COMPLEXITY LEADERSHIP GENERATES INNOVATION,
1
Complexity Leadership Generates Innovation, Learning, and Adaptation of the Organization Today organizations come across situations where traditional methods no longer bring
the preferred results. When organizations use complex adaptive systems in their strategy, it will
lead to building systems that can quickly evolve solutions that are effective and adaptive
(Anderson, 1999). These dynamic systems necessitate different leadership approaches. This
paper will share how a leader would align the organization’s strategy, structure, and processes
with its external environment, as well as assess the relationships between organizational
structure, performance, and dynamic environments, evaluate the relationship between
environment, organizational performance, and the inter-organizational and intra-organizational
fit, evaluates the application of paradox as a theoretical lens to understand and to lead
contemporary organizations in dynamic environments, and evaluates how complexity leadership
generates innovation, learning, and adaptation of the organization.
COMPLEXITY LEADERSHIP GENERATES INNOVATION,
1
Complexity Leadership Generates Innovation, Learning, and Adaptation of the Organization To lead an organization today, a leader must align the culture, structure, and strategies to
the environments that it works within. Today organizations come across situations where
traditional methods no longer bring the preferred results. Anderson (1999) asserted that when
organizations use complex adaptive systems in their strategy it will lead to building systems that
can quickly evolve solutions that are effective and adaptive. These dynamic systems necessitate
different leadership approaches. This paper will share how a leader would align the
organization’s strategy, structure, and processes with its external environment, as well as assess
the relationships between organizational structure, performance, and dynamic environments,
evaluate the relationship between environment, organizational performance, and the interorganizational and intra-organizational fit, evaluates the application of paradox as a theoretical
lens to understand and to lead contemporary organizations in dynamic environments, and
evaluates how complexity leadership generates innovation, learning, and adaptation of the
organization.
Organizational Structure, Performance, and Dynamic Environments
In order to remain competitive in the global business world, organizations need to change
their systems which are run like machines where the top leaders decide everything important, to
dynamic systems of interconnected associations that are able to change in ways that exceed the
complex demands and expectations of today’s organizations (Duin & Baer, 2010). These
dynamic systems necessitate different leadership approaches. Today’s leaders must change from
the old hierarchical systems to dynamic systems, where leaders change the structure, culture, and
the strategy, to meet the dynamic environments they are in (Duin & Baer, 2010). The new
approach is based on enabling people using more of a relational manner, with shared or dispersed
control taking place at all levels and reliant on social exchanges and networks of power (Duin &
Baer, 2010). Therefore, as a leader of a multinational organization, the job will be to transform
the organization into one that is able to adapt, change, and learn as it grows in order to sustain.
Taking the organization from the traditional structure to one that is an adaptive complex
system requires the leader to acknowledge that the old system is flawed, old, and unable to
produce the greatest outcomes. Richardson (2004a) argued that in a complex system one person
cannot “ever know it completely” and therefore would always be in the “shadow of the whole”
(p. 77). In traditional management the Chief Executive Officer’s (CEO’s) main emphasis is
obsessed on holding on to the control of the organization in order to meet the expectations of
stockholders, which would be the darkness principle (Weymes, 2004). The knowledge of one
leader may possibly have of a specific organization, is inadequate, which means that no one
leader has the vital diversity to control an organization as it is more diverse than that person
could be (Richardson, 2004b). Today an organization’s success is affected more by its social
resources, like its business IQ and the ability of the organization to learn and adapt, than by its
physical resources (Uhl-Bien, Marion, & McKelvey, 2007). This infers that it is necessity for a
leader to give up his or her old ideas of leadership, and embrace the new ideas of leadership.
