Using Systems Thinking to Facilitate Organizational Change
David Peter Stroh
© 2004, www.bridgwaypartners.com
There is an old adage in change management: “People don’t resist change; they resist
being changed.” Leaders want people to embrace change as a natural process, rather than
not resist it. What do we know about what motivates people to embrace change? What
are the implications of this knowledge for successful change leaders? What actions do
they take that cultivate people’s intrinsic desire to change, and what qualities do they
embody to be effective with minimum effort?
Through my own extensive experiences over thirty years in developing myself, furthering
individuals’ growth, and advising leaders of organizational change, I have come to
recognize several key principles that support natural change and growth:
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Both discomfort and safety are required
The truth will set you free
Commitment follows clarity
Make a few key changes
Engage others in the process, not just the product
Bring in the reinforcements
Container Building: Establishing the Foundation for Change
The purpose of container building is to develop readiness for change. Senior OD
consultant Ed Schein notes that the primary challenge in initiating change is creating
sufficient discomfort that people feel the need to change, and sufficient safety that they
are willing to take the necessary risks involved in learning something new. The metaphor
of container building describes the process of constructing a vessel that is strong enough
to safely hold the uncertainty and difficulty that most change entails. Imagine a cooking
pot: the sides of the container hold the heat that is required to transform the individual
ingredients into a nourishing dish.
In order to create discomfort and safety in a system, leaders first cultivate these qualities
in themselves. They have sufficient passion to achieve a better future, and the requisite
self-confidence to take risks. In addition, they develop a supportive coalition or core
group that agrees with what they want to accomplish, but also represents different views
about how to best achieve the results.
Change leaders create discomfort in a system by articulating the discrepancy between the
current and desired states. For example, early in his tenure at General Electric, Jack
Welch noted that GE would be first or second in every one of its markets, and clarified
the current performance of each business with respect to this standard. He complemented
the challenge he set forth with mechanisms intended to help people feel capable of
making such a change: personal attention; training, coaching and consulting resources;
the “workout” methodology designed to help managers increase the productivity of their
businesses; and an emphasis on adherence to new values as the basis for initial
performance evaluations.
People in a strong container move through five stages as they change:
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Clarity
Compassion
Commitment
Choice
Courage
These 5 C’s provide a useful mnemonic. More importantly, they inform change leaders
about qualities they need to embody and steps they need to take to help people and
organizations grow. While the following qualities are presented here as linear steps,
successful change leaders often weave them together in practice.
Clarity and Compassion: The Truth Will Set You Free
Change leaders create a shared picture of current reality to motivate change, foster
collaboration, and identify where to focus limited resources to make significant and
lasting change. They develop a shared picture of not only what is happening, but also why
it is happening. Leaders also help people understand how they frequently contribute to
the very problems they are trying to solve. Moreover, leaders couple confronting people
with their responsibility for current reality with compassion for the fact that most people
are unaware of their responsibility.
Telling the truth about reality begins with testing the assumption that we already know
the way things are. People often deny existing problems or ignore a problem that is likely
to get worse if not addressed now. Alternatively, they know that a problem exists or
might unfold, but deny that they have any role in addressing it. They are certain about
who is to blame for the problem, and even assume what others should be doing to solve
it. Finally, people might be reluctant or unable to deal with conflicting views regarding
what is wrong, why the problem exists, who is responsible, and what should be done to
solve it.
Overcoming Resistance to Seeing Reality Clearly
Change leaders address the obstacles of denial, certainty, and conflict to help people
develop a more accurate assessment of reality. One natural antidote to denial is curiosity
– a desire to understand the sources of our frustration and the world around us. Leaders
stimulate curiosity in the course of softening denial, reducing certainty, and making
conflict safe. They also ensure that the organization affirms its strengths and what is
important to not only retain but build on.
1) Softening Denial
Three ways to reduce denial are:
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Call attention to the gap between people’s good intentions and negative
experiences
Introduce feedback from a wide range of sources
Ask questions that uncover not only what is happening but also why it is
happening
Most people have good intentions and are genuinely surprised and frustrated when their
hard effort doesn’t produce corresponding results. Hence, one powerful question to ask
is, “Why are we having such difficulty in achieving our goals despite our best efforts?”
