinking is becoming the norm of strategic thinking and strategic management in this first decade of the 21st century. It is the natural way the world works and currently the best, most integrated organizing framework and language we have. Stephen Haines James McKinlay October 2007 “We don’t need to think more, we need to think differently!” -Albert Einstein iv About the Authors Stephen Haines Founder and CEO, Haines Centre for Strategic Management (CEO, Entrepreneur, Global Strategist, Facilitator, Systems Thinker) Stephen Haines is the Founder and CEO of the Haines Centre for Strategic Management® in San Diego, California, founded in 1990. He is internationally recognized as a world-class leader in the field of Strategic Management and Change. Steve has over 30 years of CEO level experience with over 300 CEOs in complex and diverse international situations. The Centre now has Partners, Principles, and Certified Business Consultants, with offices across the USA and Canada and over 20 different countries. Prior to founding the Centre, Steve was president and co-owner of University Associates Consulting and Training Services, a pioneer firm in the development of human resource practitioners and their organizations. He was the architect of its renewal before devoting full-time work in strategic management and change through the Centre. In addition, Steve was executive vice-president for the Imperial Corporation of America (ICA), a diversified $14 billion nationwide financial services firm. Prior to that, he was senior vice-president of Freddie Mac, a $32 billion United States financial institution. Steve has been a member of eight top management teams – both U.S. and International – with corporate responsibilities for all aspects of organizational functions, including planning, operations, marketing, PR, communications, finance, HR, training, and facilities. His career included executive positions at MCI, Exxon, Sunoco, and Marriott Corporations. Steve has completed his coursework for his doctorate in management from Temple University and an M.S.A. in organization development (minor in financial management) from George Washington University. He has a B.S. in engineering (minor in foreign affairs) from the prestigious and legendary leadership class of 1968 at the U.S. Naval Academy in Annapolis, MD. He is also a graduate of the Department of Defense Human Goals Institute. As a Naval Officer, he flew Navy jets, piloted ships, and served in Vietnam. Steve is the World Leader in Strategic Management using the Systems Thinking Approach®. His diverse background includes exposure to hundreds of firms and extensive “Best Practices” research. He has received numerous Who’s Who honors, written 15 books, over 50 articles, and developed 11 volumes of the Centre’s Tool Kits and Guides. He has taught over 80 different kinds of seminars and is in demand as an insightful and provocative keynote speaker at international conferences, with a special emphasis on CEO and Board issues. He is a premier Visage (formerly TEC – The Executive Committee) CEO group resource with over 80 seminars to his credit. He was also the co-leader of the prestigious North American Banff Centre for Management’s two-week senior executive “Strategy is Leadership” program. He has been on nine boards, including chairman of a credit union, and is on the national board of directors for the newly reformed Association for Strategic Planning. His interests include family, community service, sports, sailing, traveling with his wife Jayne, as well as photography, art, design, and his grandson Sebastian. James McKinlay Co-Founder and Canadian Managing Partner, Haines Centre for Strategic Management James McKinlay has provided consulting services to clients in government, business, and the community sectors since 1970. His concern for the communities he has lived in has been demonstrated by his service as board member, volunteer, or staff member for a wide variety of community based non-profit organizations. From 1977-1986, Jim held various positions as a Provincial Government Consultant for three different Ontario Government Ministries in the Hamilton, St. Catharine’s, and Toronto areas. In 1986, he moved to Regina, Saskatchewan as Senior Consultant for Organizational Change in the Staff Development Division of the Saskatchewan Public Service Commission. After three years, he was appointed Executive Director of the Staff Development Division. Here, he and his team were responsible for the design and delivery of corporate development and learning programs across the government, from senior executives to front-line supervisors. Jim played a key role in the development and operation of a very successful internal consulting service for departments across the government, which was regarded as a model by other provincial governments. In 1992, he and his family “followed their dreams” and moved to Canmore, Alberta, a small community nestled in the Rocky Mountains, just 20 kilometers from Banff. Jim, along with his wife Colleen and daughter Julie, built their dream home on a lot overlooking the Bow River. This move, along with the establishment of their own home-based consulting business, was a key component of their own Personal Life Plan. After fourteen years of “life in paradise,” Jim and Colleen relocated to White Rock, British Columbia in 2006, which provides them with another view of life in paradise along the Pacific Ocean. Jim now devotes his work to his own