In a traditional structure the leader is seen as knowing everything and is the only person
that can make the right decision for the organization. For example, at Heartland, the CEO only
meets with the division heads once a week to get an update and tell them what he would like
done, thus retaining complete control. This leadership style is old and no longer meets the needs
of the growing complex system it has become. The panel at IBM made some great suggestions
on what leaders should be like and how they should collaborate instead of control. They include;
(1) avoiding individual biases; (2) not giving into individual biases or limited knowledge; (3)
thinking beyond the limited knowledge; (4) use the collative intelligences of the group; (5) no
one person is in control; and (6) empowering people to get around biases (IBM, 2011). The key
is to enable instead of control, which is a hard concept for traditional management and leadership
to understand and embrace.
A leader also must be aware of the dynamic environments, both internal and external, so
that the organization can adapt. For instance, the two giant cola companies, PepsiCo and CocaCola, have always had a rivalry due to the nature of their organizations. However, they also have
competitive interaction. Nair and Sclover (2012) explained the each of these two organizations
have strategies that are not independent, but exhibit interdependent relationships. The
relationship between the two suggest that neither one is consistently the leader (Nair & Sclover,
2012). There are times when Coca-Cola leads PepsiCo and times when PepsiCo leads Coca-Cola
as they make their competitive moves (Nair & Sclover, 2012). This strategy does not weaken
either organization; instead it shows that both are aware of the external dynamic environments in
which they conduct business.
Of course one person cannot understand and control all of these dynamic environments;
the fact is it takes a team. Bajer (2009) asserted that today’s leaders must “attempt to develop
leadership cultures where everyone in an organization is actively working together to create
changes and add value” (p. 38). Scharmer (2010) explained that leaders, who perceive the
emergent future as the beginning of something intensely new, let go of the past, and look at the
future probabilities, a future that may perhaps be very unlike the past. In a sense this means that
chaos is vital to the development of evolution and adaptation because complex adaptive systems
are “most adaptive when near the edge of chaos” (Schneider & Somers, 2006, p. 355). Leaders
who embrace a complex adaptive system will adjust through the evolving characteristic of selforganization, which comes from the inter-dependency of the sub-systems (Schneider & Somers,
2006). Uhl-Bien et al. (2007) explained, the old traditional management structure was designed
to control behavior, whereas complex adaptive systems are changeable structures with numerous,
intersecting hierarchies. These interdependent agents interact and are bonded in a supportive
dynamic by shared goals, outlooks, and needs (Uhl-Bien et al., 2007). Again, HCL Technologies
is one organization that a leader can look at to better understand how to redesign the organization
into one that is able to adapt, change, and learn as it grows in order to sustain.
The Inter-Organizational and Intra-Organizational
As internal organizational methods become more complex, the external situations also
have become more complex creating conflicting demands, that leaders must respond to, which
can determine the organization’s destiny (Smith & Lewis, 2011). In the study conducted by
Mena, Humphries, and Wilding (2009), they found, in contradiction of past assumptions, interorganizational actually have higher levels of collaboration than intra-organizational relationships.
This means that it is vital for the organization and its leader to understand the influence that takes
place both inside and outside the organization. Bajer (2009) pointed out, “Leadership is a
competence that everyone in an organization should have and continuously develop” (p. 38). A
great example of an organization that is making the change away from the traditional leadership,
to one that empowers everyone is PepsiCo. Indra Nooyi, CEO is working on shifting from a
hierarchical structure to a dynamic, networked structure, acknowledging that PepsiCo has to
change (Colvin, 2012). This organization aggressively supports leadership development and
educational programs for all associates (PepsiCo, 2013). By developing all associates the
organization is able to make more globally responsible decisions that affect the interorganizational system in a positive way.
Complex adaptive systems are changeable structures with numerous, intersecting
hierarchies (Uhl-Bien et al., 2007). In a hierarchical system, the CEO is the only individual with
an overall view, and decisions are made from the top/down (Schraagen, Veld, & de Koning,
2010). In contrast, complex adaptive systems operate using a bottom/up strategy. Most
environments today are unpredictable, and therefore organizations cannot predict to a greater
degree the nature of the demands they will be faced with (Schraagen et al., 2010). The old fixed
organizational structure worked well when the environment was stable; however unstable
environments require original structures (Schraagen et al., 2010). In response to this
unpredictability, organizations are starting to adopt complex adaptive system structures, where
the organization is decentralized, team-based, and has a distributed power structure (Schraagen et
al., 2010). The interdependence of each agent creates success of the overall system (Smith &
Lewis, 2011). Dering (1998) explained that a leader’s behavior will help an organization get past
the theory and recognize profound, lasting change.