This question communicates support by acknowledging positive intentions and
simultaneously questions if success must come at such a high cost.
Requiring managers to get feedback from a wide range of sources - for example, both
satisfied and dissatisfied customers, employees on the front lines, high potential leaders,
and colleagues - often confronts them with the reality that performance is lower or less
sustainable than they imagined. For example, managers who become anonymous
customers of their own organization often discover how their real customers are treated.
Large group interventions that bring together multiple stakeholders can offer more
diverse views of a whole system, and 360-degree feedback provides an individual with a
broader perspective. Video feedback also helps people observe their own behavior
without being able to easily discount the source of information.
It is also useful to ask a series of questions that get below the surface of what is
happening to uncover the root causes of specific events. The “Iceberg” is a tool that helps
people identify what has been happening over time; what might happen in the future if
they do not change the course of events; and what are the underlying policies, processes,
procedures, and perceptions that influence and shape current events and trends.1
2) Reducing Certainty
Digital Equipment Corporation founder Ken Olsen used to say that nothing concerned
him more than success. He pointed out that success leads to complacency and
complacency causes people to miss cues that signal a change in the competitive
landscape. The attribution is ironic in light of Digital’s failure to anticipate the rise of
personal computers, and significant in that even the most successful strategies decay over
time and require fresh thinking. Here are some ways to reduce the certainty that what
works today will also work tomorrow:
1
Peter Senge, et al, The Fifth Discipline Fieldbook, pgs. 97-103 provides an example; Doubleday, 1994
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Consider the limits to growth of your current strategy, for example, constraints in
your own resources or the markets you serve, and actions that your “nightmare”
competitor could take to undermine your competitive advantage.
Develop alternative scenarios of the future and plan what you must do to be
successful in the face of uncertain and diverse possibilities.
Look for indicators that things are changing. For example, examine what’s
different or unusual in other industries or disciplines, track changes in the rates of
your own performance growth, and gauge leading indicators such as process
effectiveness or morale that could signal changes in results over time if not
addressed now.
Another form of certainty that hurts an organization is the belief that a problem exists and
that others are to blame and must be the ones to change. One way to reduce this certainty
is to gather all the key stakeholders in one place and ask them to develop a systems map
that describes the full complexity of the problem: the many factors, what these factors
impact, and what drives these factors. The complexity of the resulting map usually leads
people to realize that their simple hypotheses about what’s wrong, who’s to blame, and
what should be done are inaccurate or at least incomplete. It increases their willingness to
look more deeply for root causes and effective solutions.
3) Making Conflict Safe
One of the greatest barriers to clarifying current reality is the concern that people will see
reality differently and not know how to resolve their different views. This is one of the
reasons for building a strong container in the first place. Establishing ground rules and
providing tools for holding productive conversations around difficult issues is one early
step that change leaders can take to help people address conflict. The metaphor of the
blind men and the elephant, where several blind men touch different parts of an elephant
and swear that it is something else, also frees people up to recognize the inherent
limitations in any individual’s or group’s point of view. The aforementioned systems map
can help everyone draw the whole elephant, acknowledge both the validity and limits of
their own perspective, and create a richer picture of reality that incorporates multiple
views.
4) The Power of Appreciative Inquiry
Underlying the need to address obstacles of denial, certainty, and conflict is the
assumption that people will naturally resist self-criticism. Hence, a very different
approach to cultivating curiosity is to ask them to identify what is already working in
their organization and how they can build on it. This approach, known as appreciative
inquiry, can produce dramatic improvements in effectiveness without raising
defensiveness.2
See for example, David Cooperrider, “Positive Image, Positive Action: The Affirmative Basis of
Organizing”, in S. Srivasta & D.L. Cooperrider (Eds.), Appreciative Management and Leadership: The
Power of Positive Thought and Action in Organizations, Jossey-Bass, 1990
2
I believe that appreciative inquiry works best when it draws people’s attention to core
values that the organization wants to cultivate independent of particular circumstances.
