COMPLEXITY LEADERSHIP THEORY: ENABLING PEOPLE AND ORGANIZATIONS FOR ADAPTABILITY
‘‘We’ve got 21st century technology and speed colliding head-on with 20th and 19th century institutions, rules and cultures.’’
–Amory Lovins
In 2010, IBM’s CEO Study reported that the rising rate of complexity associated with increasing volatility, uncertainty and interconnectedness was the biggest challenge facing organizational leaders around the globe. In this environment, the world is operating in fundamentally different ways. As Sam Palmisano, head of IBM at the time described, incre- mental changes are no longer sufficient because ‘‘events, threats and opportunities aren’t just coming at us faster or with less predictability; they are converging and influencing each other to create entirely unique situations.’’ These contexts require adaptability and new ways of leading. Despite this, executives indicated that their organizations were not equipped to deal with complexity, and over half the CEOs doubted their ability to manage it.
Since that time complexity has only increased. If in 2010 we saw economies topple from complexity due to the Global Financial Crisis, in recent years it is as if the very foundations of what we know about management are being pulled out beneath us. Organizations and entire industries are being affected, with increased connectivity allowing everyday people to network and drive large-scale political, social and market disruption. For some, these are exciting times and the opportunities to lead change have never been greater. For others, the lack of clarity and speed at which complexity is increasing feels overwhelming and chaotic. For the latter, there is a growing sense of dismay about what the future holds and the inability to control it.
WHAT IS COMPLEXITY?
Although many are feeling and experiencing complexity in the workplace and in their lives, it is harder for them to describe exactly what it is. Despite the name, the concept of complexity itself is really quite simple: Complexity is about rich interconnectivity. Adding the word ‘‘rich’’ to interconnectivity means that when things interact, they change one another in unexpected and irreversible ways. Complexity scholars like to describe this as the distinction between ‘‘complexity’’ and ‘‘complicated.’’ Complicated systems may have many parts but when the parts interact they do not change each other. For example, a jumbo jet is complicated but mayonnaise is complex. When you add parts to a jumbo jet they make a bigger entity but the original components do not change–—a wheel is still a wheel, a window is a window, and steel always remains steel. When you mix the ingredients in mayonnaise (eggs, oil, lemon), however, the ingredients are fundamentally changed, and you can never get the original elements back. In complexity terms, the system is not decomposable back to its original parts.
Once we understand this, we can see complexity all around us. It occurs when networked interactions allow events to link up and create unexpected outcomes, or emergence. As mentioned earlier, the Global Financial Crisis (GFC) is a complexity emergence event in that a variety of factors linked up in an interconnected system and produced an outcome that was largely unpredictable, other than in the short term, and had far-reaching effects. After it happened there was no going back–—organizations and economies around the world had to operate in the new reality. Moreover, the impact can be long lasting. We are still feeling the effects of the GFC, and it influences decision-making and activities in our current contexts.
The ‘‘Order’’ Response
In this new reality, it is more essential than ever for organiza- tions to adapt–—to pivot in real time with the changing needs of the environment. They must fit the mantra of complexity theorists that it takes complexity to beat complexity. Despite this, what we see in our data over and over again is that when faced with complexity, the natural proclivity of people and organizations is to respond with order–—to turn to hierarch- ical approaches of leading and managing change top-down. Snapping back to previously successful, ordered solutions provides a sense of control that satisfies not only the needs of managers who have been trained in traditional leadership models, but also organizational members who look to leaders to take care of them and make things ‘‘right’’ again.
What we see in our research is that when confronted with complexity, organizations most often seek greater account- ability. They demand ‘‘more from less’’ and instill better risk mitigation strategies. When these fail, they turn to greater regulatory control. These ‘‘order’’ responses can actually do more harm than good. An example is the recording industry’s response to the emergence of Napster in the 1990s. From June 1999 to February 2001, the peer-to-peer music sharing entity grew from zero to over 26 million users. For the first time ever, individuals were able to gain access to their favorite songs without having to purchase entire CDs. But the Recording Industry Association of America (RIAA) responded by filing a suit for vicarious copyright infringement under the U.S. Digital Millennium Copyright Act. The result was that in July 2001, Napster was forced to shut down.
The Adaptive Response
In complex environments, instead of order we need an adaptive response. Adaptive responses resist the pull to order and capitalize on the collective intelligence of groups and networks. Organizations that enable an adaptive response do not turn to a top-down approach. Instead they engage net- works and emergence.
Emergence is the creation of new order that happens when agents (e.g., people, technology, information, resources) in a networked system combine together in an environment poised for change to generate the emergence of something that did not exist previously. In the emergence process, interacting parts of a system (i.e., agents) network around some kind of need and begin to link up. Adaptive responses are generated when these networked agents are able to resonate around a new approach, alternative way of thinking, or adaptive solution that meets the needs of a complex challenge. These innovations are generated in the ‘‘space between,’’ meaning that no one person can claim or take credit for them. Rather, they are the result of richly connected interactions that allow diverse people, ideas and pressures to collide and combine in ways that generate emergence of novelty.
ORGANIZING FOR ADAPTABILITY
A complex adaptive system is a dynamic system that is able to adapt in and evolve with a changing environment. At a macro level, it is a collection of dynamic networks of interactions, with each network comprised of a collection of many agents acting in parallel, creating rich interconnectivity. Colonies of social insects such as ants and bees that use simple rules and networked interactions to generate highly adaptive behavior are complex adaptive systems. So are neural networks that comprise the functioning of the human brain. In business, complex adaptive systems are seen in the emergence and dynamics of economies and markets.
In the physical and biological sciences, complex adaptive systems are described as having no centralized control and no fixed order. They are self-organizing, continually adapting and changing in relation to environmental conditions. But we know that is not true of organizational systems. Our struc- tures, no matter how flat or circular, do have hierarchy and hierarchical leaders. Their formal organization charts and management systems inhibit the ability of the system to self-organize. Moreover, because they are grounded in bureaucracy, they value rationality, efficiency and stability over adaptability. There is no getting around this. As long as organizations have hierarchy, and nearly all human organizing systems do, they have elements of bureaucracy, and the natural tendency of bureaucracy is to pull the system to order. The question for our research, then, was: How can we lead our organizations to be adaptive in the face of order imposed by hierarchical (bureaucratic) organizing structures? Given that by definition complex adaptive systems are self-organiz- ing, i.e., they do not have hierarchy and are not managed and planned, is it possible to enable organizations to act as complex adaptive systems even though they have hierarch-ical structures?
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