A complement is that which fills out or completes a whole. The principle of MULTIDIMENSIONALITY maintains the opposing tendencies not only coexist and interact, but also form a complementary relationship. the complementary relationship is not confined to pairs. More than two variables may form complementary relationships, as the trio of freedom, justice and security demonstrates.
The mutual interdependence of opposing tendencies is characterized by an AND instead of an OR relationship.

Plurality of function, structure and process

FUNCTION

Organizations have multiple forms of functions generating and disseminating WEALTH, POWER and BEAUTY. Still corporate actors, depending on their primary mindset or the roles assigned to them, consider only one of these functions as primary. This is the fallacy that results in successful operations but dead patients.

STRUCTURE

defines the components and relationships among them, which are multiple and variable.

PROCESS

similar initial conditions may lead to dissimilar end states (Buckley, 1967). So the process, rather than the initial conditions, is responsible for future states.

Emergent Property

However, they are a product of the interactions, not the sum of actions of the parts, and therefore have to be understood on their own terms...
What characterizes a winning team is not only the quality of its players, but also the interactions among them... [see also Tom DeMarco]
An organization's success is the product of the interactions among the five basic processes of throughput, decision making, learning and control, membership and conflict management. These processes correspond with generating and disseminating wealth, power, knowledge, beauty and values.

Counterintuitiveness

Counterintuitive behavior of social systems is further exemplifies by the following observations

• Social systems display a tendency to repeat themselves and produce the same set of nonsolutions all over again. [quote of Winneh the Pooh by Norman L. Kerth @ the Vienna Scrum Gathering, Apr. 2k4]
• A difference in degree may become a difference in kind.
• Passive adaption to a deteriorating environment is a road to desaster... Ironically, sudden change of phase with all of its ramifications is less dangerous than imperceptible, gradual change.

1. the generation of WEALTH (economics)
2. the creation and dissemination of TRUTH (scientifics)
3. the creation and dissemination of BEAUTY (aesthetics)
4. Formation and institutionalization of VALUES (ethics)
5. Development and duplications of POWER (politics)

The four organizational processes

• Membership, (beauty)
• Decision System (Power)
• Conflict management (Values) and
• Measurement system (knowledge, Learning and control)

Throughput

Model of the process

The model you have to design can well be simulated with data which should be available since three years, at least [2].

Critical Properties

the most used variables are:

• time
• cost
• flexibility
• quality

Measurement and diagnostic

The diagnostic system should be able to recognize when the improvement hits a plateau, because this indicates that the system has used up the slacks and that the existing design has exhausted its maximum potential.

Read only memory

for learning purpose and future references.

Target costing

Incoporation of target costing and VARIABLE BUDGETING in operating throughput systems is often the difference between success and failure...
As we move toward a global economy, prices increasingly become uncontrollable variables, while costs, because of technological advances, increasingly become variables.
Target costing requires a variable budgeting scheme. With variable budgeting, every active element in the process becomes a performance center. None will get a fixed budget, but everyone will have a working capital and a monthly income. This income will be a percentage of monthly throughput, which in turn will determine the level of the expenditure of the activity.

Membership

Conflict management

Conflict can be addressed in four different ways:

1. to SOLVE a conflict is to select a course of action belived to yield the best possible outcome for one side or the other - in other words, a win/lose struggle.
2. to RESOLVE a conflict is to select a course of action that yields an outcome good enough and minimally satifactory to both the opposing tendencies - in other words a compromise.
3. to ABSOLVE a conflict is to wait it out, hoping that, if ignored, it will go away - in other words, benign and neglect.
4. to DISSOLVE a conflict is to change the nature and/or the environment of the entity in which it is embedded, thus removing the conflict.
   To dissolve a conflict is to discover new frames of references in which opposing tendencies are treated as complementary in a new ensemble with a new logic of its own. It requires reformulation or, more precisely, reconceptualization of the variables involved. Finally, to dissolve a conflict is to redisign the system, which contains the conflict, in its totality, creating "a feasible whole from unfeasible parts."

from lose/lose to win/win environments

changing conflicts to competition

Decision systems

Duplication of power

... the answer lies in the fact that centralization and decentralization are two sides of the same coin. Both have to happen at the same time. This phenomenon is possible because power is like knowledge. It can be duplicated. The conceptualization of power as a non-zero-sum entity is the critical step toward understanding the essence of empowerment and the management of multiminded systems... example ...
This message of this brief story is that it's the SHARING OF DECISION CRITERIA, not abdiction of power that results in empowerment and makes centralization and decentralization happen at the same time. Achieving a higher order of decentralized decisionmaking requires a higher order of centralized agreement on decision criteria. However, to produce a shared understanding of criteria among all members of an organization individually is an impossible task. The process of empowerment has to be insitiutionalized. => learning in "design cells"...