At the same time, the primary limit to appreciative inquiry is what Gary Hamel calls the
“inevitability of strategy decay.”3 As noted, strategies and behaviors that work today
might not work in the future. Therefore, in order for people to realize their aspirations,
people need to continuously distinguish what they care about from how they need to
operate.
5) Removing Barriers to Clarity: An Example
The Chairman of a retail conglomerate was concerned about the strategic viability of one
of his companies. While the company performed adequately, changes in the competitive
landscape indicated that it might not survive without significantly overhauling its
strategy. However, the company was very operationally focused and had failed in all
previous attempts to initiate strategic company-wide changes.
He took several steps to challenge the management team:
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He replaced the retiring Managing Director, who had been very operational, with
a more strategically oriented MD.
He hired both a strategy consulting firm and an expert in the company’s market
niche to analyze and report on key challenges and opportunities for the company.
He also hired an organizational consultant to “breathe life into the strategy.” He
was concerned that the management team would not be able to either agree on the
strategists’ recommendations or implement them without additional help.
These steps had the dual effect of affirming the company’s value and questioning its
potential effectiveness. The Chairman’s actions signaled that the company warranted
investment, in no small part because of its traditional and extensive presence in
communities throughout the company’s home market. The new MD was also younger,
favored teamwork over one-on-one management, and brought new enthusiasm to the job.
At the same time, the MD’s strategic focus and the use of outside strategy and change
consultants paved the way for the management team and the rest of the organization to
rethink not only what it needed to focus on, but also how people would have to work
differently to survive, if not thrive, in the future.
Seeing Reality Clearly
Achieving clarity means:
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Discerning what to build on – and what to let go of – in moving forward
Identifying the root causes of problems before trying to solve them
Gary Hamel and Liisa Valikangas, “The Quest for Resilience”, Harvard Business Review, September
2003
3
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Determining how people are partially responsible for the very problems they are
trying to solve
Recognizing the payoffs of the way things are
Knowing “when to hold them and when to fold them” can be as difficult in management
as it is at the card table. Many studies point out that holding to a strong and positive set of
values is key to an organization’s long-term success.4 However, values that produce
success under one set of conditions can destroy it under different circumstances.5
Moreover, if we hold too tightly to a specific growth strategy, we might discover that
competitors attracted to the market by our success force us to change the rules of the
game and devise a new strategy to stay ahead. At the same time, learning from one’s own
success is essential because it raises pride, builds morale, and verifies homegrown
solutions that competitors often find difficult to copy. Leaders cultivate and maintain
strengths that are sustainable given likely changes in the environment.
Correcting maladjustments to the world around us is a necessary complement to
reinforcing what works. Yet people have a tendency to solve problems they don’t fully
understand. As a result organizations often implement solutions that either make no
difference in the long run or actually make matters worse. The resulting frustration,
burnout, and ineffectiveness are ultimately detrimental to both individuals and entire
organizations.
Therefore, another goal of a change leader is to slow down the rush to solutions by
demanding a deeper inquiry into the root causes of complex, chronic problems. For
example, the retailer’s incoming Managing Director commissioned an in-depth diagnosis
of his organization before deciding on a new strategy for the company. He knew that the
company had a very poor track record of implementing organization-wide strategic
initiatives and wanted to clarify the root causes of this problem before launching into a
new direction.
Systems thinking is a very powerful way of uncovering root causes because it illuminates
the non-obvious interdependencies among complex organizational (and external) factors.6
In the example, the Managing Director and his team learned that the team’s tendency to
rely heavily on a few key leaders and the organization’s strength in fighting fires would
undermine any attempts to define and implement new strategies based on a set of clear
guiding principles and cross-functional teamwork.
We say that the road to hell is paved with good intentions. One reason for this is that
complex systems tend to seduce people into taking actions that achieve short-term benefit
but often make matters worse in the long run. The retail organization depended on a few
4
See, for example, Arie DeGeus, The Living Company, Longview Publishing, 1997, and James Collins
and Jerry Porras, Built to Last, HarperCollins, 1994
5
Edgar Schein, DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation,
Berret_Koehler, 2003
6
David Stroh, “Leveraging Change: The Power of Systems Thinking in Action”, Reflections, Vol. 2, No. 2,
2000
key leaders and firefighting because these strategies had an immediate positive impact on
the company’s survival. At the same time they undermined the company’s ability to
utilize more of its resources and build momentum in a new direction – to actually thrive
instead of only survive.
