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strategy and business
 / Summer 2010 / Issue 59(originally published by Booz & Company)


Seeing Your Company as a System

“Organizations work the way they do because of how we work, how we think and interact,” writes Senge, who is also the founder of the Society for Organizational Learning and a lecturer at MIT. The “best systemic insights don’t get translated into action when people don’t trust one another and cannot build genuinely shared aspirations and mental models.”

Senge identified five disciplines — ongoing bodies of theory and practice — as necessary for organizational learning.

1. Systems thinking, which in this case means learning to recognize the forces of acceleration and equilibrium at work in complex systems, how they interact over time, and how to use them to gain leverage.

2. Personal mastery, which is a variation on what Abraham Maslow called “self-actualization”: tapping immense creative potential by aligning the personal aspirations of individuals with the goals of the organization and a clear view of current reality.

3. Mental models, which are the prevailing attitudes, beliefs, and cognitive habits held within a group that shape its perceptions of the world and how it takes action.

4. Shared vision, which is the collective voiced aspiration that supports the collective pursuit of worthwhile goals.

5. Team learning, which embodies open dialogue with no preconceptions, and other forms of candid, in-depth group activity.

Unlike many management principles, Senge’s disciplines are fundamentally personal, and require a shift in perspective among individual members of an organization, as well as a collective transformation. For newcomers to these ideas, the first chapter of The Fifth Discipline offers an excellent overview of the disciplines and how they fit together. Senge’s subsequent book, the collaboratively written The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization (Doubleday/Currency, 1994), offers a step-by-step guide to tackling the five disciplines. (Disclosure: Art Kleiner, the editor-in-chief of strategy+business, was a Fieldbook coauthor and its editorial director.)

Everyone’s a Knowledge Worker

Widespread employee participation is essential for creating and maintaining learning and adaptive capabilities, but that goal has long been elusive for many companies. The earliest thinkers on organizations, including Elton Mayo, the father of humanistic management, and Chester Barnard, president of New Jersey Bell Telephone from 1927 to 1948 and author of the leadership classic The Functions of the Executive (Harvard University Press, 1938), generally recognized the challenge of reconciling the interests of employees with those of the organization. Mayo’s famous Hawthorne experiments demonstrated that merely paying attention to workers could boost productivity, albeit briefly. Barnard provided the justification for participative management. Organizational purpose, he said, must be well communicated and widely accepted, and management’s authority rests on its ability to persuade, rather than command. Thus, legitimacy is a function of competence and expertise, not hierarchy.

But it wasn’t until the rise of “knowledge workers,” whom Peter Drucker first described in 1959 and broadly defined in Management Challenges for the 21st Century (Harper Business, 1999) as people who “know more about their job than anybody else in the organization,” that a widespread recognition of the role of ordinary employees in improving systems began to take hold. And even today, there is a stubborn resistance to widespread participation, a residue of machine-age approaches to management that is perpetuated by a disagreement about who exactly qualifies as a knowledge worker.

A narrow definition of knowledge workers, and some might argue this is the dominant view among U.S. companies, is articulated by Thomas Davenport. Davenport is a leading management consultant and professor at Babson College who wrote, in “Why Don’t We Know More about Knowledge?” a 2004 article in the MIT Sloan Management Review (coauthored with Michael Hammer and Dorothy Leonard), that although “every job requires some knowledge, most would agree that knowledge workers are people with high levels of education and expertise whose primary task is the creation, distribution or application of knowledge.” In contrast, a systems view demands the broadest possible definition of knowledge workers because, at the most elemental level, any employee who connects to a process must have the knowledge to recognize when something is wrong and to sound an alarm.

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Systems Thinking Resources
Works mentioned in this review.

  1. Russell L. Ackoff, Re-creating the Corporation: A Design of Organizations for the 21st Century (Oxford University Press, 1999), 348 pages
  2. Peter M. Senge, The Fifth Discipline: The Art and Practice of the Learning Organization (Doubleday/Currency, 1990), 432 pages
  3. Michael Hammer, Dorothy Leonard, and Thomas Davenport, “Why Don’t We Know More about Knowledge?” MIT Sloan Management Review, July 15, 2004
  4. Karl E. Weick and Kathleen M. Sutcliffe, Managing the Unexpected: Resilient Performance in an Age of Uncertainty (Jossey-Bass, 2007), 206 pages
  5. Mike Rother, Toyota Kata: Managing People for Improvement, Adaptiveness, and Superior Results (McGraw-Hill, 2010), 326 pages
  6. John Shook, Managing to Learn: Using the A3 Management Process to Solve Problems, Gain Agreement, Mentor, and Lead (Lean Enterprise Institute, 2008), 138 pages
  7. W. Edwards Deming, The New Economics for Industry, Government, Education (MIT Press, 1993), 252 pages
  8. NBC News white paper, “If Japan Can...Why Can't We?” first broadcast June 24, 1980, by the National Broadcasting Company. Produced by Clare Crawford-Mason and reported by Lloyd Dobyns
  9. H. Thomas Johnson, Profit beyond Measure: Extraordinary Results through Attention to Work and People (with Anders Bröms; Free Press, 2000), 272 pages; Relevance Regained: From Top-down Control to Bottom-up Empowerment (Free Press, 1992), 240 pages; “A Systemic Path to Lean Management,” The Systems Thinker, March 2009; “Toyota’s Current Crisis:The Price of Focusing on Growth, Not Quality," The Systems Thinker, February 2010,
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