Descision criteria

A POLICY is a decision criteria at a higher level of abstraction and deals with choice dimensions - essentially with the WHY questions.

PROCEDURES on the other hand, are derived from policies. They deal with HOW questions...

Each design cell should make its own rules and procedures on how conduct business (how often to meet, how to reach decisions, ...) However, for its operation to be effective, each should have the following four attributes:

1. DEGREE OF FREEDOM
2. CONSISTENCY
3. EXPLICITNESS
4. CONSENSUS

For a working synthesis to be effective, the participants, at a minimum, must feel that they:

1. Have been heard and given a chance to influence the outcome.
2. Have understood why the default decision has been taken, even though they might disagree with it.
3. Are willing to live by the decision and support it with commitment [3].

Learning and control systems

A formal process to detect these mismatches has to record the following information:

1. The assumptions on which the decision was made.
2. The information used to make the decision.
3. The process used to arrive at a conclusion.
4. The expected outcome(s).

Also reasons for mismatches are infinite, they fall into one of the following four categories:

1. The information (input) was wrong.
2. The implementation was wrong.
3. The decision was wrong.
4. The environment has changed.

social calculus

• VERTICAL COMPATIBILITY deals with the extent of compatibility between members at different levels
• HORIZONTAL COMPATIBILITY is concerned with the members at the same levels
• TEMPORAL COMPATIBILITY is concerned with the compatiblity of the interests among past, present and future members in the system.

Culture

Social learning

In this context, FIRST-ORDER LEARNING represents a QUANTITATIVE change. It revises the probabilities of choice, modifying parameters in a fixed structure.

SECOND-ORDER LEARNING, on the other hand, involves challenging the assumptions. It represents a a QUALITATIVE change that identifies a new set of alternatives and objectives [5].

Development

Schematic view of theoretical traditions

scan fig 4.1 p88

systems view of development

scan fig 4.2, p89

DIFFERENTIATION represents an artistic orientation (looking for differences among things that are apparently similar) emphasizing stylistic values and signifying tendencies toward increased complexity, variety, autonomy, and morphogenesis (creation of new structure).

INTEGRATION represents a scientific orientation emphasizing instrumental values and signifying tendencies toward increased order, uniformity, conformity, collectivity, and morphostasis (maintainance of structure)...

Note that movement toward organized complexity is the essence of negentropic processes in living systems. This mode represents the systems view of organization, a sociocultural system with upper and lower limits for integrative and differentiative processes...

In defining development, we identify two active agents: DESIRE and ABILITY.

DESIRE

is produced by an exciting vision of the future enhanced by the interaction of creative and recreative processes. The creative capacity of man, along with his/her desire to share, results in a shared image of a desired future. This generates dissatisfaction with the present and motivates pursuit of more challenging and more desireable ends...

ABILITY

is the potential for controlling, influencing, and appreciating the parameters that affect the system's existence. But ability alone cannot ensure development. Without a shared image of a more desireable future, the frustration of the powerful masses can easily be converted into a unifying agent of change - hatred - which in turn will successfully destroy the present but will not necessarily be a step toward creating a better future [1]...

Multidimensional modular design

1. responsibility (who is responsible for what) and
2. authority (who reports to whom)...

These criteria have evolved primariliy around three components of a system:

1. input (technology),
2. output (products), and
3. environment (markets)...

The multidimensional design assumes that the three common criteria (s.a.) are complements. Treating them as interdependent dimensions and managing their interactions eliminates the need for periodic reorganisations when a change in competitive environments necessiates a change of emphasis from one orientation to another - for example, from products to markets or vice versa...

But, without a vision there wil be no sense of direction. Without a vision all possibilities would have equal values; there would be no basis to judge the relevancy of the emerging opportunities [1].

Outputs dimension

Performance of an output module preferably should be as independent to the behavior of other peer output modules as possible; it should have enough authority over its resources - money and people - to be responsible and accountable for its successs or failure [6]. It should also be able to retain a percentage of its contributions above a minimum level for incentive and internal development.

