In the previous article on the subject of organizations as living systems it was explained that organizations function within an open system environment. In this article I will discuss how, within the aforementioned context, the application of Mission Directed Work Teams™ (MDW™) improves organizational performance.

First, organizational performance may be viewed as the degree to which the organization is able to maximize cash flow in a sustainable way. Second, the aforementioned can be achieved if the allocation of resources is balanced in such a way that the expectations of all its legitimate stakeholders are addressed in a sustainable way, that is, each stakeholder group needs to be satisfied with the appropriation of value as a result of the value created, measured against their contribution to the value creation process.

Systems theory is often used as a conceptual framework for describing and analyzing organizational-relevant events that are interrelated in a persistent manner. Such relationships are on-going because they sustain themselves by acquiring energy and information input from external, environmental events. These phenomena include groups of individuals in inter-dependent relationships, and the interaction of these individuals with their environment, governed by the principle of equilibrium.

The table below contains a summary of system characteristics and associated descriptions and is followed by a brief discussion on each characteristic. The article then discusses how MDW™ practices apply to an organization’s performance (that is, the system’s performance) and closes with suggested key habits of system-thinking managers.

Table 1

Inputs consist of information and signals from the environment and system functioning as well as materials and information that are to be transformed into products and services. Inputs also describe antecedents as well as enabling or constraining factors on role players’ interactions. These include individual characteristics (for example, competencies, personalities, personal values), team or group-level factors (for example, task structure, external leader influences, demographics), and organizational and contextual factors (for example, organizational design features, environmental complexity).

In an operational sense, throughputs refer to the processes required to transform inputs into outputs (typically goods and/or services), that is, to create value. Management’s role is to minimize waste by reducing variability between expectations (in between all legitimate stakeholders) and perceived organizational outcomes.

The cyclicality inherent in the throughput process is largely a process of dynamic planning and re-planning and includes episodic cycles. Episodic cycles refer to situations where different processes are executed at different times, depending on task demands. Whereas throughputs (deliberate processes to transform inputs) are considered to be the primary mediator between inputs and outputs, the emergence systems characteristic refers to internal system states that form over time and its formation is not a direct consequence of the inputs from the environment.

The perspective a manager or an organization as a collective will have of what the value creation process entails will depend on their view on what constitutes value to start off with. The value an organization plans to create is typically incorporated within its purpose or mission statement and subsequent strategic, tactical and operational objectives and goals, leading the discussion to the goals and outcomes systems characteristic. The goals and outcomes of a process may or may not be the same against what was expected (that is, the stated or unstated objectives and goals). Organizational and individual objectives and goals are often completely arbitrary, and the perceived organizational objectives and goals often vary from one person to the next. Importantly, goals are assumed as given inputs into decision-making processes. The values, experiences, and knowledge of leaders in the upper echelons of organizations impact the strategic decisions made by these leaders, ultimately influencing organizational performance. Conditioned by personal values and intra-organizational dynamics, all layers of management will interpret and filter top-down initiated assignments and events. The aforementioned emphasizes the openness of an organizational system.

Although an organization is cognitively open and therefore interacts with its environment – albeit not necessarily in a structured way – it needs to be operationally closed in order to allow constant alignment of purpose. This alignment is required as a counter to entropy – to do so organizations accumulate and store more energy than required as a form of negative entropy. This additional and often redundant energy takes the form of organizational expansion, elaboration and bureaucracy in the form of policy and procedures and is often perceived as constant conflict between flexibility and standardization.

Systems theory influenced many management theorists to envision the organization as more organic and holistic, that is, as an “organism” rather than as a “machine”. Viewed holistically, then, all of an organization’s elements or components are “necessary” to be able to fulfil its purpose. The interdependence characteristic provides the primary reason for looking at an organization as a system. Interaction between role-players (including unilateral communication) takes place because role-players perceive an interdependent relationship triggered by a common goal, service-expectations and process or task dependency. Organizations are essentially a social system, that is, the interacting units are people. Interaction between internal role players as well as with external stakeholders is, therefore, the life blood of organizations. Mutual expectations are agreed upon and variances (outcomes versus expectations) are addressed. Critically, (albeit in a perfect competitive environment) organizations with a narrow view on external as well as internal interdependencies will eventually experience a decline in performance as relationships extinguish or become destructive due to the inadequacy of interaction.

Control mechanisms, that is, positive and negative feedback loops, maintain the system at some desired state. Triggers from the outside (environment) influence the system to adjust in order to maintain a degree of internal order in response to the external environment in which it is embedded. Negative feedback mechanisms reduce the effect of these fluctuations, while positive feedback mechanisms increase these fluctuations to sustain this equilibrium state.

Adaptation refers to the preservation and changing of the character of the organization. Adaptation also refers to the organization’s renewal as it responds to threats and opportunities in its environment. Organizations are required to change and adapt in response to environmental fluctuations in order to sustain function and retain advantage. Related to the concept of adaptation is organizations’ responsiveness. Responsiveness involves two organizational capabilities namely its ability to anticipate change in its external environment and also the speed it is able to respond. In an open system, environmental interchange is on-going and because the environment is in a constant state of change, the system must be adaptable. This adaptability should go beyond homeostasis to accommodate self-organization (control) following a destabilizing event. Parts of a system must behave in accordance with its rules and must adapt to the environment on the basis of feedback, which explains the ways systems use their own outcomes to gauge effect and make necessary adjustments.

