But the importance of service quality is not limited to service industries like banking, insurance, or package delivery. As the global environment grows fiercer every day, manufacturing companies are realizing the importance of focusing on the quality of their services, not just their products.

“You can’t touch or feel a service, nor can you inspect it after the service is completed. At the point of ‘delivery,’ everything that is needed to provide the service must converge in order to provide the customer with high quality.”

“Moments of Truth”

Improving service quality promises a myriad of benefits. It costs far less to keep a customer than to win a new one, for example, and perceived high-quality service firms can often charge up to 10% more for their products than competitors. The question is how to do it.

In the rush to reap the benefits of improving service quality, companies may be too quick to borrow from past experience in manufacturing. But there are important differences that make improving service quality much more elusive.

One obvious difference between products and services is that one is tangible while the other is not. You can’t touch or feel a service, nor can you inspect it after the service is completed. At the point of “delivery,” everything that is needed to provide the service must converge in order to provide the customer with high quality. Each of those interactions are the “moments of truth” which determine whether you are seen as a high-quality service operation or not, according to Jan Carlzon in his highly-acclaimed book, Moments of Truth.

Quality, as seen by the customer, is determined by each moment-of-truth encounter with frontline personnel. The net benefit of millions of dollars worth of capital equipment, buildings, salaries, etc. that a company has assembled will be judged, in large measure, by the quality of those interactions. Those moments of truth are numerous, ephemeral and difficult, if not impossible, to measure. And yet, the long-term reputation and success of a service company is largely riding on them. This suggests that many companies are investing far too little in their front-line personnel. How many moments of truth are actually “moments of despair” for their customers?

Just-in-Time vs. Just-in-Case

For some companies, providing high quality service means creating a just-in-time (JIT) operation, where all the necessary ingredients converge at the point of delivery exactly when it is needed. In a JIT production system, inventories are kept to a minimum throughout the factory by making sure there is just enough inventory at each step of the process to supply the next batch. But it is dangerous to carry the JIT philosophy too far in the service arena.

In manufacturing, the product has already been designed; all that remains is to run the production line as smoothly as possible. Variances in the production line can then be control-charted and maintained. In a service setting, however, front-line personnel have to be ready to produce a service whose design is not fully complete until they interact with the customer. Unlike the manufacturing setting, customers often introduce variances that cannot be controlled in advance. Having adequate capacity online is critical to providing high quality service. In a JIT production system, if the production line goes down, the down-time does not affect the quality of the next product off the line. If there are enough buffer stocks of finished goods, the customer won’t even experience any difference in delivery. If you are under capacity in a service setting, however, there is no way to make it up in real time with “buffered” service time. In addition, it is virtually impossible to “recall” a poorly delivered service. A flight that arrives two hours late and causes people to miss a meeting cannot be changed. A package that is delivered too late for a speech is simply too late. The capacity has to be online and available precisely when the customer requests it. This suggests that, unlike JIT, one may need to plan in terms of Just-in-Case service capacity—that is, service capacity should be weighted more towards peak volume than average volume.

Complexity Line Model

Complexity Line Model

Work can be divided into simple and complex tasks. If the intrinsic needs of the customer is a 50-50 mix, there is a quality gap if any of the quality indicators differs from that mix. For example, Quality Goal assumes a 6040 mix, so a Gap 1 exists.

The Complexity Line Model offers a way of looking at service quality in terms of four different capacity requirements: voice of the customer, the quality goal, working quality standard, and actual quality. In the Complexity Line Model, all service work is viewed either as simple (processing) work or complex (technical) work. In reality, there are many gradations, but for ease of use we will work with the two categories. Simple work means things that can be handled by an entry-level person. Complex work, on the other hand, requires a lot more experience and skill. In general, complex work also requires more time.

Suppose we are managing a customer service call center. Ideally, we should be staffed to match the exact needs of the customer as shown on the Voice of the Customer line (see “Complexity Line Model” diagram). Suppose that the intrinsic needs of the customer calls coming into our center are split 50-50 between simple and complex. That is, on any given day, 50% of the calls are routine. The other 50% are complex and require more understanding about the business.

Gap 1: Understanding the Voice of the Customer. In reality, we never know exactly what the customer needs. The customers themselves may not fully know what they need. The quality goal line represents our current understanding of the customer’s needs. For example, we may be staffed and prepared to handle a call volume that we believe is 60% simple and 40% complex. Gap 1 represents the difference between what the customer actually needs and what we think the customer needs. In this case, 10% of the customers will not receive proper service. Reducing this gap requires an investment in understanding what the voice of the customer is.

Gap 2: Understanding the Voice of the Process. The Working Quality Standard line may be different from the quality goal if the service capacity in place is not sufficient to provide the stated quality goal. In this case, say the people doing the work are capable of handling a call volume where 70% of the work is simple, and 30% is complex. Gap 2 represents our lack of understanding of what our current system is capable of (voice of the process) relative to what we are asking it to do (quality goal). In this case, we fall short of our own goal by another 10%.

Gap 3: Managing Customer-Generated Variance. The Actual Quality line represents the day-to-day moments of truth in which the customer actually experiences our service quality. If we are staffed to meet a 70-30 complexity mix, and the volume of calls stays relatively constant, customers will experience quality at the working quality standard level. Suppose, however, that incoming call volume suddenly jumps by 20%. What will the pressure in the system do to actual quality? The only way to serve a larger number of customers with the same number of people and skill mix is to reassign complex work as simple. The work can then be given to less experienced staff (“I know Joe’s only 2 weeks on the job, but I think he can handle this one”) or we can treat it as simple and spend less time on it (“I don’t think they need to know about all the other options…”).

So now work is handled as if it is 80% simple, 20% complex, which represents the actual quality. Gap 3 represents the daily adjustments that have to be made when customer volume and special requests exceed the capacity established by the working quality standard. Although our working quality standard has not changed, actual quality has grown worse. If this becomes a frequent occurrence, the quality standard can be pulled downward toward actual quality. As the quality standard adjusts to a lower level, actual quality can get pulled down still further the next time the call volume exceeds the already lowered capacity (see “Quality Erosion over Time” diagram).

Drifting Goals Structure

The dynamics of service quality can be captured in a “Drifting Goals” archetype (B1 and B2 in “Managing All the Quality Gaps”). A gap between the quality goal and working quality standard can be closed in one of two ways—lowering the goal (B1) or raising the standard (B2). Lowering the goal is easy and quick; raising the standard takes time and investment (see “Drifting Goals: The Boiled Frog Syndrome,” Toolbox, October 1990).

Focusing on the needs of the customer can help balance the pressure to reduce the quality goal. The voice of the customer increases Gap 1 which increases the pressure to raise the quality goal (B3). In this model, we see that the art of setting quality goals requires balancing the voice of the customer with the voice of the process. In terms of TQM, this means continually trying to identify the intrinsic needs of the customer (voice of the customer) and understand the systems and processes enough (voice of the process) to design them to be in line with those needs.

Managing All the Quality Gaps

Achieving service quality excellence means managing all three gaps to set quality goals that are sensitive to the voice of the customer and the capabilities of the current system.

Maintaining the working quality standard without losing ground requires managing the gap between actual quality and working quality standard. A high-quality operation should have adequate capacity to handle the majority of the variance it encounters and should keep actual quality within a narrow band around the working quality standard. An operation that is out of control would have a wildly-fluctuating and persistent gap.

Managing All the Quality Gaps

Achieving service quality excellence means managing all three gaps simultaneously. Focusing exclusively on the customer and making your quality goals aligned with their needs will reduce Gap 1, but it will only make Gap 2 worse. If you raise the quality goal without investing in the requisite training, personnel and systems, employees will see it as nothing more than banner-waving and go on with business as usual.

If you focus exclusively on reducing Gap 2, however, you may encounter tremendous pressure in the system to close the gap by lowering the goal. The history of the quality standard can often provide compelling evidence that the quality goal is out of line with the “real” system, and lead to “Drifting Goals.” Focusing exclusively on eliminating Gap 3 will create an identical tendency for the standard to float with actual quality.

The customer’s experience of quality is determined by the sum of all three gaps. The challenge for service companies (as well as manufacturing firms with service operations) is to develop the ability to identify and eliminate all three gaps even as the voice of the customer continually changes. It requires investing in service capacity ahead of the current requirements in order to be able to treat each moment of truth with the quality that the customer intrinsically needs or wants. The Complexity Line Model is based on the work of Bob Bergin and Gerri Prusko at Hanover Insurance Co. (Worcester, MA). The author has developed and used a Service Quality Management computer simulator to provide practice fields for managers to understand the complexity line concepts. The software runs only on Macintosh computers. If you wish to acquire a copy, please write to Daniel II. Kim, MIT Organizational Learning Center, MO-294, 1 Amherst St., Cambridge, MA 02139.

Further reading: “Now Quality Means Service Too,” Fortune. Apri122, 1991; Jan Carlzon, Moments of Truth (New York: Harper & Row, 1987).

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One may be tempted to conclude that substituting new people would be easier than replacing all the information and systems. But even in the most bureaucratic organization, with all its standard operating procedures and established protocols, there is much more about the firm that is unsaid and unwritten. In fact, numerical and verbal databases only capture a small fraction of the information that is in mental “databases.”