Thinking systemically helps people recognize how they are in part responsible for the
problems they are trying to solve. They can learn how their well-intentioned actions often
produce unintended consequences that actually reduce their effectiveness in the long run.
Effective leaders know that the goal of taking responsibility is not to allocate blame, but
to take back the power that organizations surrender when they inaccurately assume that
problems are caused by forces beyond their control. For example, all members of the
retail management team, including the “go-to” leaders, saw that their efforts to keep the
company afloat prevented them from making the essential strategic adjustments that
could enable the company to succeed in the future.
Organizations must recognize that there are payoffs as well as costs to maintaining the
status quo. The costs to the retail company were obvious: it fought hard every year to
barely keep even with its competition, undermined the morale of employees who fought
one fire after another, and was losing several of its high potential leaders. Less obvious
was the satisfaction that the “go-to” leaders received from being so important, and the
adrenalin rush and immediate satisfaction that all of the management team accrued from
being in charge of frequent firefighting brigades. Acknowledging the value people get
from a seemingly dysfunctional situation is essential to making the hard tradeoffs that are
often required to create lasting change. We’ll discuss this more in the upcoming section
concerning Commitment.
Cultivating Compassion to Support Clarity
Confronting people with the truth of what is and their unwitting complicity in creating it
works most effectively when it is supported by compassion. We understand the
importance of combining these two factors when we talk about practicing tough love or
ruthless compassion. For most people, “We know not what we do.” It is easier for us to
let go of ineffective patterns of thought and behavior when we contrast the unproductive
consequences of these patterns with the good intentions that usually underlie them.7
The classic systems story is one of people whose good intentions lead them to take
actions that are effective in the short run, but who fail to realize that these same actions
hurt them over time. Change leaders who surface this story with compassion discover its
power to stimulate natural change. People can no longer convince ourselves that what
they are doing works or will turn out better if they do more of it harder and longer. They
can forgive themselves for not seeing the full truth of their situation, and move on to
reassess their intentions and strategies in light of new insights. This same management
team made significant progress when it realized that the company was stumbling not just
in spite of their best efforts, but because of them.
7
See, for example, Douglas Stone, Bruce Patton, and Sheila Heen, Difficult Conversations: How to
Discuss What Matters Most, Viking Penguin, 1999
Cultivating compassion is supported by an emphasis on learning. Change leaders
communicate, “We did the best we could with what we knew at the time. However, times
have changed, and we didn’t anticipate that the things we did that worked in the short-run
would have such negative long-run consequences.” Learning how our earlier views were
incomplete or inaccurate, how times have changed, or how our short-term successes
contributed to our current problems provides an opening to think more comprehensively
and productively. We can also anticipate more accurately the consequences of any new
solutions we might consider.
Commitment: Conducting a Full Comparison of Benefits and Costs
It might seem strange to talk about commitment so far along in a change process.
However, the power of shared aspiration is not sufficient to motivate change. People are
equally if not more committed to their reality, no matter how painful it might appear to
be. There is a saying in systems theory that systems are exquisitely designed to achieve
what they are achieving right now, however dysfunctional those results might appear.8
For example, the retail management team enjoyed the stimulation and importance of
fighting fires even if it was not being as effective as it could be. Other companies get the
benefits of reducing short-term costs even though their approaches undermine long-term
profitability. Key staff functions get satisfaction from knowing that they are working as
hard as they can to be as helpful as they can, even though they are not necessarily getting
the results they want.
Therefore, it is not sufficient to identify the benefits of changing and the costs of not
changing in order for change to occur. People must also become aware of the benefits of
not changing and the costs of changing if they are to make an informed decision about
what to do (see Figure One: Weighing Costs and Benefits below). Realizing a vision,
achieving a mission and goals, and being true to one’s values are all benefits of changing.