Open systems are self-governing or autonomous, but not “independent” in as much as they are conditioned by the environment and its inputs. An open system must be capable of sensing deviations from the ‘‘assigned’’ norm and of correcting these tendencies thereby maintaining a degree of balance. A primary function of the interacting subsystems (that is, departments or groups of individuals within an organization) is to help maintain system balance. Not all systems have equal capacity to adapt. Highly chaotic systems cannot maintain their behaviors, as small forces can result in systems disruption (the so-called butterfly effect). Highly chaotic systems have too few stable components and tend to fail due to too little buffering and low adaptability. On the other hand, highly ordered systems are often too rigid to coordinate new behaviors and likewise tend to fail. As organizations expand, the need arises for increased integration and coordination as a counter.

The characteristic of equifinality in open systems means the same final state can be reached from differing conditions and a variety of paths. In an organizational context, equifinality therefore means that the final state – for example the performance goals of an organization – can be achieved through multiple and different organizational structures and processes, even if the contingencies the organization face are the same. Related to the equifinality characteristic of open systems the essence of systems thinking lies in a shift from seeing interrelationships rather than linear cause-and-effect chains.

System hierarchy refers to the attribute that every complex system consists of a number of subsystems that have levels of increasing complexity. Organizational subsystems are composed of interconnected role-players that form a network of linkages that interact nonlinearly to form the organization’s unique identity. The hierarchy of complexity within an organization would be: an individual, a group, and the organization.

How does Mission Directed Work Teams™ (MDW™) application improve system functioning – and thereby organizational performance? MDW™ is a structured process that intensively involves all team members in high-engagement top-down cascades creating understanding, dialogue, feedback (bottom-up) and accountability. It empowers team leaders to creatively align their teams and individual roles with the overall objectives and goals of the organization and to involve team members in problem-solving key variances.

The MDW™ approach considers current teams as the smallest unit of analysis from an organizational behavior perspective. This allows a sound balance between the overall macro view of the organization (the overall organization being more than the sum of its parts) and the opposite each-individual employee view on organizational behavior (a reductionist view).

Each team is required to develop their team purpose supporting the overall mission of the organization. The aforementioned, however, should not be a top-down process only. As teams develop their respective purpose statements it should inform the overall mission of the organization. Teams are, furthermore, required to routinely provide evidence of their understanding of the organizational mission, overall strategy as well as strategy execution status. To this end, it is expected of team leaders to engage in sense making, that is, team leaders need to describe and rationalize organizational-relevant events and circumstances to team members. It goes further, though, as team leaders need to put external-to-organizational events that impact the organization into context for team members. Linked to the development of a team purpose would be the norms and values the team members prescribe to. Striving towards adherence to common values has been proven to be a key organizational alignment enabler and it also contributes to system stability and predictability.

Next, team leaders and their team members need to manage the input of information from various stakeholders of which their team leader’s principal and the team’s customers are the primary sources. With frontline level teams, the aforementioned as well as the teams’ suppliers are focused on. However, the more senior the team, the wider the periphery of stakeholders will be and, therefore, increasingly includes the balance of stakeholders (e.g. organized labor, the community, external suppliers, government institutions, shareholders). Structured engagement between role players with the aim to reduce variances is the cornerstone of MDW™ practices, hence the identification of each team’s stakeholders, based on perceived dependencies, is of critical importance as to ensure the interacting units internal to the organization as well as with external parties are formally ‘’connected’’ and that mutual expectations are clearly defined.

The cyclicality characteristic of a system is dampened through the application of MDW™ practices since teams are required to continuously align and re-align their objectives and goals with that of their stakeholders, therefore applying a more dynamic approach compared to the typical quarterly individual performance management activities, for example. The use of standardized MDW™ visual tools also reduce perceived organizational complexity and system cyclicality.

Teams are required to identify a balanced set of objectives and goals aligned with their key stakeholders’ objectives and goals. Balanced objectives and goals will include aspects such as quality, speed, cost, safety and people. The aforementioned should, furthermore, reflect balance pertaining to time horizons (that is, short and long term objectives and goals). With set trigger levels for problem solving, team leaders engage in problem solving activities in order to return to plan but also to prevent re-occurrence whilst behavior that led to the meeting objectives and goals are strengthened. Team leaders need to continuously balance the resource allocation (time and material) between their key stakeholders in order to maintain the optimum level of system stability. When cascading objectives and goals, managers should be reminded of the equifinality system characteristic, that is, the same final state can be reached from different initial conditions as well as through different strategies. This will allow team leaders to creatively align their teams’ objectives and goals with the organizations mission and should result not only in more realistic and relevant objectives and goals but also increased ownership and subsequent increased accountability.

MDW™ practices are also well suited to ensure that all teams and by default, then, the organization, continuously adapt to its changing environments. This is achieved by teams staying ‘’close’’ to their respective stakeholders’ expectations and taking corrective (and preventative) action when expectations are not met (single feedback learning). Teams, however, are also encouraged to practice double feedback learning during which they challenge the assumptions behind objectives and goals for their validity. The aforementioned also counters entropy and often, organizations realize that continuous improvement is often only good enough ‘’just to keep up’’ with the changing environment, hence many organizations rather subscribe to continuous change instead of periodic efforts to make step changes.

To summarize. Through the application of MDW™ practices, organizations optimize system performance by institutionalizing structured engagement between stakeholders with the main objective being to reduce variances between expectations and perceived outcomes.

My suggested key habits of systems-thinking managers:

1. Optimise the overall purpose of the organization by looking for common objectives between stakeholders;
2. Identify the system elements by looking for patterns of interaction;
3. Identify the level and asymmetry of dependency between interacting units through the identification of cause and effect;
4. Provide context to subsystems (teams) by engaging in sense-making discussions; and
5. Facilitate learning experiences through inclusive problem solving.

In closing, from Yuval Harari – ‘’in a world deluged by irrelevant information, clarity is power’’.

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