The essence of an organization is embodied in its people, not its systems. The intangible assets of a company reside in the individual mental models that contribute to the organization’s memory. Without these mental models—which include the subtle interconnections that have been developed among the members—an organization will be incapacitated in both learning and action. Yet in most organizations, individual mental databases are not “backed up,” nor is the transfer from individual to organizational learning well managed. A critical challenge for a learning organization is understanding the transfer process through which individual learning and knowledge (mental models) become embedded in an organization’s memory and structure. Once we have a clear understanding of this transfer process, we can actively manage organizational learning to be consistent with an organization’s goals, vision, and values.

“The essence of an organization is embodied in its people, not its systems. The intangible assets of a company reside in individual mental models…”

From Individual Learning…

In order to develop a framework for organizational learning, we must begin by understanding how individuals learn. The “Individual Learning Cycle” diagram shows a simplified model of individual learning. The diagram traces the process through which the brain assimilates some new data (environmental response), takes into account the memories of past experiences, comes to some conclusion about the new piece of information (individual learning), and then stores it away (individual mental models). After processing the new learning, one may choose to act or simply do nothing (individual action).

The processing stage has been labeled “individual mental models” because it represents much more than the traditional concept of memory. Memory connotes a rather static repository for knowledge, whereas mental models involve the active creation of new knowledge. Mental models represent a person’s view of the world, including both explicit and implicit understandings. They also provide the context in which to view and interpret new material, and they determine how stored information will be applied to a given situation.

…To Organizational Learning

In the early stages of an organization’s existence, organizational learning is often synonymous with individual learning since it usually involves a very small group of people and the organization has minimal structure. As an organization grows, however, a distinction between the two levels of learning emerges. Somewhere in that process, a system evolves for capturing learnings from its individual members.

There is little agreement on what constitutes “appropriate” learning—those individual actions or learnings that should be transferred from the individual into the organization’s memory. Standard operating procedures (SOP’s), for example, are viewed as an important part of an organization’s memory—a repository of past learning. But SOP’s can also be a roadblock to learning if an organization becomes locked into old procedures and avoids searching for entirely new modes of behavior. How does an organization decide when once-appropriate routines are no longer valid? Can an organizational anticipate obsolescence of its SOPs or must it always learn by first making inappropriate decisions in the face of changing conditions? These are the types of issues which a model of organizational learning must address.

Organizational Learning Cycles

By extending our model of individual learning to include organizational learning, we can begin to explore the transfer process between the two (see “A Simple Model of Organizational Learning”). This model represents the organizational learning cycle as a four-stage process, with organizational learning composed of three distinct sub-stages: individual learning, individual mental models, and organizational memory. Individual actions are taken based on individual mental models. These actions, in turn, translate into organizational action, and both actions produce some environmental response. The cycle is complete when the environmental response, in turn, leads to individual learning and affects individual mental models and organizational memory.

This simple model captures the transfer of individual learning to organizational memory via changes in individual mental models. Thus, organizational learning is separated from action (because all learning does not translate into taking new actions) and from environmental response (because all learning is not precipitated by the environment). The complete learning cycle, however, does include both the actions of the individual and the organization as well as the environmental response to those actions.

An Integrated Model

There are at least two fundamentally different levels of learning at which an organization must be equally adept—operational and conceptual. Operational learning deals with the changes in the way we actually do things–filling out entry forms, operating a piece of machinery, handling a switchboard, retooling a machine, etc. While operational learning emphasizes the how of doing things, conceptual learning, emphasizes the why of doing things—that is, it has do with the thinking behind why things are done in the first place. Conceptual learning deals with issues that challenge the very nature or existence of prevailing conditions or procedures. In order for organizational learning to be effective, however, conceptual learning must be operationalized into specific skills that can be learned and executed.

Individual Mental Models: Frameworks and Routines. Individual learning is captured in mental models through two different paths (see “Organizational Learning: An Integrated Model”). Operational learning produces new or revised routines that replace old or outworn ones. Conceptual learning leads to changes in frameworks, leading to new ways of looking at the world and new actions. For example, a design engineer may follow a six-step process for getting her drawings ready for a program review meeting. Through experience, she may learn to improve the process by stream-lining some of the steps involved (operational learning). As she rethinks the framework of her work—the context in which the drawings are being produced and what their use is—she may question the production of the drawings themselves and identify situations when the drawings may not be necessary (conceptual learning). Her revised mental models will contain both the new frameworks and routines as well as the knowledge about how the routines fit within the new framework.

Organizational Memory: Weltanschauung and SOP’s. The dual pathway continues from mental models to organizational memory. Over time, individual mental frameworks become embedded into the organization’s own weltanschauung, or worldview. An organization’s view of the world, in turn, affects how the individual interprets changes in the environment and how she translates her mental models into action. It also influences how the organization translates its organizational memory into action. For example, if an organization believes its ability to affect the environment is low, it will rely on standard routines and reactive behaviors. If, on the other hand, an organization assumes that it can take an active role in affecting its environment, this organization may approach everything in the spirit of experimentation, testing, and inventing.

In similar fashion, individual routines that are proven sound over time become a company’s standard operating procedures. The strength of the link between individual mental models and organizational memory depends how influential an individual or group is. In the case of a CEO or upper management, influence can be high due to the power inherent in the positions. Similarly, a united group of hourly workers can have a high degree of influence due to their size.

Incomplete Learning Cycles

Organizational learning requires completing the entire loop. If any of the links are either weak or broken, learning can be impaired. Situational learning, for example, occurs when the link between individual learning and individual mental models is severed: that is, the learning is situation-specific and does not change mental models. Crisis management is one example of situational learning in which each problem is solved but no learning is carried over to the next case.

When the link between individual models and organizational memory is broken, fragmented learning occurs. Individual mental models may change, but those changes are not reflected in the organization’s memory. When organizational learning is fragmented among isolated individuals (or groups), the loss of the individuals (through turnover or layoffs) means loss of knowledge as well.

The link between organizational memory and organizational action, if broken, can lead to opportunistic learning. This occurs when organizational actions are pursued without taking into account organizational memory or the organization’s values, culture, and SOP’s. Sometimes this is done purposely, when one wishes to bypass the features of an organization that may impede progress on a specific front. The use of “skunk works” to develop the IBM personal computer is a good example, as is General Motors’ creation of an entirely new car division, Saturn.

Managing the Whole Learning Cycle

Managing organizational learning means managing the complete cycle—explicitly. Improving each of the pieces is not enough—the links between the pieces must also be managed. This requires addressing each of the incomplete learning cycles described above.

Beyond Situational Learning.

Mental models are the critical pathway between individual learning and organizational memory. Mental models are the manager and arbiter of how new information will be acquired, retained, used, and deleted. Although a company can try to manage the flow of information, control the environment, or manipulate peoples’ learning environment in various ways, if a person’s view of the world remains unchanged, it is unlikely that any such actions will affect the quality of learning.

Therefore, closing the loop on situational learning—the link between individual learning and individual mental models—requires developing individuals’ ability to transfer specific insights into more general maps that will guide them in the future. In order to make mental models explicit, we nerd appropriate tools to capture the type of knowledge that is being mapped.

Dynamic systems, in particular, require a different set of tools for making mental models explicit. Systems archetypes (systemic structures that recur repeatedly in diverse settings) such as “Shifting the Burden” and “Tragedy of the Commons” can be very helpful for eliciting and capturing managers’ intuitive understanding of complex dynamic issues. Action maps are also useful for capturing the behavioral dynamics of a team or organization over time. They help managers see the larger patterns of behavior in which their specific actions are embedded. Together, these two methods can help surface and capture a great deal of tacit individual knowledge in a way in which it can be shared, challenged, and subject to change—thus transferring it to organizational memory.

From Fragmented to Organizational Learning. Capturing individual mental models alone is not sufficient to achieve organizational learning, however. There also needs to be a way to prevent fragmented learning among individuals and to spread the learning throughout the organization. One way to accomplish this is through the design and implementation of learning laboratories—managerial practice fields where teams of managers can practice and learn together (see page 5).

Learning laboratories can be designed, in part, around the learnings captured in systems archetypes and action maps. The spirit of the learning lab is one of active experimentation and inquiry, where everyone participates in surfacing and testing each other’s mental models. Through this process, a shared understanding of the key assumptions and inter-relationships of the organization can emerge. The use of an interactive computer management flight simulator (see “Flying People Express Again,” V IN6) offers the participants an opportunity to test their assumptions and to viscerally experience the consequences of their actions. The learning laboratory can be the vehicle through which organizational memory—via its weltanschauung and SOP’s—can be enriched over time.

Harnessing Opportunistic Learning. If the organization’s own culture and ways of doing things get in the way of learning, scenario planning and idealized designs can provide a way to break out of the norms. Royal Dutch Shell uses scenario planning to create alternative realities that stretch beyond what most managers in the company are likely to envision. By carefully constructing a multiple set of possible scenarios, Shell has been successful in anticipating and adapting to extremely volatile environments (see “Scenario Planning: Managing by Foresight,” V IN7).

Idealized designs, used by Russell Ackoff and his colleagues at Interact (Bala Cynwood, PA), can also minimize the amount of influence an organization’s current state has in determining its future. The principle idea is to start by crystallizing an ideal future without considering the current capabilities or organizational limitations. Thus, the planning process is “pulled” by where you want to be instead of “anchored” by where you are.