Leaders can apply network theory to assist in organizing the organization. Segre (2004)
explained network theory from a sociological viewpoint centering on the structural examination
of social networks, and looks at individuals, or actors, actions as controlled by these networks.
Moliterno and Mahony (2011) stated that the actors in a network of an organization are
individuals, groups, or the organizations they do business with. Kilduff and Brass (2010)
expounded that there are main concepts that make up an organizational social network. These
ideas are: embeddedness, social relations, utility of network connections, and structural
patterning (Kilduff & Brass, 2010). The actors in the network are embedded in a relational
system (Rowley, 1997), which connects and divides them (Kilduff & Brass, 2010). A great
example of this is when Nayar and his organization created the U & I portal, which produced
transparency and built trust, with questions going both ways, thus creating a social network
within the company that had an informal structure (Nayar, 2010). Kilduff and Brass (2010)
explained that individuals rely on social networks to make essential choices that forge, and
renew social ties.
Cohesive networks offer chances for innovation, collaboration, execution, and the
learning of complex information (Kilduff & Brass, 2010). Actor characteristics, agency, and
cognition are all necessary parts of the value of social connections (Kilduff & Brass, 2010).
Segre (2004) asserted that when actors are directly related to their society by means of robust ties
creating a dense network, the consciousness of the actor is at such a degree that everyone may
perhaps create strong ties with everyone else. In an organizational network, where actors have a
wide variety of functions, they are aware of the importance of their social parts for the
organization’s society as a whole (Segre (2004). An example of this would be the over whelming
responses Nayar (2010) received when he shared his problems. Nayar (2010) stated that it
seemed that everybody in the company wanted to help their CEO and had an opinion on the
problem. Organizations have nested organizational networks because the social network
perspective entities are not separate, and instead they are entrenched in systems of social
connections (Moliterno & Mahony, 2011). Rowley (1997) asserted that the “interaction of
interactions” in an environment impacts an organization's actions and can affect the tendency to
adopt new technologies. As in the case of HCL Technologies, the significance is in the fact that
actors are well connected providing actors with an environment that offers many alternative
sources of information and resources that would not otherwise be available (Rowley, 1997).
Nayar’s sharing with his employees that no one person can have all the answers and every
employee’s suggestions or thoughts mattered, helped HCL Technologies develop a network that
can be applied to any organization. In reality, other organizations could easily start adapting this
concept by simply creating a Facebook page that all employees would have access to. From there
anyone who had a problem could share that problem and have others help solve it. This would
bring about a social network that would allow for greater transparency and build trust.
Paradox as a Theoretical Lens
As organizations transform from the traditional machine systems, to ones that are viewed
as a natural open system with fewer defined limits within its external environment, leaders must
embrace the paradox of organizing (Macey, 2011). Organizations were once viewed as selfcontained, today’s organization are viewed as social structures that are influenced by dynamic
systems of interconnected associations (Macey, 2011). Macey (2011) asserted that the paradox of
organizing looks at organizations as open systems that react to the interdependence using
strategies like enactment and deviation. There are two parts to the paradox; first the inflexible
structures that are designed to solve issues have unintentional costs and the resolutions
experience an uncomfortable dualism because they are designed to control, as well as are
influenced by the organizational environment (Macey, 2011). This means that for organizing to
transpire, predictable influence and dependent embeddedness must occur (Macey, 2011). Smith
and Lewis (2011) proposed that the dynamic managerial equilibrium approach involves a
paradox that uses complementary and intermingled strategies of approval and resolution. Leaders
must accept that tensions must and can coexist; therefore, these tensions can be carefully
explored (Smith & Lewis, 2011). If leaders can manage the organizational paradox, then a
dynamic equilibrium will promote imagination and learning.
