Complexity and Management – The European Approach

The European Management approach is rooted in Systems Theory and Complexity Thinking. In this respect it is very different from mainstream management thinking and by its very nature it is capable of coping with the complexity of our new world.

Richard Straub, founder of the Peter Drucker Society Europe, looks into a recent blogpost of the Harvard Business Review for explanations, why system thinking hasn’t become a general part of management thinking (Why Managers Haven’t Embraced Complexity). The blogpost’s comments vividly display the huge differences and hence the divide, between mainstream US-management thinking and the systemic European management approach as it is taught e.g. in St. Gallen/Switzerland.

Complexity science, system science and cybernetics find their origins in the 1940s and 1950s. Since then, “systems”, their dynamics and behavior, and our possibilities to influence, govern, and manage have become an object of interest. As any company or institution can be viewed as a “system”, insights of aforementioned sciences are the theoretical foundation for the “practice” or “profession”  of management.

Mainstream US-management thinking (and therewith mainstream global management thinking) on the other hand is based on economics and business administration. Hence, financial accounting remains the core principle of any theory or practice. With most comments to the aforementioned blogpost written by US-thinkers, you can clearly see that systems thinking has not yet become a general world-view and that there is still no common understanding for its basic ideas and concepts.

Very shortly, here are some basic clarifications:

First, a system is generally the segment of the world an observer is interested in. For the practice of management it is typically a company or any other institution or part of an institution. A system is always embedded in an environment. As the system is part of the environment and the environment consists of more than the referred system, the complexity of the environment is always higher than that of the system.

Second, a social system is a system which entails human beings. In general, a social system has a far higher degree of “complexity”.

Third, complexity refers to the number of states a system can adopt. Complex is not the same as complicated. Complicateness refers to the number of elements the system consists of.

Fourth, cybernetics has provided us with a fundamental rule for the management of complexity –  “Ashby’s law”: Only complexity (better “variety” as a measure for complexity) can absorb complexity (variety). How can an organization manage the much higher complexity of its environment? Firstly, in becoming more complex itself.  Or secondly, in reducing the complexity of its environment.

A company becomes more “complex” itself e.g. by acquiring knowledge, diversity, new devices and so forth. It reduces the complexity of its environment e.g. by concentrating only on specific customer groups.

However, today we see that almost all spheres of life have become more complex, a phenomenon also known as “complexification” (Fredmund Malik). Hence, complexity has become a commonplace-issue affecting an ever-increasing number of people.

What are the consequences?

1. We can no longer deal with our most challenging problems by simply reducing the complexity of our surrounding environment. All “keep it simple” toolkits fail to show us the full picture, prevent us from utilizing our full potential, and fall short in resolving any of our global challenges.
2. As complexity is a resource creating new possibilities and solutions, it is crucial that we manage complexity more consciously, .

Richard Straub concludes in his blogpost that the recognition of complexity requires a change in our world-view. It causes us to be more humble and open-minded. Above all though, it makes us aware that only too often the interventions we engage in are destined for failure and inclined to provoke consequences which initially were unintended.

Read also:

Roger Martin’s puzzle – a world of constant complexity?