management consulting business, as one of a group of 30 Alliance Partners in the Haines Centre for Strategic Management. Jim currently serves as a member of the Global Executive Committee, the North American Executive Team, as well as Canadian Managing Partner. Jim is a graduate of the University of Waterloo, receiving a degree in Honours Recreation (1973), the first degree program of its kind in Recreation Studies in Canada. He earned his Masters of Human Resource Development (MHRD) in 1989 through University Associates in San Diego, California. He has served as a faculty member at the Banff Centre for Management (1996-2001), an internationally recognized executive development centre, on several of their leadership and executive management development programs. Jim brings over 30 years of practical experience in the areas of strategic management, leadership, organizational development, and human resource management. He has been highly acclaimed for his work in public consultations, conference keynote presentations, and more than 700 consulting projects with clients from the private sector, the public sector, and not-for-profit groups. Jim is also one of three co-authors of Enterprise Wide Change: Superior Results through Systems Thinking (Pfeiffer, 2004), along with Stephen Haines and Gail Aller-Stead, the Centre’s Partner in Toronto, Ontario. vi Acknowledgements Any time a book is written, there are many people involved in its production. In this case, there are two groups of people to acknowledge who have had no involvement in the actual writing of this book but who have been absolutely essential to its formulation. First, we would like to acknowledge all of our Global Partners at the Haines Centre for Strategic Management who have also used this Systems Thinking Approach® over the last 16 years. They have helped to refine this book over and over again as they struggled to learn and perfect their consulting practices. In particular, our regional managing partners around the world have been key to honing these concepts. They include Stephen Lin in Singapore, Oscar Castello in South America, Allan Bandt in Australia, Coetzee Badenhorst in Africa, and Chander Mohan in Dubai In the U.S., our late partner, Charlie Hoffman of Tucson, Arizona, had been deeply introspective regarding our work and model over the years. As a result, many of the latest and best new ideas in the book are a result of the discussions we had while working with Sundt Corp. of Tucson and Giant Industries of Phoenix. However, since “transparency” is part of the Centre’s values, we must admit that most of these good ideas actually showed up about 10 p.m. in a hotel’s hot tub while discussing the events of the day. Secondly, we would like to thank our many strategic planning clients over the past 10 years who have shown a tremendous willingness to experiment with infinite variations in planning and change – to boldly go where they had not gone before – thus teaching us far more than can possibly be measured. Their practical planning and implementation of solutions to problems that we grappled with together were the genesis for the many, many linkages in our systems thinking approach to strategic management. We also jointly discovered most of our “Fail-Safe Mechanisms for Implementation Success” that are detailed throughout this book. They have helped to make this the most practical, common sense “how-to” book on strategic planning and strategic change management possible. Stephen Haines James McKinlay Reinventing Strategic Planning Is Strategic Thinking, Planning, and Change Disciplined & Focused Thinking OR “Empty Rhetoric?” Arrogance And Reason Writers’ Arrogance – The ABCs Paradigm Shift It would be pure arrogance to presume that we – or any one individual – could set down the one, complete, perfect method for reinventing strategic planning and change management. Indeed, if there is anything in our Reinventing Strategic Management Model that comes close, it is the common logical, A, B, C, D, E systems framework of General Systems Theory. It is a new paradigm, a Systems Thinking Approach® to leading planning and change in an organization for the better in a strategic and holistic fashion. When we view the glut of management books, we believe that the only way to create a cohesive whole is by looking at everything we do within the framework of systems thinking. If you agree that this systems thinking framework is the key to planning and progress, then the most important thing to take away from our Reinventing Strategic Management Model is not its details. What’s most important is that it gives you a simple, yet comprehensive way to strategically plan and manage your entire organization as a system, using the A, B, C, D, and E phases as your guide. Our Reasons for Writing This Book Our reasons for writing this book grew out of our convictions that these observations are part of a continuing pattern, not just isolated events. Henry Mintzberg’s books continue to substantiate our views. Prior to developing the Reinventing Strategic Planning into Strategic Management (Planning and Change) model that serves as the basis for this book, we observed and participated in a wide variety of planning processes. In addition to this, we researched and analyzed 14 other planning models and 13 more change models that are well known and currently in use throughout the business world. However, each one presented only a piecemeal solution to the multilevel