A paradox is conflicting, interconnected components that concurrently continues over
time (Smith & Lewis, 2011). For example, organizational leaders should understand that both
flexibility and stability is needed, thus creating the paradox. Today, organizations must have
flexibility in order to create adaptability, innovation, collaboration, cost control and sustain a
competitive advantage (Melin, 2010). Flexibility allows the organization to change or be
changed effortlessly depending on a situation (Melin, 2010). Yet, stability is also needed because
it creates predictability which reduces uncertainty (Melin, 2010). Melin (2010) explained that
stability is about holding a permanent position that is not likely to move or change and sustain a
competitive advantage. The goal is to find the balance between the two in order to produce
practical outcomes (Melin, 2010). For instance, whenever a leader is looking at short term
performance the leader has to take into account the long-term adaptability (Macey, 2011).
Organizations are complex adaptive systems that continue to grow in complexity
demanding an increase in shared interdependence. Each of the different sub-systems has a
different way in which they function, which is limited by how its members experience and
understand their environments (Macey, 2011). These different sub-systems cause underlying
tensions. Some of these tensions are: collaboration and competition; learning and belonging; the
need for change and the desire to stay the same; as well as become enablers and hurdles to
change and development (Macey, p. 384). These tensions often cause agents to force an either/or
decision instead of a both/and perspective, which is more productive (Smith & Lewis, 2011).
With the overwhelming rate of change today, organizational paradox has become even more a
part of everyday life because change makes conflicting demands on individuals. Organizational
paradox is a natural consequence of change. For example, when a decision is made to adopt a
new technology, tension is created. This tension takes place because the technology becomes
both an obstacle one must learn and an enabler to those who find the technology easy to adapt to.
Leaders must learn to understand that there will always be paradox within the organization and
develop a way that everyone can understand it and use it as an advantage.
Complexity Leadership
Leaders today must shift away from viewing their organizations as machines, to viewing
them as complex knowledge centers that can generate innovation, learning, and adaptation. This
simply means that rules transpire as an unstructured order; they are not initiated intentionally by
one scheming mind (Lee, 2011). Instead everyone in the organization plays a part in how rules
are formed within the organizational system. Organizations, which are systems, are made up of
an assortment of sub-systems and people with various freedoms for independent action (Wilson,
2009). These actions or patterns are not always predictable, yet they can impact other subsystems or people inside the complex system, possibly changing its circumstances (Wilson,
2009). Complexity from emergence of simplicity is complexity theory. Complexity theory uses
the living system with its non-linear ability to adapt and is founded on two concepts, how
sensitive the system is to its starting environments and the feedback from the system (Wilson,
2009). Lee (2011) explained that the emergence of patterns comes from local interactions.
Complexity theory refers to relationships and patterns between the components, and the
randomness connected with working with individuals in a dynamic organization or system
(Wilson, 2009).
The creation of non-formal and formal social structures and relationships, which comes
from human beings bounded rational nature, affects the choice and usefulness of the action, as
well as the outcomes of such actions (Lee, 2011). What takes place in the emergence of complex
systems is evolutionary change that comes from “adapting beyond the circumstances that gave
them birth” (Lee, 2011, p. 516). Lee (2011) explained, “What emerges is a form of “social mind”
that solves complex organization problems without conscious cognition” (p. 516). Consequently,
what emerges is a social organization that performs as a united problem-solving unit, which
occasionally supplements and replaces the decision and resolution procedures at the single level
(Lee, 2011). One organization that has found a way to encourage its people to become part of the
problem-solving unit is the Cheesecake Factory. The Cheesecake Factory has created a video
learning portal, which is a YouTube-like learning portal that allows any member to upload a
video showing themselves performing their job well (Bersin, 2012). The member can share any
job that they have from making food to cleaning, which has let them share how they solved
issues that they had on the job (Bersin, 2012). By creating a place where everyone can share and
learn the organization has the ability to adapt and grow without looking for answers from the top.
