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


Seeing Your Company as a System

Employee participation plays an integral role in companies seeking a systems orientation. For example, it lies at the core of one type of company that Karl Weick and Kathleen Sutcliffe, professors at the Stephen M. Ross School of Business at the University of Michigan, have studied in depth: high reliability organizations (HROs). These are nuclear power plants, aircraft carriers, and other enterprises that must foster constant mindfulness as a way to avert catastrophic system failures.

In Managing the Unexpected: Resilient Performance in an Age of Uncertainty, an account of the unique management characteristics of HROs, Weick and Sutcliffe describe a culture in which employees engage in the continuous updating and deepening of their understanding of the context of organizational systems, the problems that define them, and what remedies they contain. Mindful organizations, they explain, are characterized by a broadly defined “deference to expertise,” in a setting where “expertise is not necessarily matched with hierarchical position.” (Barnard meets Drucker.) HROs are also capable of seeing weak signals of systemic failure and responding with vigor. To support this capability, such organizations strive for open communication, recognizing that if people refuse to speak up out of fear, this capability will be undermined.

Managing the Unexpected is replete with examples of the importance of mindfulness and imagination at all levels of the hierarchy. The authors show how maintenance personnel made it possible to avoid a potentially catastrophic containment failure at the Davis-Besse nuclear power plant in Oak Harbor, Ohio, in 2002. They note the precision and on-the-ground decision making that are necessary to prevent accidents on aircraft carriers operating on the high seas, explaining that because of the sensitivity of operations, junior officers are expected to disregard a captain’s orders when following those orders could jeopardize the crew’s safety. “Rigid hierarchies have their own special vulnerability to error,” write Weick and Sutcliffe. “Errors at higher levels tend to pick up and combine with errors at lower levels, thereby making the resulting problem bigger, harder to comprehend and more prone to escalation.”

Training and Tools

Systems thinkers embrace Louis Pasteur’s dictum that “fortune favors the prepared mind.” That is why a commitment to training and tools — for individuals and for organizations as a whole — is a key theme in guides to improving social systems.

Notwithstanding the Toyota Motor Corporation’s current problems with product quality and safety, the kaizen philosophy, long associated with the Toyota production system, remains one of the most critically important facets of a systems approach to management. Over a period of decades, it enabled Toyota to achieve its current position as the automaker with the most to lose, in terms of both market share and reputation.

Learning is such an integral part of kaizen — the continuous improvement of every process, every day, at every level of a company —that for many practitioners, training is considered the most important responsibility for any manager. For years, Toyota’s competitive advantage rested on the institutionalization of two interlinked routines, or kata: continuous improvement and coaching. The coaching kata, explains Mike Rother, a consultant and author of Toyota Kata: Managing People for Improvement, Adaptiveness, and Superior Results, “is the repeating routine by which Toyota leaders and managers teach the improvement kata to everyone in the organization.”

Rother offers a detailed look at the intertwined layers of routines, processes, and training that define the kaizen approach. He also provides the historical context for this philosophy and its pursuit of continuous flow production, or “1x1” production, when he vividly describes trekking through Ford Motor Company’s six-story Highland Park plant in Michigan. Now a storage facility, it was the site of the world’s first automobile assembly line, in which parts were built on the upper floors and, with the aid of gravity and chutes that were punched through the holes of each floor, moved to subassemblies below and eventually to final assembly on the ground floor. Henry Ford’s aspiration to create a continuous manufacturing flow from one value-added step to the next, without interruption and entirely free of slack and waste, captured the imagination of Toyota’s founder, Kiichiro Toyoda, who brought it to Japan.

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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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