Poor results, frustration, and burnout are clear costs of not changing. Less obvious are the
benefits of not changing and the costs of change. We like being important, being
stimulated, being helpful, being right when others are to blame, cutting short-term costs
or increasing short-term revenues. We believe they are not only justified but will also
ultimately produce the long-term satisfaction we seek. Moreover, we shy away from the
risks and uncertainty associated with change. How can we trust that letting go of some of
our current payoffs will yield what we say we really want?
8
Robert Kegan and Lisa Lahey refer to this phenomenon as competing commitments in their book, How
the Way We Talk Can Change the Way We Work, Jossey-Bass, 2000.
Figure One: Weighing Costs and Benefits
In order for change to naturally occur, people must weigh the value of what they say they
want and the costs of not changing against the benefits of not changing and the costs of
changing.
1) Benefits of changing
 Better long-term performance
 Meet deeper human needs
4) Costs of changing
 Give up stimulation, selfimportance, etc. of working hard
 Risk short-term results for longterm effectiveness
3) Benefits of not changing
 People feel they are working as
hard as they can to be successful
 Others can be blamed for shortfalls
2) Costs of not changing
 Extraordinary effort yields at best
ordinary result
 Increasing financial pressure,
frustration, and burnout
We might say that change (C) occurs when C=1 x 2 > 3 x 4 in the diagram above.9
Enabling people to truly commit to what they say they want entails clarifying all four
quadrants and honestly assessing if change is worthwhile. For example, the in-group
within the retail management team needed to give up their special powers, and the group
as a whole needed to give up the stimulation associated with firefighting if they were to
create a more coherent and sustainable company. They were able to make the shift
because they could see that the costs in terms of uncompetitive performance, stress,
burnout, and turnover would only get worse if they continued their current behavior. In
addition, they developed a new and more meaningful mission for their work – being at
the heart of the communities where their stores were located – that both satisfied their
deeper needs for making a positive difference and led them to new ways of improving
operational performance. As they experimented with new ways of working, they were
also able to see that the costs of changing were lower than they thought: managers from
the in-group became more powerful as members of a powerful team in an increasingly
competitive company, and real movement on strategic initiatives began to reduce the
need for firefighting as a way to survive.
Choice and Courage: Two Qualities for Bridging the Gap
A gap is created when people simultaneously own what is and commit to what they really
want. Bridging the gap then involves making choices about how to best focus limited
resources and exhibiting the courage required to stay the course of implementation.
9
This equation was inspired by one developed by David Gleicher, C=ABD>X, where C=change, A=level
of dissatisfaction with the status quo, B=clear desired state, C=practical first steps toward the desired state,
and X=cost of change.
Making Choices
Despite statements to the contrary, many leaders and organizations find it difficult to
focus their limited resources on a few key priorities. The reasons include:
1. Leaders and their subordinates often assume that more effort will yield greater
results. By contrast, they do not consider that fewer initiatives carefully chosen
and sustained or sequenced over time are likely to produce even higher impact;
these are the leverage points that propel complex systems change.
2. Leverage points are often non-obvious, or they are apparent but unpopular
because they require people to accept short-run costs for long-run benefits.
3. Doing a lot is experienced as rewarding, exciting, and significant in and of itself.
4. Saying that some things are more important than others risks excluding certain
people.
5. Short-term progress leads managers to incorrectly conclude that they can move
onto other things, when in fact problems usually return without continued
reinforcement of the solutions that they are implementing.
6. Leaders often underestimate the time it takes to implement change and introduce
additional initiatives to push the troops when their original assumptions are
proven wrong.
7. New urgent needs tend to crowd out longer term important ones.
8. It is always easier to start something than to finish it, and people are more often
rewarded for their initiative than their follow-through.
It always makes sense to build on successes and strengths as long as they are sustainable.
Using the principle of leverage, successful leaders then discern the few changes that are
likely to make the greatest difference. One way that they determine such changes is to
identify logical connections between the various possible priorities that are being
proposed and the many change initiatives that are already underway.10 For example, the
retail company had a proud tradition and committed employees that it wanted to retain.