Uncertainty, diversity, and rapid technology changes are adding to complex
organizational systems (Ilinitch, Aveni, & Lewin, 1996). The key is to enable instead of control,
which is a hard concept for traditional management and leadership to understand and embrace.
Great leaders make it easier for people to: connect, have different ideas, and have disagreements
(Wagner, 2011). Bersin (2012) asserted that when a huge mistake takes place in an organization
it creates the most learning; the key is to learn from these mistakes. Wal-Mart is a great example
of an organization that helps its people look at their mistakes and learn from them so that they
can share it with the entire organization. Whenever Wal-Mart puts out a new initiative they
require the manager and supervisors to create a list of what could have been better and an action
plan with best practices included in it (Frazier, 2008, personal experience). The goal of Wal-Mart
is to create an environment that stresses the importance of honesty, respect, open communication
and innovation (Walmart, 2013). This allows the entire organization to learn and adapt. By
embracing the complexity and working within it, organizations will succeed in today’s complex
market.
Conclusion
In order to remain competitive in the global business world, organizations need to change
their systems which are run like machines where the top leaders decide everything important, to
dynamic systems of interconnected associations that are able to change in ways that exceed the
complex demands and expectations of today’s organizations (Duin & Baer, 2010). Today’s
leaders must change to dynamic systems, where leaders change the structure, culture, the
strategy, to meet the dynamic environments they are in (Duin & Baer, 2010). A leader also must
be aware of the dynamic environments, both internal and external, so that the organization can
adapt. As internal organizational methods become more complex, the external situations also
have become more complex creating conflicting demands, that leaders must respond to, which
can determine the organization’s destiny (Smith & Lewis, 2011). Organizations were once
viewed as self-contained; today’s organizations are viewed as social structures that are
influenced by dynamic systems of interconnected associations (Macey, 2011). The paradox of
organizing looks at organizations as open systems that react to the interdependence using
strategies like enactment and deviation (Macey, 2011). By shifting away from viewing their
organizations as machines, leaders can turn their organizations into complex knowledge centers
that can generate innovation, learning, and adaptation. By embracing the complexity and
working within it, organizations will succeed in today’s complex market.
References
Anderson, P. (1999). Complexity theory and organization science. Organization Science, 10(3),
216-232. ISSN 1047-7039
Bajer, J. (2009). Today, either everyone is a leader, or nobody is. Strategic HR Review, 8(5), 3839. ISSN 1475-4398
Bersin, J. (2012). 5 Keys to building a learning organization. Forbes, 1-2. ISSN 2219-1933
Colvin, G. (2012). Indra Nooyi’s Pepsi challenge. Retrieved from
http://management.fortune.cnn.com/2012/05/29/pepsi-indra-nooyi-2/?iid=EL
Dering, N. Z. (1998). Leadership in quality organizations. The Journal for Quality and
Participation, 21(1), 32-35. ISSN 1040-9602
Duin, A. H., & Baer, L. L. (2010). Shared leadership for a green, global, and Google world.
Planning for Higher Education, 39(1), 30-38. ISSN 0736-0983
IBM . (Producer). (2011). IBM THINK forum | A conversation on bringing science to leadership.
Available from http://www.youtube.com/watch?v=aEcEdJaxr0c&list=UU28uMrop1YYpzHN8ukzOXA&index=71&feature=plcp.
Ilinitch, A. Y., Aveni, R., & Lewin, A. Y. (1996). New organizational forms and strategies for
managing in hypercompetitive environments. Organization Science, 7(3), 211-220. ISSN
1047-7039
Kilduff, M., & Brass, D. J. (2010). Organizational social network research: Core ideas and key
debate. Academy Of Management Annals, 4(1), 317-357. ISSN 1941-6520
Lee, C. (2011). Bounded rationality and the emergence of simplicity amidst complexity. Journal
of Economic Surveys, 25(3), 507-526. ISSN 0950-0804
Macey, G. P. (2011). Environmental crisis and the paradox of organizing. Brigham Young
University Law Review, 2011(6), 2063-2114. ISSN 0360-151X
Melin, U. (2010). The enterprise system as a part of an organization’s administrative paradox.