The Learning Challenge

The old model of a hierarchical corporation where the top thinks and the bottom acts is giving way to a new model where thinking and acting must occur at all levels. As organizations push for flatter structures and reduced bureaucracy, there will be increased reliance on the individuals to be the carriers of the organization’s knowledge. Instead of codifying rules and procedures in handbooks and policy manuals, the new challenge is to continually capture the emerging understanding of the organization wherever it unfolds. At the heart of it all is understanding the role individual mental models play in the organizational learning cycle and continually finding ways to manage the transfer from individual to organizational learning.

Further reading: Daniel H. Kim, “Individual and Organizational Learning: Where the Twain Shall Meet?” System Dynamics Group Working Paper #D-4114 (MIT Sloan School of Management, Cambridge, MA) 1989.

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* * * *

Utilization review (UR) procedures have become common in healthcare, as employers try to manage costs by restricting and limiting unnecessary care. For a while, such procedures worked: a study in Medical Care that analyzed 223 insured groups from 1984 to 1986 concluded that hospital admissions decreased 13% and overall medical costs were cut 6%, as a result of UR.

But The Wall Street Journal article raises concerns about the overall financial benefits of these procedures, be-cause of the great administrative burden they place on doctors and hospitals. Some analysts estimate that 20% of the current healthcare bill can be attributed to excess paperwork and other administrative-related tasks. By the year 2020, such spending could amount to half of total healthcare dollars. Although the UR system worked well at cutting costs at first, recent problems and increased administrative costs for providers suggest that the UR industry is suffering from a “Fixes that Fail” situation.

The Utilization Review Fix that Failed

As healthcare costs skyrocket, utilization review helps businesses reduce their spending (81). Over time, however, the additional administrative burden on providers caused by UR leads to higher costs, which are eventually shifted back to the employer (RI ).

Some generic structures occur so frequently that they have been identified as a generic set of tools called “systems archetypes.” This column is designed to help readers recognize archetypes at work in newspaper and magazine articles.

UR is popular because the cost savings far outweigh the fees charged to employers (B1 in “The Utilization Review Fix that Failed”). But over the long term, the increased costs to providers will lead to increased costs of services, further cost-shifting to patients, and in the end, greater costs for employers (RI). The increased costs are invisible for the most part, since the extra time it takes to answer a phone call or chase down information for a report is not measured.

Clearly, UR firms have helped employers deal with their biggest concern with healthcare: increasing costs. But the “Fixes that Fail” archetype suggests that any successes will be short-lived. As the healthcare system is revamped, it is critical that employers and providers focus on the long term and make sure any proposed “fixes” will not worsen the healthcare crisis (see “No More Band-Aids for Health-care Reform,” Cover Story, August 1992).(‘The Systems Thinker’ 4 Vol. 3, No. 7 01992 Pegasus Communications, Cambridge, MA)

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How did this happen? All your planning schedules seemed up-to-date, and there were no indications of delays. Now each of the departments is blaming the others: “If only they had given me x on time…” “If only the packaging group had let me know when they first knew they were falling behind…” Now you will have to hassle the different departments to get the parts out as quickly as possible, like you did with the last program. But you thought the problem had been solved—the company made it clear that late parts and missed target dates would not be tolerated. In fact, severe penalties were out-lined. What happened?

The Problem-Solving Treadmill

The above scenario is typical for many people caught on a problem-solving treadmill. The “Fixes that Fail” archetype provides a starting point to help you get off the treadmill by identifying “quick fixes” that may be doing more harm than good (see “Fixes that Fail: Oiling the Squeaky Wheel — Again and Again…” November 1990). The central theme of this archetype is that almost any decision carries long-term and short-term consequences, and the two are often diametrically opposed.

In the case of the product launch, the fix that was meant to keep everyone on target actually made things worse. Penalizing those who missed deadlines created a dynamic where no one dared reveal that they were running late. If no one was “discovered” before a critical deadline (like prototype test), then everyone would be discovered at the same time, and no one person or team could be singled out. After that crisis was addressed, schedules would be stressed even more and penalties for failure would be increased…again. The result: programs are continually run with inaccurate information, creating rework and further hurting the schedule.

Getting off the problem-solving treadmill starts with becoming aware of how one is operating in such a structure. What follows is a seven-step process for mapping out the systemic consequences of quick fixes and for identifying high leverage actions.

1. Start with the Problem Symptom (and only the symptom)

Oftentimes we confuse “problem solutions” with problem symptoms. We are so used to responding to certain types of problems that we begin to see the lack of our solutions as being the problem. Problem solution statements like “The problem is….we need a bigger sales force,” or “The problem is…we don’t have the latest order processing system,” can lead you right back on the problem-solving treadmill.

It is important to spend some time up-front defining the problem symptom. This will force you to understand the problem as separate from any actions that you have taken, are taking, or plan on taking. Try turning problem solution statements such as “lack of sales training” into problem symptom phrases like “falling sales volume.”

2. Map Current Interventions

After you have clarified the problem, you can map out various past “solutions,” as well as current and planned actions. This is where you may include your favorite solutions such as sales training, marketing promotions, advertising campaigns, etc. In each case you want to draw out how the interventions will rectify the problem. For example, marketing promotions make it more attractive to buy now vs. later, which leads to higher sales (loop B1 in “Fixes for Falling Sales” diagram).

By following the discipline of clearly articulating how your actions affect the problem, you create an explicit map of your causal assumptions. The output of this mapping process can be used to show others how you understand the problem, and invite them to add to or modify the diagram from their point of view.

3. Map Unintended Consequences

One action can produce multiple consequences. People are usually good at recognizing the intended results, but not as good at identifying the unintended consequences. Use the causal diagram to map out potential side-effects of any actions you have taken to rectify the problem.

For example, one danger of repeatedly using marketing promotions to boost sales volume is that the products become less attractive when they are not accompanied by promotions. Over a period of time, product image erodes and sales decline. This exacerbates the sales volume problem, which then justifies the use of more marketing promotions (R2). This tendency of the system to reinforce the need to take the same actions again and again is at the heart of “Fixes that Fail.”

4. Identify Loops that Create Problem Symptoms

Treating symptoms can become a full-time job, since each set of fixes creates new symptoms that beg to be “solved.” To stop the treadmill, however, we must identify what is causing the problem in the first place. This search for the fundamental cause may lead to very different questions. Instead of looking for ways to solve a “falling sales problem,” for example, we should try to understand what factors directly affect sales (aside from the fixes we have already proposed).

Some root causes may include quality of customer service, number of new products, manufacturing lead times, or product quality. As you explore the root causes of falling sales volume, for example, you may discover that the number of new products has been declining in recent months. The next question to ask is: “How is the problem symptom connected to the number of new products (or any of the other potential root causes)?” You may find that in response to revenue pressure in the past, investments in new products were curtailed. The effects of that decision are now being seen in the reduced number of new products, which further aggravates the falling sales volume (R3 in “Shifting Emphasis to Marketing Promotions”).

5. Find Connections between Both Sets of Loops

Oftentimes, “fixes” and fundamental causes are linked together in ways that further reinforce the continued use of the fixes. Identifying the links can highlight the many ways fixes can get entrenched in a company’s routine.

Shifting Emphasis to Marketing Promotions

As product attractiveness relies more on promotions, the emphasis on promotions increases. This leads to more promotions (R4) and lower investments in new product development (R5), which will further exacerbate the falling sales volume (R3).

In our marketing example, as the product attractiveness depends more on promotions, emphasis on promotions will increase, leading to more promotions (R4). Investments in new product development, on the other hand, will be reduced as the company shifts its attention to marketing (RS). The resulting diagram looks similar to a “Shifting the Burden” archetype, as the company grows more dependent on marketing promotions to push sales. (A “Fixes that Fail” structure usually carries the seeds of a “Shifting the Burden”).

6. Identify High Leverage Interventions

Identifying high-leverage interventions usually means cutting or adding links in the causal maps. These actions represent structural interventions that will alter the policies that affect how people make decisions and take action.

Cutting the links from “revenue pressure” and “emphasis on marketing promotions” to “investments in new product development,” for example, decouples investment decisions from other responses to falling sales volume. On the other hand, adding a link between “erosion of product image” and “investments in new product development” can channel important market information that can be used to enhance the product’s appeal.

7. Map Potential Side Effects

For every contemplated intervention, try to identify side-effects that may be undesirable (using steps 3-4 above). By mapping them in advance, you can better prepare to respond or perhaps design around them altogether.

Summary

The preceding seven steps are meant as guidelines (not a rigid set of rules) for systematically mapping out the multiple consequences of actions. The resulting diagrams can help clarify the critical issues and provide a common, shared understanding of the problem in order to design more effective and long-lasting solutions.

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According to Business Week, the risks are high, but so are the potential earnings. “For some suppliers, today’s painful cuts may eventually lead to fat profits. As customers settle in with their favorite Windows programs, software makers will collect a steady stream of upgrade fees…But before long, the old rule will set in. As more customers master these new Windows programs, it will become harder and harder for rivals to get them to switch. Regardless of the price.” (“The PC Price Wars Are Sweeping Into Software,” Business Week, July 13, 1992)

Features and capabilities weigh heavily in new product purchase decisions. Over time, however, the buying decision becomes more determined by the past history of purchases. A “Success to the Successful” archetype suggests that the success of a new product in the marketplace may depend more on structural forces than the intrinsic value of a product (see “Success to the Successful: Self-fulfilling Prophecies,” Toolbox, March 1992).