need of focusing on the customer from an organization-wide, strategic perspective in our rapidly changing environment. It became clear to us over time that there were actually three “premises” that failed to appear in most strategic planning processes. As a result, these plans rarely got off the ground. “Any intelligent fool can make things bigger and more complex… it takes a touch of genius – and a lot of courage – to move in the opposite direction.” -Albert Einstein viii Table Of Contents Part 1 Reinventing Strategic Management: An Overview Chapter 1 Revolutionary Change: Its Implications for Organizations Chapter 2 Yes … There Are Right Answers and Best Practices Chapter 3 The Organization … A Living, Breathing System Chapter 4 Reinventing Strategic Planning Into Strategic Management 1 3 13 25 47 Part 2 Developing a Strategic Plan: Step-by-Step Chapter 5 Smart Start: Plan-to-Plan (Step 1) Chapter 6 Environmental Scanning and the Parallel Involvement Process Chapter 7 Ideal Future Vision (Step 2) Chapter 8 Key Success Measures or Goals (Step 3) Chapter 9 Internal Current State Assessment (Step 4 – Part One) Chapter 10 External Current State Assessment (Step 4 – Part Two) Chapter 11 Strategy Development (Step 5) Chapter 12 Business Unit Planning (Step 6) Chapter 13 Annual Plans and Strategic Budgeting (Step 7) 65 67 87 101 131 147 167 179 197 217 Part 3 Mastering Strategic Change: Where the Rubber Meets the Road Chapter 14 Successfully Implementing Your Strategic Plan (Steps 8-10) Chapter 15 Strategic Management Applications Chapter 16 Getting Started: Options References Index List of Figures Management’s Ultimate Challenge Search for the simplicity on the far side of complexity The Goal (in Whatever We Do) Should Be: Clarify and simplify Clarify and simplify Clarify and simplify 237 239 259 273 289 291 298 Introduction Revolutionary Change Business as usual just won’t cut it anymore. When we try to imagine what business will be like over the next 5-10 years in this new millennium, it seems that the only constant we can count on is change. When we consider the fluctuating, competitive global markets and governments, telecommunications, the Internet, high-technology industries continuing their exponential gains, recessionary costcutting, and shorter life cycles for products and services juxtaposed with higher consumer quality and service expectations, revolutionary change, in fact, is our new daily reality. These revolutionary changes present us with business challenges that test our creativity and endurance. What business and organizational strategies can we come up with that will help us respond to these challenges? Will it be possible to lead and manage our way through these turbulent times to future successes? Most importantly, can we determine what the right answers are for us and then adjust along the best path to follow amidst this revolution? Past Practices/Future Successes One thing is certain today – “business as usual” really won’t cut it anymore. It won’t cut it in private industry anywhere, or in government, the military, or any not-for-profit. In these tumultuous times it is tempting to look for answers among solutions that worked for us in the past. Tempting, but perhaps not wise. The best advice we’ve heard is what Jack Welch, the former CEO and Chairman of General Electric, is reputed to have said, “If you are still doing things now the same way you did them five years ago, you are probably doing something wrong.” Applying past practices to current problems will only confuse our need for a future direction and innovative strategies. It is impractical to expect any single trend from today’s popular lineup – such as value-chain management, the learning organization, appreciative inquiry, Six Sigma, knowledge management, best value, empowerment, service management, cost-competitive, benchmarking, or the balanced scorecard – to act as a general cure-all. There is a continuous stream of books available on every conceivable type of management topic, each one focusing on a different topic, slant, fad, or trend. With each of these trends, it’s easy to believe that we’ve found salvation, when in truth we’re only adding to the confusion. Searching for a universal or holistic solution that really works just doesn’t seem realistic. During our 30 years of active participation in organizations, we at the Centre have observed a growing dissatisfaction with the way organizations are managed and led. Playing a variety of executive roles in a diverse range of public and private institutions has convinced us that there is no one best solution to the issues that confront organizations today. We believe, however, that there are “right answers and best practices” available to us. If it truly is our desire to build and lead a customer-focused, high-performance learning organization in our future, we must completely rethink, reinvent, and replan the way we position, define, and run our businesses. Throughout our years of work, we have often found strategic plans falling victim to the dreaded SPOTS syndrome. Even where de facto strategic plans already exist, we have found that they are often based on simplistic premises, such as purely financial or quality considerations, with no provision for other, complimentary and necessary strategies, activities, and processes for handling the implementation of change. If we tried to sail boats the way we run organizations, the boats would all sink. Boats have to have “watertight integrity.” In contrast, for many reasons, organizations don’t have an integrated fit, synergy, and commitment to the overall vision by every single employee. Think about this. Why do CEOs allow this to happen? Given the current state of global, revolutionary change, fully integrated planning is needed more than ever before. So is the strategic change aspect of following up, tracking, adjusting, and correcting the plan, which begins to become obsolete soon after the ink is dry. Unfortunately, it seems we have abandoned disciplined thinking, planning, and the difficult job of strategic change for the empty rhetoric of vision or value statements along with short-term communications and training as the way to achieve results. A “culture of discipline” is lacking according to best selling management author and guru, Jim Collins, in his latest monograph and follow-up to his best selling book Good to Great (Collins, 2001). In short, while the number of planners has dwindled drastically, strategic management (planning and change) is increasing dramatically. Without a multilevel, disciplined, systems approach, however, the “plan” is not worth much more than the paper it’s printed on. The foundation of the systems approach is three main premises that, while seemingly simple, actually embrace a complex body of thought and action. Premise #1: Planning and Change are THE PRIMARY Job of Leaders The first premise suggests that planning in today’s organization is often not viewed as an inherent part of top management’s leading or managing role. In fact, the actual planning process often dwindles to nothing more than an activity to be completed quickly so executives can get back to their real job of managing the day to day operations of their businesses. Worse, they abdicate planning to that endangered species – planners – who are then expected to write a doctoral-sized thesis that is destined for SPOTS. Or, even worse, they listen to organization development consultants who convince them that they simply and mainly just need a clear and shared vision and values for the organization to self-organize. This failure to see planning and change now as the primary responsibility of the senior management and leadership team has caused us to lose sight of the three common sense Strategic Management goals in every effective strategic planning and strategic change management process. These three goals are needed by virtually every organization everywhere, and in every sector and country. So, Mr. and Ms. CEO, below is your set of yearly goals. Goal 1: Develop the strategic, business, and annual plans and documents. Goal 2: Ensure their successful rollout, implementation, and change. Goal 3: Build and sustain high performance over the long term. For you HR executives looking for the core competencies of your organization, strategic management (the competencies of understanding and achieving these three goals) is the number one core competency of every successful organization. Most plans that fail do so because there is no provision or focus on Goal 2 (implementation and change) from the beginning of the planning process. Instead, the plan with all its associated documents, is seen as an end in itself. In most traditional approaches to strategic planning, planners and CEOs tend to minimize the number of strategic changes and paradigm shifts that will need to be made as the strategic plan is implemented. Thus, they neglect to insert fail-safe mechanisms and structures for successful strategic change management into each step of the strategic management process itself. Thus, the Right Answer and Best Practice 1 (and our number one absolute for success) is that it is essential to institutionalize a Strategic Management System and Cycle to guide the successful implementation of the strategic plan (Goal 2). To combat this failure, our Reinventing Strategic Management Model was developed with 44 change management structures and fail-safe mechanisms incorporated throughout the strategic management process. We have our clients to thank for these fail-safe mechanisms as they have consistently worked with us to develop these structures and systems that help guarantee success. Premise #2: People support what they help create It is critical for successful strategic planning and change management implementation that a complete, committed “buy-in” is obtained from the collective leadership of the organization, as well as from all key stakeholders responsible for implementing the plan. Beyond that, the important issue of maintaining the “stay-in” of all those key stakeholders will be a later issue. “Stay in” is even more crucial over the long term due to the natural property of all living systems to run down and die over time (i.e., entropy). We all know that the traditional boss-subordinate relationships prevalent in most organizations 20 years ago have pretty much disappeared. In today’s successful organizations, employees are seeking more learning, growth, and empowerment. This requires more of a leader-follower relationship. It introduces a non-fear-based, more proactive or voluntary aspect into the work environment. In turn, this raises motivation, productivity, and trust. Employees today demand participation and respect within the organization, especially (but not only) white-collar workers. People need to know that their ideas count, that they have some say in decisions that will affect them, and that they are empowered to use