Therefore, it engaged all of its 30,000 employees in revisiting the company’s mission
over a six-month period. The management team also determined that how it worked was
a critical success factor in making the changes it wanted to make. Cross-functional
collaboration over time on a few company-wide strategic initiatives was essential to
overcome the firefighting efforts overseen by a few key managers that had kept the
company afloat until then. When additional priorities still tended to emerge during the
coming year, management recognized that it also had to change its reward structure to
support completion of current critical projects over initiation of new ones.
Exhibiting Courage
While courage is described here as a necessary quality for sustaining implementation, it is
also clearly an important attribute in earlier stages of the change process. Beginning with
10
For a more thorough approach to identifying leverage points, see, for example, Daniel Kim and Colleen
Lannon, Applying Systems Archetypes, Pegasus Communications, 1997
container building, change leaders take a stand that the status quo is no longer acceptable.
They then challenge unquestioned assumptions about what is happening and why, and
they surface individual as well as organizational responsibility for current circumstances.
They also question the benefits of a seemingly dysfunctional system and support people
to take the risk that they will lose those benefits in exchange for a more desirable but
uncertain future.
When it comes to implementation, change leaders have the courage to stay the course on
a program that might produce short-term pain for long-term gain. They recognize that
expediency and immediate gratification must sometimes be sacrificed for real
effectiveness. At the same time, they ensure sufficient short-term results in a new
direction to build momentum. As new successes occur, they resist the temptation to
declare victory and move on prematurely. They also continuously learn from experiments
without judging their efficacy too hastily.
In addition, leaders have the patience and fortitude to engage those not initially involved
in the change process, and are willing to address their concerns and resistance as well. In
essence, change is implemented in waves, and they realize that new people must retrace
the learning path of their predecessors.
One excellent checklist for staying the course of implementation and creating a new
organizational reality is described in the book Intentional Revolutions.11 The authors
identify seven levers that produce significant changes in thinking and behavior when
applied in concert:
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Persuasive communication: making the case for change
Participation: involving those affected in the change process
Expectancy: resetting expectations and mental models about what brings success
Role modeling: walking your talk as a leader
Structural rearrangement: redesigning systems and processes
Extrinsic rewards: reinforcing new values with positive rewards
Coercion: forcing out the people who do not support the change
Coercion, used sparingly and early on in a change process, can sometimes be the most
difficult lever to pull. Jack Welsh relates that people only got the message that he was
serious about cultural as well as performance change at GE when he fired several
managers who made their numbers but refused to accept the new values he wanted people
to adopt. Co-opting or marginalizing resistant stakeholders are related options that change
leaders must be willing to employ when necessary.12
For the retail management team, a critical moment of truth came when the company
began experiencing shortfalls in its operating performance halfway through the year.
Instead of fully retreating on the five strategic initiatives they were leading, the team
11
Edwin Nevis, Joan Lancourt, Helen Vassallo, Intentional Revolutions, Jossey-Bass, 1996
See, for example, W. Chan Kim and Renee Mauborgne, “Tipping Point Leadership”, Harvard Business
Review, April 2003
12
pulled back only slightly and insisted that employees remain engaged in this work while
addressing the immediate performance shortfall. Thanks to their persistence, the company
not only achieved its best operating year ever, but also made progress on all five strategic
programs.
Summary and Conclusions
Although we are accustomed to thinking of change as something that has to be forced on
people, effective change leaders make change more natural and acceptable. They begin
by building a strong container to hold the inevitable tensions and fears that change
produces. They cultivate curiosity about why the organization is struggling despite its
best efforts, and produce greater clarity about root causes and responsibility for current
performance. They communicate compassion for people’s inability to see the
consequences of their actions, and revitalize commitment to a direction based on a richer
appreciation of the benefits and costs involved. They make strong choices based on a
deep understanding of current reality and of the long- as well as short-term consequences
of their decisions. They draw on their own innate courage and passion for change while
utilizing change levers that send clear signals about what is desirable and required. The 5
C’s articulate both a roadmap for guiding effective change and a set of qualities that
leaders can cultivate in themselves as well as their organizations to navigate the terrain.