Say a company purchases software A and B but begins using A right away. As the company uses software A, the employees become more experienced with it relative to package B, making software A an increasingly attractive choice. For the next purchase, it seems easier to choose software A (R1). Software B becomes less attractive, since people are less experienced with it and therefore find it more difficult to use. This leads to fewer purchases, less usage and experience, and ultimately, no more purchases (R2).

A product’s long-term attractiveness is often more the result of this familiarization structure than the merits of the product itself. For software companies, the “Success to the Successful” archetype highlights the importance of not only getting a product to market rust, but making it easy for people to start using it. An early investment in customer hand-holding and technical support may kickoff a reinforcing engine ahead of the competition. For companies who are the consumers of these software packages, the archetype points out the risk of developing competency traps—using a technology solely because it is familiar. The danger is that companies can end up investing in and developing competencies in technology that is obsolete or ill-suited to their needs. To avoid falling into such competency traps, the best advice is to continually review the appropriateness of software (and other tools and technologies) relative to the company’s needs.

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Welfare — Problem or Solution?

A recent article in The New York Times touted the ills of the current welfare system in the United States (it was the first of a six-part series of articles beginning on July 6, 1992, entitled “Rethinking Welfare”). The article talked of the “increasing alarm over the persistence of welfare dependency,” and quoted President Bush as vowing to “break this cycle of dependency that destroys dignity and passes down poverty from one generation to the next.”

The welfare system, as described by the article, seems to be a feedback systems issue: an underlying structure, most likely resembling the “Shifting the Burden” or “Addiction” archetypes, containing self-reinforcing cycles that need to be broken (see “Organizational Addictions: Breaking the Habit” in the April 1992 edition of The Systems Thinker for another treatment of addiction).

Welfare Rationale

The original rationale for creating welfare programs can be described by a simple balancing loop: assistance decreases poverty, which then decreases the need for assistance.

Growth of Welfare

The Great Society programs of the 1960s grew out of the belief that poverty could effectively be reduced by providing the poor and disadvantaged with economic assistance. Developers of the programs argued that children specifically needed proper support if they were to grow up healthy, educated, and able to live full and productive lives. This was the rationale behind the Aid to Families with Dependent Children (AFDC) program — the primary welfare program in the United States — as well as related programs such as Food Stamps and Medicaid. The structural basis for this argument traces out a simple balancing loop: assistance decreases poverty, which then decreases the need for further assistance (see “Welfare Rationale”).

Welfare grew dramatically in the decades that followed, from approximately 3 million children in 1961 to nearly 12 million children in the mid-1970s, while the amount of payments in real dollars quadrupled. This growth in welfare soon became known as the welfare crisis, as evidence showed that poverty, particularly urban poverty, had gotten worse over the years instead of better. The welfare programs have been criticized as primary contributors to this entrenchment of poverty.

The underlying causes are thought to be as follows. First, since people receiving welfare do not have the same economic pressure to work as before welfare, their self-reliance erodes. This erosion of self-reliance further reinforces their poverty. Second, welfare affects social institutions, both governmental and cultural, in a manner that encourages poverty and rewards people for not working and not saving (welfare recipients are actually penalized for saving beyond a certain level). Although the evidence is somewhat controversial, it is also thought that welfare provides incentives for poor families to become larger than they otherwise would by encouraging unwed mothers to remain unwed and have greater numbers of children in order to receive more benefits. These additional effects also decrease self-reliance and increase poverty.

The “Welfare Addiction” diagram displays these relationships: decreases in poverty from assistance causes decreased self-reliance; this effect is delayed over time because cultural changes usually take about a generation to have an impact. The decreased self-reliance then results in increased poverty. In addition, increased assistance result in poverty rewards, such as disincentives to work or save money. These rewards again take time to be fully absorbed into the culture, but when they do, they further decrease self-reliance and eventually increase poverty.

The result is a case of dependency, where society has adapted to economic assistance and eventually comes to rely upon it. Self-reliance atrophies and the burden of economic support shifts to external assistance. This leads us to where we are today, with a sector of society well entrenched in poverty and a large and costly welfare program.

Evaluating the Proposals

A number of proposals are currently being developed to address welfare issues, and they are sure to be hotly debated in the coming months of this election year. From a systems viewpoint, how should we think about them?

One policy that is being taken seriously (and has been implemented on a small scale in a number of states over the last few years) is to reduce welfare programs outright. This could potentially plunge the system into withdrawal. In the short run, poverty would increase for those who depend upon assistance, and costs to the public would decrease. Over the long term, society should adapt and become more self-reliant. However, self-reliance is a skill that is easier lost than learned, so existing poverty may remain entrenched for quite some time after welfare programs are scaled down. Also, the side-effects of withdrawal, as with any addiction, could be devastating or overwhelming. Urban unrest and riots are likely withdrawal symptoms that could cause much pain and suffering. Just as heroin addicts can use methadone to negotiate their transition from addiction, perhaps welfare-addicted societies need something similar — a welfare equivalent to the popular “nicotine patch.”

Another proposal consists of supplementary aid to cities. For example, several billion dollars have recently been authorized by Congress to fund jobs for inner-city youth. Though it sounds promising, supplementary aid is the equivalent of a quick fix for an addicted society. It is politically expedient because it relieves a short-term need, but it does not address the fundamental issue of welfare dependence and its long-term impact on poverty. Rather, it will reduce the symptoms of poverty temporarily, thereby alleviating the discomfort generated by some of the recent cutbacks of welfare and the economic downturn in general.

A third proposal is workfare and job training. Under these programs, people would be eligible for assistance, but only for a short time unless they found a job, performed community service, or entered into a training program. This proposal has much merit — it eases the pain of welfare withdrawal while it requires and encourages people to work, thereby developing their self-reliance. In other words, it alters the structure of the system (loop B4 in “Welfare Addiction”).

Unfortunately, effective job training programs are costly and their results are not seen immediately. Therefore, they can be very hard to justify politically, especially during bad economic times. The New York Times describes such policies as “new attempts to change the behavior of the poor with carrots and with sticks.” If such efforts are implemented with long-term commitment, they stand to make a difference. But if they are done halfheartedly, they are apt to prove ineffective, lose their credibility, and become difficult to support.

Welfare Addiction

Although assistance decreases poverty (81), it also erodes self-reliance, which results in increased poverty over time (B2). Increases in assistance also increase poverty rewards, which further decrease self-reliance (R3). The result is an ‘Addiction” archetype that makes it difficult to break out of the welfare cycle. Properly implemented workfare and job training programs could increase self-reliance (B4) and break the cycle.

Implications for the Future

Admittedly, the above discussion is not an exhaustive analysis of welfare and somewhat oversimplifies the issues. Since approximately 75% of welfare recipients are African-American, many people regard welfare as a cultural issue. Others point out that the welfare budget is but a small fraction of the defense budget, and so in this larger context should not be viewed as a fiscal crisis at all. Lastly, many people assert that the rapid growth in welfare did not cause substantial increases in poverty. They claim that the poverty was there all along and was merely acknowledged as welfare programs came into their own.

Regardless, the central issue is one of self-reliance and self-responsibility versus addiction and dependence. This is not intended to reduce the welfare issue to a plug for rugged American individualism, but to point out that our society’s approach to welfare has become destructive and self-defeating. The mental models of linear cause-and-effect that policy makers had when they designed our existing welfare programs still abound. Therefore, much of the proposed legislation stands a good chance of being implemented from the same worldview that gave rise to the welfare crisis in the first place. The predictable solutions will alleviate the side-effects of dependency in the short-term, but will not address the fundamental dynamics of the system, particularly over extended periods of time.

An appreciation for the systemic structures that underlie welfare dependency could change this — shifting the focus to creating and increasing self-reliance and economic independence. In our various roles we will make choices as to how to participate in this, whether by being involved in a job-training program at work, volunteering at a shelter, or endorsing and voting for elected officials. We should let our insight into the structure of the addictive process guide our actions — realizing that it will take time, will almost certainly be uncomfortable, and in this age of the ten-second sound-bite, will require enduring commitment.

David Daniels is currently a manager at a large financial institution in New York City. He studied at the System Dynamics Group at MIT, where he did Master’s work on the dynamics of welfare and the AFDC program.

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Manage, support, boss. These are the words we commonly use in our working lives. Their meanings, whether we are aware of them or not, affect us, too, and they seem quite descriptive of what needs to change in corporate America.

Hierarchy and the Learning Organization

Much has been said recently about the “learning organization.” Readers of Peter Senge’s The Fifth Discipline: The Art and Practice of the Learning Organization are struck by the common sense of many of his insights. Qualities such as openness, empowerment, creativity and honesty are the desired foundation for the learning organization.

But is our current hierarchical employment structure, with secretaries and “bosses,” compatible with such a learning organization? I believe it is not. Yet little inquiry has been made about the nature of support work in organizations and the changes that need to occur, indeed, I have yet to hear the question raised as to whether such a structure can or should exist any longer.

What is the value of a secretary? She or he (usually she) assumes many of the caretaking tasks in the workplace. In effect, secretaries clean up after their bosses: they follow them around and put their things away (we call that filing); smooth over the rough edges in their communication (we call that proof-reading or “straightening things out”), and act as intermediaries between their bosses and the rest of the world (knowing when a “good time” to talk is, how to approach them, or what not to say).