their minds and their ideas. Without this involvement, even the best provisions for implementation of the organizational plan will fall by the wayside. The NIH (Not Invented Here) syndrome wins again. In other words, people naturally want input into decisions that affect them prior to the decision being finalized. Bringing all the collective leadership and key stakeholders into the development and implementation of a strategic plan presents one of the first tough choices you will face as you think through this process. This is where you must engineer success, up front, prior to beginning the planning process. In selecting who will comprise your core strategic planning team, it is normally important to keep the ideal, theorectical size of the team to six to eight individuals from a group dynamics viewpoint. However, our experience shows it is practical to double this number up to 15 and still be productive in planning. The authors prefer 12 people as their practical, ideal number. However, there are still many more individuals throughout the organization and its environment who will be the key stakeholders in implementing the plan – namely, middle managers, supervisors, frontline employees, customers, vendors, etc. The problem then becomes, how do you get buy-in and commitment from all the key stakeholders who did not participate in creating the plan? This dilemma is usually handled very differently in public versus private organizations; however, neither group has been particularly successful. In the public sector, with its need for openness and public consultation, the conventional response is that the leadership delegates the planning across functions, diagonally to task forces in the name of participation. The frequent result, however, is that the senior leadership actually ends up abdicating their responsibilities; i.e., there is no sense of ownership by the senior or collective leadership. The result is often a SPOTS Syndrome or only partial fulfillment of Goal 1 (creating the document). The private sector, with its competitive and confidential leanings, is just the opposite. The number of people involved in any planning or decision-making process is usually so small that there is no ownership or understanding of the plan outside of a few select executives. In fact, the major, well known consulting firms help perpetuate this lack of ownership by offering to develop strategic plans for organizations, often at very high prices. As in the public sector, this breeds lack of commitment to a plan in which most of the organizational members had no participation. These examples point out, again and again, why Premise 2: People Support What They Help Create, along with a critical mass for change from everyone involved, is really quite complex and, at the same time, quite critical to success. This Reinventing Strategic Planning into Strategic Management (Planning and Change) model uses what we call a “Parallel Involvement Process” to address this issue. This Parallel Involvement Process identifies the specific key stakeholders and collective leadership that can either block or assist effective implementation. In Chapter 6, we will deal with this fact and the tough choices involved in the Parallel Involvement Process. In sum, this leads us to Right Answer and Best Practice 2 in Reinventing Strategic Planning into Strategic Management (Planning and Change): your leadership practices that drive involvement and empower employees in pursuit of your mission. This critical, but often-overlooked leadership element in Strategic Management is business’ only true competitive advantage over the long term. Premise #3: The Systems Thinking Approach® Problems that are created by our current level of thinking can’t be solved by that same level of thinking. -Albert Einstein The third premise is one that embraces a common sense way of looking at the organization as a whole system. A system is a set of components that work together for the overall objective of the whole. (Systems Thinking came from General Systems Theory (GST) developed during the study of biology in the 1940s through the 1970s.) By definition, the piecemeal approach of solving only one problem at a time, then moving on to the next, cannot succeed in our interactive, living systems world. However, most of the 14 other planning models we researched had the following worn-out analytical approach to planning: 1. 2. 3. Analyze today’s issues as our starting point Problem-solve those issues Conduct long-range forecasting and planning by projecting today’s current trend data into the future. In our experience, this methodical approach produces plans that are unveiled and then sit collecting dust and are never looked at again. Though this “one-foot-in-front-of-the-other” approach may have worked in a relatively constant environment, it won’t work in today’s ever-changing business environment. Rather, we must make a fundamental shift to systems thinking, where our focus is consistently on outcomes first, adjusting the relationships among the parts as necessary to keep on track toward these desired outcomes. This focusing on the outcomes compels us to practice what we call “backwards thinking.” In backwards thinking, we focus on what we perceive as the ideal future vision, goals, and outcomes for our organization and then think backward to our present state. We then look for ways to bridge the gap between the t…

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