Iv) Not Understanding Situational And Contextual Settings


It needs to be remembered

"...human beings turned out to be creatures that are quite context-or-site specific. We require actions, behaviors, thoughts, skills in one situation, and we may master these......we maintain those features in the setting in which they have been learned......But we are loath to apply skills or concepts widely, let alone promiscuously. Speaking more generally, the mind is organized not as an all-purpose computer; it is more precisely conceptualized as a set of relatively independent modules. Just how or when or why these modules should connect remains obscure to many theorists of psychology.....it is useful to keep in mind that, as a species, we evolved to survive indistinctive ecological niches; we did not evolve in order to have correct theories, to master disciplines, or to transfer lessons encountered in one setting approximately to another..."

Howard Gardner, 2006a

Furthermore, what has been successful in the past, such as concepts, techniques, strategies, approaches, frameworks, etc often fails in new situations as different contexts require different kinds of responses. Each situation should be recognized for what context governs it, with responses to that situation adjusted accordingly.

There is no one size fits all. Just because something works in health, education, etc, it does not follow that it will be effective in the finance industry, for example.

Some classic Australian examples of what has worked in the one organisation will necessarily work in another organisation are:

- Peter Smedley's work in Mayne Nickless. The successful approaches he adopted in Shell (oil) and Colonial (banking) were unsuitable for Mayne Nickless (health). 

He spent the first 29 years of his career at the energy giant Shell when it was at the forefront of strategic thinking.In 1993 he took charge of the life insurance group (Colonial) for 9 years, making 17 acquisitions, including the State Bank of New South Wales, Prudential, Legal and General, etc. This turned Colonial from a A$ 1.0 b under-performer to a diversified global financial services heavyweight by introducing a new distribution structure and working on its strength in fund management. In 2000, the Commonwealth Bank paid A$ 9 b.for Colonial,

Next he became CEO of healthcare and logistics giant, Mayne Nickless (2000). After 2 disastrous years, he was removed owing to significant profit declines, shares price falling and doctors in revolt as he treated them like employees rather than customers. The health sector's markets are more complex and demanding than oil and banking; vigorous centralisation did not work, ie not responsive to local needs; rapid acquisitions created operational difficulties. Furthermore, he took many of his 'successful' management team with him. He imposed a harsh cost-cutting model; reduced staff levels; left doctors out of the decision-making process. He didn't understand the culture of the medical professionals who value their independence and individualism, and the importance of the relationship with their patient. He did not realise that the most effective way to keep the medical profession on-side is to

"...make doctors' life easy, meet their demands, minimize hassles and red tape..."

 Pat Grier (Ramsay Health) as quoted by Fiona Tyndall, 2007

As a result of this, Mayne Nickless suffered a massive $456 m loss in its hospital division; more than $1 b was wiped off its share value. Thus little remains of Mayne Nickless, and Smedley has moved elsewhere!!!!!

- Alan Jackson built a manufacturing empire based on acquisitions, only to lose it; he then repeated this cycle

- Tony Berg was a hero of the growth-business model at Macquarie Bank but struggled at commodity-based Boral

- Peter Ritchie who successfully introduced McDonald's into Australia and is now struggling with Australian licence for filtered water from USA (Culligan); it is "hard" water while most Australian prefer 'soft'.

Similar stories exist for David Hearn at Goodman Fielders; Phil Green and David Coe at Babcock and Brown; Andrew Scott as a retailer at Centro; Michael King as a developer in MFS.

(sources: Fiona Tyndall, 2007; Andrew Cornell, 2009a; Jason Clout, 2010)

Not understanding that the classic boom and bust of markets is repeated in behavioural cycles. Many managers go too far with their measures, eg in an economic downturn they drastically reduce staff and jettison project, etc as many managers become paralyzed by fear and inertia. Furthermore, many managers make questionable acquisitions in an upturn. This reaction in the downturn makes it difficult for organisations to make the most of when the market improves, such as acquisitions, research projects, development of new products, etc

"... history shows that companies that continue to pursue growth while economic conditions falter are in a much better position when the market improves..."

Dominic Holder as quoted by Catherine Fox, 2008d

Some tips to handle this situation are

- avoid knee-jerk reactions and savage cost cuts (as the latter takes years to recover from)

- communicate bad news quickly

- set goals for short, medium and long-term horizons

- leaders should try to identify patterns and thus opportunities as they emerge

- manage loose/tight

. Not understanding the importance of negative feedback. In the marketplace, people's behaviour readily swings from greed to fear - with greed creating "bubbles" that eventually burst, and fear creating panic. Negative feedback is a way of keeping things in check, while positive feedback builds on itself and can accentuate the swings

. Not realising that technology, like automation, is a 2 edged sword, as it brings improved productivity, convenience, speed, efficiency & effectiveness, but its impact on performance can be negative as it alters how we act, how we learn & what we know, ie weaken our awareness & attentiveness, and lulls us into a false sense of security (complete faith in the output)


Each context requires different actions. Simple and complicated contexts exist in an orderly universe, where cause-and-effect relationships are perceptible and right answers can be determined based on the facts. Complex and chaotic contexts are unordered - there is no immediate apparent relationship between cause and effect, and the way forward is determined by identifying emerging patterns. The ordered world revolves around fact-based management; the unordered world requires adaptive leadership.


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