Secretaries hold what little power they have by virtue of the real or imagined secrets that they hold about their bosses. In fact, that is the definition of secretary, “one entrusted with secrets.” So much for openness, honesty and trust. Managers and bosses, likewise, are trained to control, manipulate and get others to do their wishes. So much for freedom, autonomy, respect and the notion of a team.

“Little inquiry has been made about the nature of support work in organizations, and the changes that need to occur…I have yet to hear the question raised as to whether such a structure can or should exist…”

We accept that bosses require support. Does this imply that we believe they cannot stand alone? That left to their own devices they will slip, fall, sink, and therefore need to be held up? This runs counter to the discipline of personal mastery and the belief that we are whole people who stand on our own integrity. Yet, for some reason, this idea has not yet dispelled our expectations that the people in charge can’t do without helpers. These are long-held, hidden-way-down-deep assumptions that need to be brought forth and examined.

Hidden Assumptions

The support staff, by virtue of its existence, creates two tiers: the assisted and the assistant. No matter how convivial the relationship may be, the structure of the system often produces inequality and resentment over time.

I question the following beliefs about an organization’s needs, and the assumptions that lie behind the boss/ secretary relationship:

1) The “helped’s” time is more valuable to the organization than the “helper’s.”

2) The “helped” needs the “helper.”

3) The “helper,” if capable of doing more, would be among those “helped.”

4) What the “helped” require assistance in is only what they don’t want to do — the mundane, tiresome, repetitive, tedious tasks that require little skill and less creativity. Support staff is needed, therefore, because without people specifically hired to do these unsavory tasks, the work would not get done. There is no value in someone who could be “doing more” for the organization to do support work.

5) Secretaries like their work and do not aspire to more. Some people just want to be secretaries. The trick is to find them, for they are a dying breed.

Limiting Personal Growth

There is nothing inherently offensive about typing, filing, or answering someone’s telephone. One can learn a great deal about an organization and what the business is about from this position. However, there are some dangers in the system. One is the tendency for people who are good at administrative tasks — those who pay close attention to detail and can be counted on to hold the pieces together (or at least know where to find them) — to be discouraged from moving on. There is a lid placed above many of these positions, real or imagined, which is different from other entry-level positions in an organization. What starts out as an enthusiastic learning arena with new people, tasks and ideas, becomes stagnant when the challenge is only to do more of the same.

Equally limiting is our tendency to lump together repetitive and unimaginative tasks and call it support work, fashioning a job description that makes it one’s duty to act first in the person of one’s employer, and second as oneself. There is a danger in being encouraged to think the way your boss thinks, to know how he or she would handle a given situation, and to act in like manner. While some might call that “mentoring,” it is not always a positive learning experience. Rather than seeing work as a place to become more oneself, to find ways to contribute one’s gifts in the world, one can lose the fragile connection with one’s own voice and mind. Secondly, and just as damaging, one may begin to disappear in the minds of co-workers, so that they only see “X’s secretary.”

These assumptions produce hidden losses for the organization as well. The talents of the “helper” which fall outside of job description are rarely tapped into or known. Similarly, those “helped” have few opportunities, if any, to experience firsthand the dust they stir up behind them on the road. As a result, some basic learning about completion is unavailable to them. Low morale persists due to an over-reliance on hierarchy, even if people are genuinely fond of each other. When the going gets tough, and people are under extra stress due to deadlines or other difficult circumstances, the tendency is to revert to what we know best — the hierarchical role structure. Also, the organization can create or produce only what the “helped” envision. The whole organization must, then, live with their blind spots.

Sharing More than the Vision

There is much more we need to learn about the effects of the employment structures we are living and working in. What difference do titles make? How constricting/liberating are the labels we use, for people and for the activities they engage in? What other ways, besides seniority and office space, salary scales and titles, can we deal creatively with the fear and insecurity that exist in us about our jobs?

We have much to gain from inquiring into our beliefs and assumptions about hierarchy: a better understanding of how this system affects us as people and affects the relationships between the different organizational tiers, and the power of the words we use to name different roles. The relationship between a boss and secretary connotes more than a work relationship; it implies ownership, as a parent was once thought to own a child, a husband was once thought to own a wife, a plantation owner was once thought to own a slave. These are age-old and dark beliefs that were commonplace just a generation ago. Vestiges of them still linger in our organizations. The belief, the history, the unsurfaced assumption is present and it is ours to surface and to change.

“Secretaries” and “bosses” are the effects of a system of control and hierarchy that hampers the growth of individuals and inhibits the ability of our organizations to thrive. It depends upon a belief that some people can be treated as adults, given responsibility and privileges, but others, the majority, must be “managed.” For this to change, the roles people play must provide a real share in the range of experiences in an organization — the vision and the voice, the labor and the privilege, the failures and the triumphs. Such inclusion will benefit the entire system, which will gain access to a greater pool of human experience and talent.

Eileen Mullen has been working as an administrative assistant in MIT’s Center for Organizational Learning for the last two years. She is a singer/songwriter, and formerly worked as a high school English teacher and health educator in schools in Boston, Braintree and Worcester, MA.

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—George A. Weimer

The best managers are not just those who can address today’s problems, but those who will learn to deal with the changing paradigm of tomorrow—managers who will be the most flexible, open, and able to support and encourage the development of a learning organization. Achieving such objectives will require much more from our educational system than current reforms demand. It will require a fundamental shift in thinking about the purpose and value of education, and how the educational system should fit into the rest of society.

Current Fix-it

Many current reforms call for various changes in the system such as more financial investment and/or longer school hours. Some programs suggest allowing parents to choose schools and, through a voucher system (or equivalent), letting market forces determine quality. Still other reform advocates believe schools should simply go back to teaching the basics. A common assumption behind each of these proposals is that the basic design of our educational system is sound—it just needs some changes.

Therefore, most attempts to “fix” the educational system focus on the individual parts of the system and try to improve them, while believing the goal itself is to fix the broken pieces. As we faltered in our objective of educating students, we have focused on the stumbling as the problem to correct. This phenomena is called “error-correction error.”

Boston from New York City when you discover you have taken a wrong turn and are instead heading south to Philadelphia. An error-correction error would occur if you began focusing on not reaching Philadelphia, shifting your goal away from the original purpose of reaching Boston and focus instead on not committing the error again. The “fix” would be to pick a city, such as Albany, and head for it in order to avoid Philadelphia.

“Most attempts to fix’ the educational system focus on the individual parts of the system and try to improve them, while believing the goal itself is to fix the broken pieces.”

Most proposed educational reforms follow this same pattern. Rather than reexamining the fundamental purpose of the educational system, they focus on removing present ills such as low test scores, high dropout rates, low teacher morale, and low parental involvement. Proposals that fixate on the past and advocate going back to the basics are further examples of error-correction error. They don’t necessarily ask the question of where we should be headed today; instead they focus on correcting a course deviation that may be totally irrelevant to our current needs.

Because the causes of our current educational crisis are so complex and deeply embedded, only fundamental changes in the structure of the system will have lasting results. Lengthening the school day won’t help if students are not learning during the time they already spend in the classroom. Testing teachers won’t improve their skills if they were not well-trained in the first place, just as tightening standards and testing students will not make any difference if the standards are irrelevant to today’s needs.

There must be a profound shift in thinking and inquiry into the nature of change in education; otherwise, reform efforts might actually make things worse (see “Shifting the Burden of Re-form”). Attempts to “fix” low test scores, for example, may involve setting up focused classes on exam-taking techniques which can improve scores (B1). This, however, can reinforce a belief among students that education is about “performing,” and more fundamental ways to engage a student’s interest in learning will be lost.

The basic question remains: is incremental reform what we really need, or are we, as Bela H. Banathy suggests in his recent book Systems Design of Education, “still trying to rearrange the chairs on the deck of [a] sinking ship?” This is the critical question that must be addressed before we rush to “fix” the current crisis in education. Answering it will require us to step outside of the educational system and the current political arena; to shift our time horizon beyond the painful shortcomings of the present to see education in a broader social context.

Shifting the Burden of Reform

Attempts to “fa” low test scores through exam preparation can promote the belief that learning is about performing, and erode students’ interest in education.

Changing Needs of Society

One of the reasons the current educational system is not meeting today’s needs is because its basic structure was based on the requirements of an agrarian society. From that beginning, our schools adapted to meet the needs of an industrial society, producing workers who will work long hours and follow orders without challenging or questioning authority. As technology has advanced in the last few decades, however, society has shifted from producing goods to generating information and rendering services. Banathy argues that our educational system must be reexamined in the context of this cultural evolution to see how its role can be redesigned to meet society’s larger needs.

According to Banathy, the technological revolution has accelerated to the point that we have lost power over it—the wisdom and intelligence needed to guide the development of such technology have not developed along with it. Therefore, the key challenge for education is to nurture the sociocultural intelligence and wisdom to match the pace of the technological revolution. “Education creates the future generation, and that creation is shaped by the society of that generation,” Banathy explains. “We can say that education and the society are in a co-evolutionary relationship. There are times when an evolutionary imbalance exists between education and the society. Such is the case today.”

In examining the co-evolutionary relationship of our society and education, we must also question our current values and attitudes about education. In Japan, “education mothers” spend several hours each night helping their children with their homework, and Japanese students’ success reflects their parents’ efforts to encourage scholarship. “In America, we figure a kid either has it or he doesn’t at an early age, then channel the child into fast or slow learning groups,” says William Loxley, executive director of the International Association for Evaluation of Educational Achievement (Johnathan Levine, “Why Akio and Yves Beat Out Johnny,” Business Week, Sept. 14, 1992). In order for any reform to be successful, learning must become valued as a primary means for fulfillment and self-development.

