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Systems thinking as a platform for leadership performance in a complex world


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Systems thinking as a platform
for leadership performance
in a complex world
Tomas Palaima
Warwick Business School, University of Warwick, Coventry, UK, and
Aelita Skarzˇauskiene˙
Kaunus, Lithuania

Published in: Leadership & Management
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Systems thinking as a platform for leadership performance in a complex world

  2. 2. Systems thinking as a platform for leadership performance in a complex world Tomas Palaima Warwick Business School, University of Warwick, Coventry, UK, and Aelita Skarzˇauskiene˙ Kaunus, Lithuania Not only a conception towards the has changed (from conception of an organization as a biological modeltosociocultural model)butalsoan attitudetothe methodhasshiftedfromanalytical thinking (science, which operated independent variables) to systems or holistic thinking (science, which operates interrelated variables) (Gharajedaghi, 2006). Effective decision making and learning in a world of growing dynamic complexity requires managers to become systems thinkers – to develop tools to understand the structures of complex systems (Sterman, 2000). The relevance of systems thinking as a competence was disclosed in the contextof leadershipinthe complexworldandhow the principlesof systemsthinkinghelpthe leader to achieve higher quality in his activityand to find new productive forms and tools for organization management. Developmentofsystemsthinkingand leadershipperformance relationshipmodel:backgroundand hypothesis formulation Systemsthinkingisawayof understandingrealitythatemphasizesthe relationshipsamonga system’sparts,rather than the parts themselves(Sterman,2000).The systemsthinkingisevaluated: as a mean which helps to understand any system in a complex manner, where everything is interrelated and, thus, one element of the system cannot be affected separately without affecting other elements. 1. The systemsthinking approach to theorganization:organization asa socio-culturalsystem Why is it important to treat the organization as a system in this age of changes? The importance of systems thinking approach to the organization in management science rests on the following assumptions:  the socio-cultural systems are characterized by dynamic complexity that “arises from the interactions of the agents over time” (Sterman, 2000);  increasingcomplexityof the worldrequiresnew toolstointerpretpatternsand eventsinthe organizations; and  systems thinkingisatool,whichhelpstounderstandcomplexityandtosee an orderin chaos. The environment in organizations is becoming more complex and changes more often and suddenly,processesinorganizations,society andotherplaceshave muchmore variablesthancanbe covered together. Managers try to manage socio-cultural systems in goal-oriented way, but it is difficult to forecast results of their influence because of complexity of global systems.
  3. 3. The benefitsof systemsthinkingapproachtowardsthe organizationincomparisonwithanalytical or mechanistic thinking are:  A clearerwaytosee andunderstandwhatisgoingoninanyorganizationandits environment.  A new way to create strategies, problem solving and find leverage points – keeping the outcome/vision/goal in mind at all times.  A way to manage the complex systems by focusing on the whole, its components, and the interrelationships of the components, rather than by focusing on supposedly isolated and independent parts and problems.  A new perspective for managers to interpret patterns and events in their organizations  A specialized language and a set of tools that can be used to address the most stubborn problems in organization and enables us to understand the structures and dynamics of complex systems and designs strategies for greater success  An ability to actively influence events and form the surrounding environment rather than mechanically react to environmental changes  A new orientation to life. In many ways, it also operates as a worldview – an overall perspective on, and understanding of, the world Methods,means,and toolsof systemsthinkinghelptounderstandsocio-cultural systemsandto impact them, therefore systems thinking is described as important and valuable competence of a leader. 2. Systemsthinking asan intelligence competenceand its relationship to leadership performance Three clusters in a set of competencies that can cause or predict outstanding leadership performance: 1. Cognitive competencies, such as systems thinking and pattern recognition. 2. Emotional intelligence competencies, including self-awareness and self-management competencies. 3. Social intelligence competencies, including social awareness and relationship management. An integrated concept of intelligence competenciesoffers theoretical structure for developing new theoretical model linking intelligence competencies and leadership/organization performance. The competencies impact organization performance indirectly through construct of leadership performance,forexample:the betterqualityof interactionbetweenaleaderandfollowerinfluences the leadership performance and the leadership performance has impact of positive organization climate, which affects organization performance. The newtheoretical model restsonthe conceptof leadership,which encompassesdimensionsof leadershipdelineated inmoderntheoryof leadership: (1) Personal dimension:  leadershipas personal development  leadershipasthinkingandlife style (2) Relationshipdimension:  leadershipasrelationship betweenaleaderandfollowers  leadershipasabilitytocreate a collective visionof the future (3) Organizational/strategicdimension:
  4. 4.  leadershipas continuouschange,transformationof the organization  leaderasconstructor inthe organization The hypothesized model the mechanism of relationship between intelligence competencies and leadershipperformance.The constructof systemsthinkingascognitive intelligence competence has six sub constructs in this model: The impact of systemsthinkingon leadershipperformance The effectsof competenciesonleadershipperformance:  The model has more explanatory power in manufacturing industry. The effect of systems thinking on leadership performance is stronger (especially on organizational/strategic
  5. 5. leadershipperformance).The biggerpartof leadershipresultsinmanufacturingindustrycan be attributed to intelligence competenciesand especially systems thinking. Manufacturing orientedtoprocess managementandefficiencyismore dependentonglobalization.Results of executivesinmanufacturingindustrycanbe improvedthroughunderstandingof principles of processorientation,systemslogic,dynamicthinking,anduse of thisknowledgeinpractice.  Weaker effect of systems thinking on leadershipperformance in retail trade industrycan be explained by the nature of service management. Retail trade organization is a service organizationandservicemanagementrequires havingmore socialintelligencecompetencies. On other hand, retail trade is dependent from market cycles and equilibrium between demand and supply and integration to market.