Inputs dimension

These shared services [sysadmin, for example] and specialized functions can be provided by groups of special-purpose modules, which together constitute the input dimension of the organization.
However, in general, centralization should be avoided unless one or all of the following situations weigh overwhelmingly against decentralization of a particular service [7]:

• UNIFORMITY
• ECONOMY OF SCALE
• CORE TECHNOLOGIES [Zope]

Markets dimension

Internal market economy

defining the relationships between input, output, and marketing modules is the most critical task of this conception...???

Planning, learning, and control system

REACTIVE PLANNING is concerned with identifying deficiencies and designing projects and strategies to remove or supress them. It deals with parts of an organization independently of each other.

PROACTIVE PLANNING consists of two major activities: PREDICTION and PREPARATION. The objective is to forecast the future and then prepare the organization as well as possible.

Systems methodology rests on the INTERACTIVE type of planning, which assumes that future is created by what we and others do between now and then. Therefore, the objective is to design a desireable future (idealization) to invent or select ways of bringing it about (realization).

PART III: Systems Methodology: the logic of madness

The second dimension would have to define an operational method to

1. start the search process,
   
2. to modify and verify initial assumptions, and
   
3. evolve closer and closer to the truth, until a satisfactory notion of the whole is produced. Truth lies at the end, not on the beginning, of the holistic inquiry...

STRUCTURE

defines components and their relationships, which in this context is synonymous with input, means and cause.

FUNCTION

defines the outcome, or results produced, which is alos synonymous with outputs, ends, and effect.

PROCESS

explicitely defines the sequence of activities and the know-how required to produce the outcomes.

Structure, function, and process, along with their containing environment, form the INTERDEPENDENT set of variables that define the whole.

... Recall that each each of the three concepts of structure, function, and process has been separately and successfully used as the core concept of the following inquiry systems.

1. analysis (classical sciences)
   
2. synthesis (functional approach)
   
3. process orientation (behavioral scinece)

A holistic approach has to include all three notions of structure, function, and process.

Systems design is as much an art as a science. A systems designer should have

1. a working knowledge of systems theory and methodology
   
2. the capacity for abstraction
   
3. the creativity to see both similarities and differences
   
4. the courage to question the sacred assumptions, and
   
5. the sensitivity to be moved by the power of an idea.

Practical implications

1. deviation of the norm
2. lack of resources
3. the tendency to define it in terms of the solution we already have. Separating problem from solution

Formulating the mess

Searching

Searching is the iterative examination that generates information, knowledge, and understanding about the system environment.

The searching phase of mess formulation involves three kinds of inquiry:

1. System analysis: develop a snapshot of the current system.
2. Obstruction analysis: identify the malfunctioning in the power, knowledge, wealth, beauty and value dimensions of a social system.
3. System dynamics: to understand the interactions of critical vairables in the context of time, the totality and their interactive nature of the change within the system, and the system environment.

Mapping

Generation of themes usually requires an interactive discussion to achieve a shared understanding of the grouping criteria.

Finally, after all relevant themes are identified and substantiated, the relationships (interactions) among the elements must be addressed...

1. An event (cause) might have more than a single outcome (effect).
2. Cause and effect are seperated in time and space (time lag).
3. Cause and effect can replace one another (circularity).
4. Effects, once produced, might have an independent life of their own. Removing the cause will not necessarily remove the effects.

Once the elements of a mess and their interactions are mapped, we need to know why and how the current mess has evolved.
Mapping the mess is the heuristic process of defining essential characteristics and the emergent property of the mess...

Telling the story

The challenge is to create a shared understanding of the current reality and its undesireable consequences, thus creating a desire for change...

The mess should be presented as a consequence of past success, not as a result of failure.

Rules of the game

1. Produce an order of magnitude improvement in the throughput of the system. The basic assumption is that cost and performance of any system are essentially design driven.
2. Create a shared understanding among critical actors. The best way to learn a system is to redesign it.
3. Generate ownership and commitment. People are more likely to implement an idea when they have a hand in shaping it.
4. Dissolve conflict and create win/win solutions... Management of multiminded systems requires the ability to dissolve conflict.
5. Convert obstructions into opportunities. According to Ackoff, "With infeasible parts one can create a feasible whole".

Idealized design

The system's boundary and business environment

A system's boundary is defined by understanding the behavior of its stakeholders... Therefore we need to know the following:

• Who are the major stakeholders?
• What are their expectations?
• What are the desired properties of the system from their perspective?
• What is their influence?
• Which critical variables do they control (or influence)?