A Shift in Thinking

This kind of connected, integrated view of education has been around since PAIDEIA of Athenian society, which was a lifelong transformation of the human personality that integrated every aspect of life. PAIDEIA, as Willis Hannan describes in his book Global Mind Change, aimed at the attainment of wholeness as a human being, embracing all domains of experience, including ethical, physical, cultural, social, mental, spiritual, economic, scientific, and technological. Robert Hutchins described PAIDEIA as a concept where “Education was not a segregated activity, conducted for certain hours, in certain places, at a certain time of life. It was the aim of the society…” (The Learning Society, 1968). Unfortunately, such a paradigm is underdeveloped in the United States today, where linear thinking dominates schools in their isolated environment.

System dynamics holds the potential to achieve this type of multifaceted view of education. Through systems thinking, students can learn they have the power to change the future—but that power can only be harnessed when their minds are first opened for learning. In the broadest sense, education as a system should be an integration of all resources and opportunities that enable the development of children and the continuous learning of adults. The current system enables children to learn while in school, but when they graduate they become alone in their pursuits (unless their employment offers opportunities for continual learning). The educational system needs to break out of its disjointed isolation and develop mutually beneficial relationships with other social systems, such as businesses.

Designing a New Future

In order to work toward improving and integrating our educational system, Banathy suggests first developing a clear vision of the future state of the system. This vision can then be clarified by forming a new image which will guide the design process. Banathy refers to the vision as the grand ideal, the underlying philosophy and inspiration that guides the imaging, while the image should capture a system of core values and ideas that elaborate on the vision and guide the system design (see “Map of the Design Journey”).

As this design journey proceeds, new thinking and core values will continuously evolve. They should guide the journey and at the same time be enriched and informed by it. The stages of the journey will likewise be interactive and recursive, creating an open process where we examine how we think about change, and further clarify the role and image of education.

Because it is constantly evolving, the journey of designing a new system will never end. Design is creative and decision-oriented; and Banathy believes “it is only the envisioning of an ideal educational image that will have the power to pull education into the 21st century” (see “Third-Wave School Systems: A Blueprint” on page 4 for an experimental model of a redesigned school).

Our Most Important Learning Organizations

It is becoming apparent that our nation’s schools are our most important learning organizations. Not only is it critical to train and prepare our workers for changing industries and a global economy, but the educational system can serve as a foundation for lifelong learning that can continue into the workplace.

Map of the Design Journey

A map of the design journey for a new school system. The center of the circle represents the core ideas, thinking, and values that will become part of the design. The questions along the outside mark the milestones of the journey.

As educational organizations strive to become learning organizations, they must work toward distinguishing between instances requiring adjustments and corrections, and situations which merit change and redesign. Banathy, applying Chris Argyris’ concept of single- and double-loop learning to education, says the thrust in single-loop learning is to maintain the system and “don’t rock the boat.” Double loop learning moves beyond boundaries and reexamines the vision, purpose, and necessary action. To redesign our current system, much double-loop learning needs to take place among everyone in the system—teachers, parents, administrators, businesspeople, and most of all, the learners themselves.

“There are currently many efficient schools; there are a number of effective schools; there are very few that are significant” (Don Glines and Kathleen Long, “Transitioning Toward Educational Futures,” Phi Delta Kappan, March 1992). Working to develop significant schools filled with learners and facilitators is a tremendous challenge; but to provide American companies with what they will need in the future, it is the only alternative.

For further reading about ongoing systems reform programs, see “Revitalizing the Schools: A Systems Thinking Approach,” Juneiluly 1991. Other reading: Banathy, Bela H. Systems Design of Education, (Englewood Cliffs, NJ: Educational Technology Publications, Inc., 1991). Global Mind Change by Willis Harman (Knowledge Systems, Inc., 1988) is avail-able through Pegasus Communications. To order a copy, or for additional resources, call our offices at (617) 576-1231.

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Of course this scenario is ludicrous — a pilot is allowed into a cockpit only after hundreds of hours of experience in a flight simulator. Then he or she spends many additional hours as a co-pilot, assisting in the operation of an aircraft. The result of this careful system of education and training is an industry with the highest safety record of any mode of transportation.

Flight Training for Managers

Imagine if we trained pilots like we do managers; how many people would be willing to take a flight? Managerial training, in the traditional business-school sense, is the equivalent of the ground-school for pilots. Managers-to-be read textbooks and solve already-formulated problems, but they don’t get much real experience before they have to perform on-line.

Management Flight Simulators

Management Flight Simulators (MFS) provide a simulated environment in which managers can “learn from experience” in a controlled setting. The simulator captures the interconnections between the different parts of the system under study and provides a computer interface which allows managers to interact with the model through a familiar “lens” (reports, graphs, and spreadsheets).

Similar to a pilot’s flight simulator cockpit, an MFS puts managers in control of a realistic environment where they are in charge of making key decisions similar to the ones they face in their actual work settings (see “Systems Thinking in Action” on page 7 for an example of an MFS project). MFS’s are particularly useful for getting away from the details of day-to-day operations and focusing on the long-term dynamics of managerial decisions.

Creating a Flight Simulator

There are four stages involved in creating a management flight simulator: (1) selecting an issue focus, (2) developing a conceptual model, (3) constructing a computer model, and (4) translating the computer model into an interactive simulator (see “Management Flight Simulator Development Stages” figure). These four stages involve integrating many of the tools of systems thinking into a single, powerful learning tool (see “A Palette of Systems Thinking Tools,” August 1990 for a description of each of the tools).

1. Select Issue Focus. The first step in designing a flight simulator is to choose an issue to explore. To select a topic, look for a problem symptom that has been around for a long time or a puzzling dynamic you want to investigate (see “The Do’s and Don’t’s of Systems Thinking on the Job,” August 1992, for guidelines on identifying good systems problems). The goal at this stage is to gather relevant data through interviews, company records, and the experience base of those involved in developing the MFS.

Management Flight Simulators Development Stages

In a classic “Success to the Successful” scenario, the greater the rich’s (A’s) access to the factors governing production, the greater their ability to generate still more resources and control even more production inputs (RI). Poor people (B) are thus able to control less and less of the world’s resources (R2).

For example, let’s say we are puzzled by a pattern of oscillating quality levels in the customer service department. Interviews with people in the department reveal a pattern of tremendous time pressure that repeats in a regular cycle. Company data provide a record of steadily rising sales and irregular levels of customer satisfaction. This process grounds the project in real data from which to build a causal theory.

2. Build Conceptual Model. After selecting an issue focus, you can begin to build a conceptual model that organizes the data into a coherent dynamic theory. Systems archetypes and canal loop diagrams (CLDs) can be very helpful for trying to understand what is going on (see “Systems Archetypes at a Glance,” May 1992, and “Guidelines for Drawing Causal Loop Diagrams,” February 1992).

In the customer service quality example, we can start building causal structures that provide plausible explanations for the observed data when customer demand increases, we know our service people feel added pressure. If the increase in time pressure is not addressed, quality tends to drift downwards and eventually dampens demand (B1 in “Time Pressure Loops”).

Our service people tell us people initially respond to the time pressure by working harder, thereby increasing productivity and getting more work done (B2). If the time pressure persists, however, morale declines and begins to hurt productivity even though people continue to work harder. As time pressure escalates, morale spirals downward (R3). By adding additional loops, we can continue building a dynamic theory about our customer service setting.

3. Construct Computer Model. The dynamic theory developed in the conceptual model helps guide the construction of a computer model. It provides a framework for people to distill their experience into explicit statements that can be represented in a computer model. Just as the pilot’s flight simulator is created based on the laws of physics and aerodynamics, the computer modeling process uses a set of fundamental building blocks (e.g., accumulators and flows) to represent a coherent set of theories about the interconnections in an organization.

In the customer service quality ex-ample, we could model the number of “personnel” as an accumulator and “hires” and “turnover” as inflows and outflows, respectively. The effect of time pressure on turnover may be modeled using a graphical function diagram representing a non-linear link between the two variables. That is, there may be little or no negative effects at low levels of pressure, but beyond a certain threshold, there may be a sudden dramatic increase in turnover.

4. Translate to Flight Simulator. Pilots first learn about the principles and concepts of aviation in school and then use the simulator to gain a better understanding of how those principles actually play out in real-life situations. Likewise, a management flight simulator is created by translating the “principles” captured in the computer model into a form that allows managers to interact with it in a realistic way.

A good simulator interface should provide managers with a set of decisions that either they have control over, or that directly affect them. The main criteria should be that the decisions are directly relevant or easily transferable from the simulator to the workplace.

In the service quality example, the simulator could require managers to make decisions about hiring/firing, monthly production numbers, and quality standards. By implementing a “Quality First” policy, for example, we may discover if we raise quality standards but don’t adjust capacity, we actually end up with lower quality in the long run. Quality improves in the short run, but as time pressure persists, morale decreases, turnover increases, which in turn increases time pressure, resulting in more turnover. The overall dynamic is a vicious reinforcing cycle in which capacity continually erodes and quality suffers.