Journal of Enterprise Information Management, 23(2), 181-200. ISSN 1741-0398
Mena, C., Humphries, A., & Wilding, R. (2009). A comparison of inter- and intra-organizational
relationships. International Journal of Physical Distribution & Logistics Management,
39(9), 762-784. ISSN 0960-0035
Moliterno, T. P., & Mahony, D. M. (2011). Network theory of organization: A multilevel
approach. Journal of Management, 37(2), 443-467. ISSN 0149-2063
Nair, A., & Sclover, D. D. (2012). A study of competitive dynamics. Journal of Business
Research, 65(3), 355-361. ISSN 0148-2963
Nayar, V. (2010). Recasting the role of CEO: Transferring the responsibility for change: How
leaders can tap the creative energy of employees. In Employees first, customers second:
Turning conventional management upside down (pp. 1-32). Retrieved from
http://cb.hbsp.harvard.edu/cb/pl/20123171/20123174/b8254571e65dc7ffa6f67903a2727d
bd
PepsiCo. (2013). Associate learning & development. Retrieved from
http://www.pepsico.com/purpose/talent-sustainability/associate-learning-anddevelopment.html
Richardson, K. A. (2004a). Systems theory and complexity: Part 1. Emergence: Complexity &
Organization, 6(3), 75-79. ISSN 15327000
Richardson, K. A. (2004b). Systems theory and complexity: Part 2. Emergence:
Complexity & Organization, 6(4), 77-82. ISSN: 15327000
Rowley, T. J. (1997). Moving beyond dyadic ties: A network theory of stakeholder influences.
Academy of Management, the Academy of Management Review, 22(4), 887-910. ISSN
0363-7425
Scharmer, O. (2010). The blind spot of institutional leadership: How to create deep innovation
through moving from egosystem to ecosystem awareness. World Economic Forum
Annual Meeting of the New Champions 2010, 2-13. Retrieved from
http://www.ottoscharmer.com/docs/articles/2010_DeepInnovation_Tianjin.pdf
Schneider, M., & Somers, M. (2006). Organizations as complex adaptive systems: Implications
of complexity theory for leadership research. The Leadership Quarterly, 17(4), 351-365.
ISSN 1048-9843
Schraagen, J., Veld, M., & De Koning, L. (2010). Information sharing during crisis management
in hierarchical vs. network teams. Journal Of Contingencies & Crisis Management,
18(2), 117-127. ISSN 0966-0879
Segre, S. (2004). A Durkheimian network theory. Journal of Classical Sociology, 4(2), 215-235.
ISSN 1468-795X
Smith, W. K., & Lewis, M. W. (2011). Toward a theory of paradox: a dynamic equilibrium
model of organizing. Academy Of Management Review, 36(2), 381-403. ISSN 0363-7425
Uhl-Bien, M., Marion, R., & McKelvey, B. (2007). Complexity Leadership Theory: Shifting
leadership from the industrial age to the knowledge era. The Leadership Quarterly, 18(4),
298-318. ISSN 1048-9843
Wagner, M. (Producer). (2011). What great leaders do in complex times. Available from
http://www.youtube.com/watch?v=OLFtWABAg_c.
Walmart. (2013). Our story. Retrieved from http://corporate.walmart.com/our-story/leadership
Weymes, E. (2004). A challenge to traditional management theory. Foresight : The Journal of
Futures Studies, Strategic Thinking and Policy, 6(6), 338-348. Retrieved from
http://search.proquest.com.library.capella.edu/docview/224168127?accountid=27965
Wilson, M. (2009). Complexity theory. Whitireia Nursing Journal, 16, 18-24. ISSN 1173-1966,