Purpose

To define the purpose of the mission of a business is perhaps the most important task of designing a business architecture. To understand purpose we need to deal with the four basic concepts:

1. definition of the business
2. strategic intent
3. measure of success
4. core values

Traditionally products, markets and technology have been used by corporations to define their business, formulate their competitive strategy, and design their organizations...
When the business is defined by technology, a variety of products are developed around a given core technology, using the same base of knowhow, and sold in different markets...
An interactive architecture is based on managing the interactions among technology, products and markets.
[fig. 7.7]

Functions

Selecting a product market niche is the first step in defining an enterprise's function and designing its architecture. We need to answer the following questions:

• Whose problems are we trying to solve?
• What solutions do we offering?
• How will we access the target customers?
• And. finally, will the target customers have sufficient purchasing power to pay for this solution?

Structure

Version one [fig. 7.10] represents a design concept concerned only with defining responsibilities (how the work is divided) and the line of authority (who reports to whom).

This linear framework lends itself to a unidimensional concept of system architecture where product, market and technology are arranged in sequential order based on their relative importance.

This is why version two [fig. 7.11] uses color to differentiate the parts and group them according to the role they play in the organization.

To demonstrate the flow and the relationships in the value chain, the following format was adopted to underline three basic relationships among peer units [fig. 7.12]:

For interaction among peer units, the interactive paradigm uses two distinct paira of relationships: 1) superior-subordinate and 2) customer-provider. This becomes real and meaningful when, and only when, the user of the service has the power of money and controls the payment to the provider. This requires that providers function with a variable budget paid by the customer in exchange for the services [8].

1. Output units are in competition with one another.
2. Relationships between each output unit with the input or market access units are complementary. It is the same relationship that exists between a producer and its suppliers or between a producer and its distributors.
3. The relationships between control units and all the input, output and market access units are one way, usually bureocratic and more or less autocratic in nature. This is why combining a service function with a cintrol function in a singel unit, which is usually done under the pretext of coordination, is a design for failure.

Process

Throughput processes are those directly concerned with the actual output of the organization

Organizational processes on the other hand, are concerned with creating integration, alignment, and synergy among the organization's parts.

Technological Feasability: All of the technolgies involved in the design of the throughput process must be available.

Operational Feasability: A system design must be available in the existing evironment. To asses the viability of a business enterprise requires measurement system.

Measurement systems

To develop an effective measurement system we need it deal iteratively with two elements: performance criteria and performance measure

Performance Criteria: Unfortunately, the more accurate the measure of the wrong criteria, the faster the road to desaster. We are much better off with an approximation of relevant variables than with precise measurement of the wrong ones.

Performance Measure: Performance measures are the operational definition of each variable - that is, how each variable is to be measured specifically.

Viability Matrix:
The viability matrix is a framework for identifying the relevant dimensions - the performance variables - for measuring a business's viability or the different aspects of an operation.

The first dimensions of the matrix identifies the variables that define the organization as a whole:

1. Structure (inputs)
2. Function (outputs)
3. Environment (markets)
4. Process (technology)

The second dimension identifies the processes that define the totality of the mangement system:

1. Throughput (production of the outputs)
2. Synergy (management of interactions, adding value)
3. Latency (defining problems and designing solutions)

Capacity Utilization

Turnover ratio is a good indicator of capacity utilization. Compared to industry standards and best in class, it can signal the existence of an excess capacity that can be the major source of malfunctioning and fluctuation in the system.

Profitability

A dynamic and interrelated model of operating income, operating expense, investment (hard and soft), cash flow, and cost of capital.

Attributes of the Outputs

The outputs are defined in terms of a quantifiable delivery of goods or services in time and space. This is measured on three dimensions: price, quality, and availability (time).

Reliability of Demand

Demand for a product is reliable if the amount to be purchased can be predicted reasonably and if actors beyond a firm's influence do not create unexpected fluctuations.

Throughput Capability

The level of integration and effectiveness of activities required for the delivery of goods and services to satisfied customers is measured by cycle time, waste reduction, safety, and competency of critical processes.

Default Value of the Culture

The degree to which members accept responsibility and act with authority; duplication of power, assumptions regarding the source of value, nature of competition, and relationship between equality and competence.

