Networks and Complex Systems

Linked with culture is understanding networks (formal and informal) within the organisation. The networks and the way they operate demonstrate how an organisation works (see network mapping in Volume 4).

According to Michael Mauboussin (2009), in handling complex systems like organisations, managers make 3 common mistakes:

i) incorrectly extrapolating individual behaviour to explain collective behaviour. You need to focus on the aggregate and not just the components.

ii) failing to recognize that changing one component of a complex system has unintended consequences. It is like throwing a pebble into a pond of water: there is a ripple effect.

iii) tending to focus on a few key individuals while ignoring their surrounding support systems. There are many instances of hiring a star performer who does not continue to perform when separated from the people, structures and norms that made them star performers in the first place.

We don't encourage learning from mistakes. There is a focus on punishment for mistakes and this often leads to CYA-type behaviours

Not understanding the importance of negative feedback. In the market place, people's behaviours readily swing 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; positive feedback, in contrast, builds on itself and can accentuate the swings.

The Australian Banking Royal Commission (2019) was investigating organisations with toxic cultures. It recommended 6 principles that should guide corporate conduct, ie

"...obey the law; do not mislead or deceive; be fair; provide services that are fit for purpose; deliver services with reasonable care and skill; and when acting for another, act in the best interests of that other..."

Kenneth Hayne as quoted by Michael Pelly 2019


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