In the Next Issue

The simulator should also provide managers with the same type of reports, spreadsheets, and graphs they use to make decisions. There are many issues involving the design of the simulator’s management information system which are entwined with the intended use of the MFS as a whole. These and other issues about the purpose, use, and outcomes of MFS’s will be covered in Part 2.

For help on converting conceptual maps to computer models, see “Accumulators: Bathtubs, Bathtubs Everywhere,” February 1991; “Structural Thinking: The World According to Accumulators and Flows,” March 1991; and “Graphical Functions: ‘Seeing’ the Full Story,” September 1991. To learn more about constructing computer models, see Introduction to System Dynamics Modeling with DY-NAMO (Cambridge, MA: Productivity Press), and Academic User’s Guide to STELLA (Hanover, NH: High Performance Systems).

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The “1992 Systems Thinking in Action Conference: Creating Learning Organizations” made a statement that creating learning organizations is a long-term process of fundamental change. The 600-plus participants showed their commitment to that journey through their enthusiastic involvement throughout the 27, days. Over 30 concurrent sessions helped add details and richness to the central theme, providing people with the opportunity to learn new tools and techniques as well as share their experiences putting those ideas into practice.

Each of the three keynote speakers provided a different perspective on what it means to create a learning organization. The following pages contain excerpts from their talks, which helped paint, in broad brushstrokes, the essence of what is needed to build learning organizations.

—DHK

“Acknowledging the collective nature of our perceptions marks the first step in the journey toward becoming a learning organization because the way we perceive the world is absolutely critical to all learning processes.”

PETER SENGE – A CRISIS OF PERCEPTION

Peter Senge’s talk, “A Crisis of Perception,” cut deep into our shared pool of assumptions. In a real sense, we are our assumptions because we perceive the world through the distinctions we make. But those distinctions do not originate from us as individuals; we inherit them through culture. Corporate paradigms and sacred cows are part of the “inherited” assumptions that affect how we perceive the world. Acknowledging the collective nature of our perceptions marks the first step in the journey toward becoming a learning organization because the way we perceive the world is absolutely critical to all learning processes.

We, as a species, have been evolutionarily programmed to be acutely aware of sudden, dramatic changes in our environment. There’s a very simple reason for that: for virtually all of our history, those were the primary threats to our survival.

The problem is that our world has changed and we have not. Today, all the primary threats to our survival come from slow, gradual processes, but we’re still waiting for sudden events. One way to think about this dilemma is as a crisis of perception. It is as if we are driving down a dark road and at the same time we are accelerating, we’re also turning down the headlights. Our power, our prowess, is causing the acceleration. Our diminishing capacity to see what’s around us is dimming the headlights. But as we accelerate, we really need an even greater capability to see into the future. That is, as our power increases, our perceptiveness also needs to increase…

Fundamental Assumptions

To address this crisis, we have to begin by exploring this question: what do we mean by perception? A common notion of perception is that we’re here and the world is out there. We don’t see it perfectly, since it’s very complex, so we filter, abstract, and process it. This view of perception is based on two assumptions: that there is an external reality, and that we can say something intelligent about its intrinsic nature, independent of our interaction with it.

There are a couple of problems with this common notion of perception. First, it’s rooted in assumptions. Secondly, progress in the field of understanding the biology of perception is beginning to show that it is an untenable viewpoint…

The reason we have this love affair with this simple model of an external world is that it suggests a basis of certainty. We have a deep love of certainty. It starts our whole cognitive process off with an external point of reference — the reality that is out there. What we need to do is give up the belief that there is absolutely, intrinsically, an external reality.

Perceiving through Our Distinctions

We perceive the world by making distinctions — but where do those distinctions come from? That is the territory of culture, because by and large, how we make distinctions is inherited. Our perceptions are collective, not individual. To a much higher degree than we recognize, we, collectively, are the perceiving apparatus, not I.

So what might be some of the implications? One implication is that it will begin to shift the perceptual center of gravity in our culture. Right now that center has shifted to the extreme of events and short-term orientation. The practical question is, what can we be doing to shift that perceptual center of gravity? (See “Causal Loop Diagrams—A Tool of Perception.)

Forecast vs. Prediction

Several years ago my friend Pierre Wack, the man who developed the scenario planning process at Royal Dutch Shell, was telling me an interesting story that highlighted the difference between prediction and forecasting. He had lived in India for much of his life, and he told me that if it rains for seven days in the foothills of the Himalayas, you can predict the Ganges will flood.

Now, it’s not the rain that causes the flooding, but the intermediating structure. If it rained for seven days in the middle of a tropical rain forest, there would be no flood. It’s the structure of the network of rivers, the absorbency of the ground, and the waters flowing through that create flood conditions. Relating that to forecasting versus prediction, Pierre explained, “A forecast is an attempt to get some quantitative information about the future. A prediction, however, is an understanding of certain predetermined consequences. You don’t know exactly when they’ll happen, you don’t know exactly how strong they’ll be. But you have some appreciation of an underlying phenomenon….”

Proprioception of Thought

If you close your eyes and raise your hand, you are aware your arm is upraised. When you close your eyes, you know where your body is. That phenomenon is called “proprioception,” and it is linked to one particular part of the brain. If that part of the brain is damaged, you have to learn to use visual cues to control your body, because you are no longer conscious of your body movements.

It appears we have no proprioception regarding our thoughts — we just have them. Our perceptions just occur to us. If we’re really trying to create a whole new domain of behavior, actions, and possibilities, but our perceptual apparatus is dysfunctional, then we have to become conscious about it. We have to become proprioceptive of our thought and our perception…

Seeing into the future is not about our eyes. The capacity to expand our time frame is not about what we can see; it’s about the distinctions we make and the way we think. We need to be able to speed up time in a way that allows everybody to see it. We need to be able to see into the future and extend our time horizon, by virtue of the distinctions we invoke. Maybe the whole purpose of this systems thinking stuff is nothing but expanding our capacity for perception…

Dialogue

Our perceptions may be vastly more collective than we think. The work that’s going on today in the area of dialogue is looking at this issue very directly. In dialogue, as we’re starting to understand it, we begin to probe into the cultural creation of meaning.

The exploration into dialogue is clearly in the right area, because it looks at the generative process whereby we invent cultural distinctions collectively. This is not an individual job. This is us, not me, not I…

One thing I keep coming back to, as a deep, deep, personal cornerstone in the changes that have to be made, is this business about certainty. There is something in all of us that loves certainty. And my own experience in watching others is that one of the things that may be the hardest to give up is that rigid external point of reference — what is it really?…

RUSSELL ACKOFF — ORGANIZATIONAL LEARNING AND BEYOND

If our old ways of perceiving the world are dysfunctional, then the institutions and structures that are a product of those perceptions need to be reviewed and redesigned. Russell Ackoff presented a different kind of organizational structure that is more closely aligned with the democratic ideals that govern the way we operate as a nation. He proposes a circular design where hierarchy is not just top-down but bottom-up as well. Every system has essential properties which none of its parts have. If I bring an automobile into this room and take it apart, I no longer have an automobile. The reason is that an automobile is not the sum of its parts — it’s the product of their interactions. The same thing is true in business. Business schools offer courses in production management, finance, accounting, marketing, etc. They take the organization and business apart. The assumption is that if you know how to run each part, you can then put them together into a well-run whole. But there’s a fundamental principle in the system of science that can be rigorously proven — if every part of a system operates optimally, the whole cannot operate optimally.

Effective management has to be the management of the interactions of the parts, not of the parts taken separately. Divide and conquer is no longer an effective strategy for management. How, then, can we organize in order to manage interactions? To do so, we need to understand a fundamental difference between “power over” and “power to.” “Power over” is the ability to exercise authority — to punish and reward. When you have a well-educated workforce, you can’t get things done by exercising power over them. There’s a negative correlation between “power over” and the rising education of subordinates. We can no longer get things done in our organizations by exercising power over people…

Democracy and Hierarchy

The solution, then, is to democratize organizations. Now, this appears to raise a paradox. Hierarchy is essential for the organization and coordination of work. But hierarchy and democracy are inimical. You cannot have a democratic hierarchy, because hierarchy is inherently autocratic, right? Wrong. Absolutely wrong.

There is nothing under the meaning of organization which requires that we represent it in two dimensions — levels of authority that flow up and down and responsibility that flows right and left. It’s just a convention. And because we haven’t been able to see organization in more than two dimensions, we have not been able to see how to develop a democratic hierarchy….

The Circular Organization

There is such a thing as a democratic hierarchy — the circular organization. The essential idea in the design of a circular organization is the creation of a board. Since the board of directors is considered to be a good idea for the chief executive, why should we deprive every other manager of having a board? So every manager has a board which will consist of himself, his immediate superior, and his immediate subordinates (see “The Circular Organization”). This promotes interaction within the organization, because each manager interacts with five levels of management — two levels up, two levels down, and across at his own level. In most organizations you don’t have that kind of an opportunity.

At the very bottom of the organization, the work groups should be small enough so every employee of the organization has the opportunity to serve on the board of his boss. Also, no group on the board should be larger than the number of subordinates. The subordinates do not have to be the majority, but they ought to be the largest single group on the board…

Now what do the boards do? They have six functions. First, the board produces plans for the unit for which it is the board. Secondly, they establish policy — they set up the rules that govern decisions. The third function is the board is responsible for coordinating the activity of the level below it. This way, coordination, or horizontal interactions, are in the hands of the people who are being coordinated (with the participation of the two higher levels of management).