Credibility in the Marketplace

A firm is credible when it can take actions its stakeholders will initially accept on good faith alone. This is a reflection on the firm and its sound relationships with customers, suppliers, and creditors.

Value Chain Transaction Index

A model for explicitly measuring the total contributions that a business unit makes to the profitability of the whole organization. The model recognizes not only the unit's own profitability, but also its contribution to the profitability and/or success of other units within the context of a value-chain architecture.

Value-Added Ratio

A calculation of the value a unit produces in comparison to the value it consumes. The value a unit consumes is adjusted to reflect the cost of the resources, the amount and kind of inputs (scarce or excess resources) the unit consumes, and whether they are obtained internally or externally. The value a unit produces is also modified to recognize the contribution of each line in its product/market mix. For example, revenue generated by selling a new product in a new market is multiplied by 1.2 in order to encourage new product/new market introductions.

Reward System

A priority scheme superimposed on the measurement system, which will allow the organization to assign priorities to particular variables (activities) and thus influence the behavior of the actors toward achieving organizational goals.

Product Potency

A product's potency is the degree to which the product meets a variety of customer needs and desires, in absolute terms as well as relative to competitors and substitute products.

Market Potential

A market has potential when there is a real and sustainable need and sufficient (size) or growing purchasing power to satisfy those needs.

Intensity of Competition

Competition is intense when the supply of a product is greater than the demand, and it is easy to enter but difficult to exit the market.

Realization: successive approximation

Type I constraints

Type I constraints cannot be removed within the existing framework... It is critical that type I constraints be continously monitored so that the target design can further approximate the idealized design as soon as these constraints are removed.

Type II constraints

Type II constraints are those whose removal will require extensive preparation. They consist of activities that consume considerable time and resources, as well as knowledge and management talent. Design of measurement and reward system with variable budgeting and target costing seems to be an integral part of all successful realization efforts.

Type III constraints

Type III constraints deals essentially with behavioral constraints [fig 7.13].

Cultural Transformation: dissolving the second-order machine

Notes

[2] A very nice tool for simulating processes is a Software called ithink

[3] This issue has been demonstrated in single projects. The next step should bring these findings into the system where all the projects are embedded i.e. the company itself.

[4] Maybe the partners have a "vision", but it's not enough communicated to the other members which are part of the system. (Example of the building a cathedral: Three masons building a cathedral were asked what they're doing: the first said "I'm earning some money", the second said "I'm the best mason of the world" and the third said "I'm helping to build a cathedral"...)

[5] An assumption could also be a (technical) dogma, which could be questioned from a process perspective. If, say -- some kind of technology is well suited for small projects -- one can not take for granted, that this holds true for big projects. Because in projects with more people involved, the process in reaching a specific goal will be different.

[6] If you're not in control of the resources to finish a project in an agreed timeframe, you'll get de-motivated as you're not feeling responsible for it.

[7] This is especially true if one of your key input dimension can be seen as a process itself. For example: In the company I'm currently working for, we've defined a Software Development Process. The tools used in this process are completey interdependent and can only be adressed via a hyperlink. This assumes a thorough understanding of the software development process itself, to use the combination of the tools efficiently. On the other hand, there is much more flexibility, openess and creativity when compared to completely integrated environments.
Check out my article (in german) covering this issue in more detail: Open Source Tools in the Software Development Process from a project management perspective

[8] If a provider of a service has a fixed budget which is directly paid by the boss, then the boss becomes the customer as well. In this case, the user of the service has no power and customer-provider relations is meaningless.

Links and Articles

System Thinking

Introduction

Articles and further Information

http://www.systems-thinking.org/

Emergence

See Steven Johnson and the references therein.

Articles

Leadership in TQM: What Does It Mean?
The importance of leadership to the success of Total Quality Management (TQM) implementation is broadly recognized. But what does leadership mean? Most likely it means different things to different people. In this paper, we try to look at the definition of leadership on a more specific basis, that is, in the terms of semantics, we try to move down the ladder of abstraction to discuss specific functions. We will also discuss the tools for the functions.

Organizational Development (OD)

1. http://www.odnetwork.org/
   THE source for Organizational Development... Check out for their famous and high quality Mailinglist
2. Resistance in Organizations: How to Recognize, Understand, & Respond to It

3. Facilitated Systems
4. retrospectives.com

5. Links @ Orgdyne
   Orgdyne is an organizational training and consulting firm, dedicated to the research, exploration, and understanding of group and organizational dynamics.