Leadership in Chaotic Environments John and Jo Lee Loveland Link VOLVOX Inc. Systems Dynamics Specialists

Outline Chaos and Complexity Paradigm CHAOS Inc. ™ Road to Complex Adaptive Systems Feedback Chaos: Stages of Equilibrium Leadership Case Example: Chaordic System -- VISA Chaotic Times: What is a Leader to do?

Chaos and Complexity Paradigm Appeal of chaos and complexity science: Brings together disciplines as never before since “philosophy” meant “all learning” Risk of applying chaos and complexity science for organizational applications: Human systems have a special set of dynamics distinct and unlike physical systems

CHAOS Inc.™ A table-top game originally developed as research tool to examine chaos and complexity dynamics in organizations. No pre-determined outcome. Production organization is subjected to chaotic events. Participants redesign organization and examine what works or not. Continues as leadership tool to discover “fitness landscapes” in turbulent environments

CHAOS Inc.™ - Results Outcomes: As various as the groups who have experienced the exercise Many participants decree: “The only realistic workshop I’ve ever encountered”! Challenges are real and stimulate a myriad of creative solutions

The Road to Complex Adaptive Systems Linear systems: Rules governing behavior do not change and low number of variables Complicated Linear Systems: Rules don’t change but may exhibit very complicated behaviors; however, these systems are (at least somewhat) predictable) Complex Adaptive Systems: Governing rules and behavior are emergent and dynamic. Complex Adaptive System “learn” by selection of new rules among a “Random Repertoire of Possibilities.”

Feedback Propelling feedback loops (self reinforcing) amplify and move the organization toward Chaos. -Think the squelch of microphone in front of speaker. Restraining feedback loops (limit system parameters) keep the system from moving into Chaos. -Think thermostat. ________ Most change management strategies build on propelling feedback loops Most traditional management strategies build on restraining feedback loops Either can lead to “feedback traps”

CHAOS: STAGES OF EQUILIBRIUM Equilibrium/(Dynamic Equilibrium) Near-Equilibrium Far from Equilibrium / Edge of CHAOS CHAOS New Dissipative Structure(s) /(Self-Organizing/ Emergent) Randomness

Why are Stages of Equilibrium THE BEST DIAGNOSTIC TOOL TO LEAD ORGANIZATIONAL CHANGE? The closer an organization is to chaos, the easier it is to change the system. The closer an organization is to equilibrium- more energy is required to change the organization.

Case Example of Leadership: Dee Hock’s “Chaordic System” (VISA) Now: 20,000 financial institutions 4 million merchants 600 million consumers 220 countries

Dee Hock’s “Chaordic System” (VISA) -2 Then: Hock asked: What would be the nature (NOT the structure) of an ideal organization to create the world’s premiere device for exchange of value?

Principles of “Chaordic Systems” -1 Response -- Simple few principles: Equitably owned: All advantage from individual ability & initiative Distributed power & function: No function except at max periphery, no power not driven down Distributed governance: No one person/institution able to dominate

Principles of “Chaordic Systems” -2 Infinitely malleable (adaptive) yet durable: Capable of constant self-organizing without sacrifice of core nature/ principles Embrace diversity and change: Attract people/institutions comfortable with principles & provide environment to allow to flourish

Principles of “Chaordic Systems” -3 Core Tools for Leaders to Create Create Effective Chaordic Systems: Compelling, shared vision Set of few simple guiding rules or principles That’s it!

So – How Can Today’s Leaders Convert These Principles to Successful Action? What are new, effective leadership approaches in these chaotic times????

Chaotic Times: What Is a Leader To Do? Leadership starts with shared vision (often jettisoned in turbulence if too complicated – keep it simple!). Determine equilibrium stage (organization and environment) -- then act to align with appropriate equilibrium strategy. Focus on quality, relevance, and criticality of the organization’s rules…and periodically re-examine (no sacred cows!).

Chaotic Times: What Is a Leader To Do? -2 Don’t be fooled by “linear org charts”- your organization is a Complex Adaptive System -- and what is really happening will elude you. Rather than “linear org charts” – think early communications techniques – smoke signals, listening posts, runners from tribe to tribe, etc. – to find out what’s really going on

Chaotic Times: What Is a Leader To Do? -3 Beware of “best practices” - they tend to limit the solution set (current & emergent). Instead of “best” practices – think about a “hip pocket full of mighty good practices” – if one does not work, you’ll have Plan B … Plan C … etc.

Chaotic Times: What Is a Leader To Do? -4 Heavy handed management-by-metrics gives rise to negative feedback, suppresses emergence and adaptiveness. Metrics only partially useful – can delude and mislead –Instead, use cross-organizational teams to validate, sniff out erroneous implications, uncover innovations, etc.

Chaotic Times: What Is a Leader To Do? -5 Remember: Great management today is BOTH global AND local.

John W. Link & Jo Lee Loveland Link Contact Information John W. Link & Jo Lee Loveland Link VOLVOX Inc. www.volvoxinc.com PO Box 610, Middletown VA 22645 Ph: 540-465-1491 johnwlink@hotmail.com Jlloveland@aol.com