The fourth responsibility of the board is integration. Because of the vertical integration of the circular organization, no board can pass a plan or a policy which is incompatible with a higher level. This eliminates a lot of problems, since 50% of the problems managers face are created by managers at some other level of the same organization. Why? Because decisions that are perfectly sensible at one level of the organization can often be disastrous three or four levels down.

The fifth function of the board is it makes the quality of work life decisions for the members of the board. The sixth function is the most critical one: they evaluate the performance of the manager whose board it is, and are responsible for helping him increase his effectiveness.

No manager can hold his position without the approval of his board. That’s what makes it a democracy and not an autocracy. Nobody can be in a position of authority over others without the others collectively having authority over him or her. So you get circularity. That’s why it’s called a circular organization…

Traditional Management

There are fundamentally three traditional kinds of management. One is the kind that says, “The current situation is intolerable, and things are getting worse. I wish things were like they used to be.” Their primary function is to recreate the past. This type of management is called reactive. It’s “reacting” — acting back, going back to a previous state.

A second way of dealing with problems is to forecast the future, decide where we want to be in that forecast, and plan a path from where we are now out to the realization of our vision. The problem is that the path lies through a future that is out of our control to forecast. That’s called proactive, as opposed to reactive.

The third position is inactive. These are people who say, “Well, the world may not be perfect, but it’s good enough. Let well enough alone. Don’t rock the boat. Let nature take its course.” So their principle objective is to do nothing.

Occasionally, the people who are trying to make things better, and who, in the eyes of the inactive manager, arc responsible for all the problems, sometimes create a problem which threatens the survival or stability of the inactive’s organization. Now the manager has to react to the crisis, so he practices crisis management. That means he’s always active, because with an increasing rate of change in the environment, the intensity and number of crises increases.

But the inactive manager would be busy even if there were no crises. Why? Because people don’t like doing nothing — being inactive. They have to do something. And therefore, the inactive manager’s principle concern is, “How do I keep people busy doing nothing?” This creates bureaucracies…

Corporate Perestroika

In almost every organization, the service units are bureaucratic monopolies. Why? They’re subsidized from headquarters through a budget that’s allotted to them, and their users do not pay for the services or products they receive. Their users have no choice as to where they get their accounting, or their advertising, or their research and development. They have to use the internal source. And the internal sources have no choice in to whom they supply their service. So we get bureaucratic monopolies…

Companies don’t operate under the market economy. In fact, they operate with an economy which is identical to the economy that the Soviet Union had before it recently reorganized. So what I’m describing is corporate perestroika. Just as what I just finished talking about was corporate glasnost, or the democratization of the corporation.

What happens if we introduce the market economy within rums as well as between firms? The essential characteristic of that new system is this: every unit in the organization whose output is consumed by more than one customer or consumer will be a profit center. That does not mean profitability will be the measure of its performance — but it will be taken into account in evaluating its performance. And, subject to a few constraints, every unit will have the following freedoms: it can sell its output to whomever it wants (internally or externally) at whatever price it wants to sell it; and it can buy what it wants anywhere it wants to at whatever price it’s willing to pay…

Learning

You never learn anything from doing something right. Because if you do something right, you already know how to do it. So, all you get is confirmation or affirmation of what you already know. You only learn from mistakes — that’s obvious, right? What is not obvious is that almost every organization — public or private, for-profit, or not-for-profit — is designed to conceal mistakes, particularly from those who make them. As a result, they can’t learn. Because if you don’t know what mistakes you make, there’s no way you can improve.

How do we design a system which will make people aware of their mistakes without acting as a policeman and punishing them for errors? August Busch, at Anheuser Busch, one of the best corporate executives I’ve known, had a very simple saying for his executives: “If you don’t make a mistake this year, there’s something wrong with you because it means you’re not trying anything new. But you better not make the same mistake twice.” Now, that’s the right kind of a rule to have. You want a system which allows you to make errors but enables you not to make the same error twice — a system that deals with learning not only skills and information, but gaining understanding and hopefully even wisdom…

“Almost every organization—public or private, for-profit, or not for-profit—is designed to conceal mistakes, particularly from those who make them. As a result, they can’t learn. Because if you don’t know what mistakes you make, there’s no way you can improve.”

SUE MILLER HURST — COME TO THE EDGE

Designing and implementing new structures will not fully transform an organization if the people do not release themselves from the old internal structures that say “1 can’t,” or “I am not worthy.” Sue Miller Hurst spoke to the learner inside each of us, talking about challenging our assumptions about our limitations and then breaking through them. Creating a learning organization requires a community of learners — and if we do not believe in our capacity to learn, then we cannot help create the space in which learning thrives. One of my favorite poems is by St. Appollonaire: “‘Come to the edge,’ he said. They said, ‘We are afraid.’ ‘Come to the edge.’ They came, he pushed them, and they flew.”

Eric Hoffer has said “in a time of drastic change, it is the learners who inherit the future. The learned find themselves equipped to live in a world that no longer exists.” One of the possible questions for us today, while we’ve been so diligent about our learning, is in what way have we followed the path of the learned instead of the path of the new learner? Imagine or remember if you can when you were a little child, when the beginner’s mind was not something you had to put on, but actually was something you lived through and in. Think about the child in you, still present. You are a marvel. You are unique. In all the world, there is no other child exactly like you. In the millions of years that have passed, there has never been another child like you.

We come as children, and when we come we really ask of life to be nurtured, to be loved, to be inspired. And we ask of life to notice us and to feel that we’re a gift. We come, each of us precious, fragile and very, very unique. And as we come, we come with the highest of hopes. And it’s the possibilities I want to talk to you about today…

Breakthrough — Moving to “I Can”

I want to talk to you about breakthrough. I have a sense that we’re wiser than we know or we’ve claimed. Over the last decade, over the last millennia, we have actually discovered much. But it seems as if it sometimes sits “out there” as interesting stuff. Somehow it’s hard to take it in and really act like we know it from the place of behavior instead of the place of intellect.

Remember Nobel Prize winner Ilya Prigogene, who was looking at the second law of thermodynamics and questioning whether the universe actually does run down in energy? He won the Nobel Prize for his work with dissipative structures. The interesting part is that he talked about how organisms under enough stress and perturbation actually fall apart and fall back together at a higher level of organization. The more complex the organism, the more easy it is to actually disrupt it so it will fall apart and fall back, fall apart and fall back—except that with human organisms we get the choice, do we want to fall back together or just leave it?

“If we are so rich in potential, what bars the door to our wisdom? To our collective action?…Maybe our skills and knowledge are the means for becoming acquainted and reacquainted again and again with our infinite capacity…”

When we look at the work of other pioneers — Karl Pribram, Rupert Sheldrake, Roger Sperry, Lyall Watson, Howard Gardner, or the ground-breaking work of Lazonov, Bell, Pert, Borysenko, David Bohm, Robert Rosenthal, Marian Diamond — we can see we have learned much about the human mind, the uncertainty of our sciences, and the holographic nature of memory. We can sense the limitlessness of our human capacity and the limits of our current working models of life. If we are so rich in potential, what bars the door to our wisdom? To our collective action?…

Remember the AIDS quilt? One of the quilts said, “If we are made in the image of our maker, then we are not human beings having a spiritual experience; we are spiritual beings have a human experience.” I want to invite us to the beginner’s mind that suggests maybe we are not using our learning capacity to gain the skills and knowledge we need. Maybe it’s the reverse — maybe the skills and knowledge are the means for becoming acquainted and reacquainted again and again with our infinite capacity…

Attention as Leverage

What really is the leverage for opening up to wisdom? Maybe it’s as simple as our attention. What do you want to pay attention to, right here, right now? When there’s disharmony between us — when I forget to think of the system, when I’m blaming and accusing, when I’m feeling like a hero, when I’m feeling like a victim, when I can’t figure my way out — what would happen if we just focused our attention? What if I actually honed all this ability — not of the brain but of the mind — right to this one point of attention? I actually think whole changes would be made on the planet, one by one by one…

I’d like to call you to a different action than some might do: I want you to make all the organizational changes you can think of that will make things more democratic, that will actually give people a voice, that will actually honor their being. I want us to reform and rethink and redesign factories. In fact, let’s call them design shops instead of factories. That way we can be free to place the furniture and the people differently so we might really empower people to come to work in a way that the soul comes to work. And then I want to empower you to stand in a place in 1993 that maybe you never stood before. This group here today can actually be the momentum of a wide change, coming not so much because we knew we had to fix it, but because we knew we could help — that we could hold the possibility and call on others to join in. Now that’s a beautiful possibility, and it’s a journey I think we’re getting ready for.

Carlos Cassanada would have called this a “cubic centimeter of chance,” and I think it’s worth taking. As we touch the web of each other’s lives, and the web of something much deeper than we can understand right now, if we can hold each other in a place of that mystery and that caring, I think it might come into being…

In the opening speech, Peter Senge stripped away the veil of unsurfaced assumptions and challenged us to examine the very nature of reality. To address the major crises we face today, we cannot learn what we need to learn without extending our perceptive capabilities beyond the short time horizons to which we are accustomed. Russ Ackoff described alternative models of an organization that can take us further in helping us break through the dualities that bind us in our dilemmas. Sue Miller Hurst challenged us to look deep inside ourselves and recognize the eternal learner in all of us that can set our spirits free. And it is that spirit that will bring life to this thing we call a learning organization.

—Edited by Daniel H. Kim

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