One of my favorite parts of The Fifth Discipline by Peter Senge is the topic of systems thinking and how so many of the problems inherent in organizations (and even personal behaviors) stem from being unaware of the various systems at play and how these systems, when undetected and untouched, can control and determine outcomes, often in ways contrary to what you may have intended.
In such situations, we’re likely to blame external forces for our problems, but Senge explains that this misses out on a bigger picture:
Systems thinking is a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static “snapshots.”
…Systems thinking is a discipline for seeing the “structures” that underlie complex situations, and for discerning high from low leverage change. That is, by seeing wholes we learn how to foster health.
Senge illustrates systems thinking through systems archetypes, simple yet powerful examples that distill many of the systems at play in organizations and everyday life.
I’ve been thinking a lot about these examples in the context of running a business and the experience I’ve had at Barrel. In the appendix of the book, Senge lists out each of the archetypes. Below, I went through the exercise of listing each one and then coming up with a corresponding example inspired by the challenges and issues we’ve run into at Barrel over the years.
It’s been helpful to borrow some vocabulary and a new lens through which to view the way business works. In many of the scenarios below, I’m reminded of the dangers of short-term thinking and “quick fix” solutions that only exacerbate the underlying problems in the long-run.
Balancing Process with Delay
A person, a group, or an organization, acting toward a goal, adjusts their behavior in response to delayed feedback. If they are not conscious of the delay, they end up taking more corrective action than needed, or (sometimes) just giving up because they cannot see that any progress is being made.
Digital agency example: A spike in new business and requests from existing accounts puts strain on the resources of the entire team as engineers, designers, strategists, and project managers all seem have very heavy workloads. In response, the team goes on a massive hiring spree and increases headcount by 30%. During that time, some of the projects that were slated to start are postponed to a later time and other projects fall through. The original team is able to handle all the work while there’s not enough work to go around to the newly hired employees, creating a drag on the company’s finances.
Limits to Growth
A process feeds on itself to produce a period of accelerating growth or expansion. Then the growth begins to slow (often inexplicably to the participants in the system) and eventually comes to a halt, and may even reverse itself and begin an accelerating collapse.
The growth phase is caused by a reinforcing feedback process (or by several reinforcing feedback processes). The slowing arises due to a balancing process brought into play as a “limit” is approached. The limit can be a resource constraint, or an external or internal response to growth. The accelerating collapse (when it occurs) arises from the reinforcing process operating in reverse, to generate more and more contraction.
Digital agency example: After very slow growth the first few years, the agency went from 4 to 24 people in a span of 18 months due to some award-winning work and some bigger-than-usual opportunities that all closed at the same time. The rapid growth was a strain as the company lacked formal organization and issues such as resource management, quality control, and client communication began to fall apart. This led to unhappy clients, a build-up of poor reputation, and low morale among employees who were stressed by the lack of structure and process. Eventually, both clients and top employees began to flee and the company experienced not only flattening growth but a decline in revenues.
Shifting the Burden
A short-term “solution” is used to correct a problem, with seemingly positive immediate results. As this correction is used more and more, more fundamental long-term corrective measures are used less and less. Over time, the capabilities for the fundamental solution may atrophy or become disabled, leading to even greater reliance on the symptomatic solution.
Digital agency example: Relatively inexperienced project managers are assigned to lead projects, which results in mistakes that irk or worry clients. The senior members of the team step in to “resolve” the mistakes while berating the project managers for their errors. The next time, when a project manager makes a mistake, the default behavior is to seek out a senior team member to “make things right”. This becomes a drag on the senior team members, who’re constantly brought in to resolve even the smallest of errors.
The entire situation becomes a missed opportunity in which the company never puts in a process to properly train the project managers and to provide guidance and mentoring that may allow them to resolve issues on their own.
This example corresponds more to the special case of “Shifting the Burden to the Intervenor” as discussed in The Fifth Discipline.
A shifting the burden type of structure in which the short-term solution involves letting a long-term fundamental goal decline.
Digital agency example: Project managers are told to closely monitor their hours on website build projects. The hours are based on a profitable hourly rate. However, as the project progresses and the work drags at a pace slower than anticipated, the hours quickly add up and are on the verge of going over. Because the client will not approve budget increases, the firm’s partners and the project managers decide to lower the hourly rate incrementally to “free up some more hours”, although this is just an illusion and an erosion of the profit margin. Weeks go by again, and when more hours are needed, the rate is lowered once again. The cycle continues until the rate is so low that it’s not enough to cover the basic cost of the project and the firm would have been better off not having taken on the project at all.
Two people or organizations each see their welfare as depending on a relative advantage over the other. Whenever one side gets ahead, the other is more threatened, leading it to act more aggressively to reestablish its advantage, which threatens the first, increasing its aggressiveness, and so on. Often each side sees its own aggressive behavior as a defensive response to the other’s aggression; but each side acting “in defense” results in a buildup that goes far beyond either side’s desires.
Digital agency example: The engineers are annoyed that the QA team seems extra nit-picky about the website’s cross-browser compatibility and its performance on mobile and don’t appreciate the number of tickets. They decide to cut corners on the code since “we’ll catch in QA anyway” and rely on the QA team to point out the egregious mistakes that they’ll get to later. The QA team feels overwhelmed by the number of tickets they’re having to write and unhappy that the website is coming to them in such a poor condition. In response, the QA team asks and receives more resources to generate an even greater number of tickets. The engineers are further annoyed and continue to produce hacky, half-finished website code for QA. The cycle continues while dragging out timelines and impacting the overall ability of the agency to deliver for their clients.
Success to the Successful
Two activities compete for limited support or resources. The more successful one becomes, the more support it gains, thereby starving the other.
Digital agency example: One designer does a stand-out job on a project and shows the leadership team that she’s an excellent presenter. She’s given the opportunity to work on a high-profile client project and also has the chance to work closely with the creative director, who mentors her and teaches her new ways to approach projects. Another designer, whose work was not as well-received by the client, is assigned to more repetitive assignments and hops around from account to account filling in for whatever resource gaps the team has. The designer has very little one-on-one time with the creative director and his skills grow at a much slower rate.
Tragedy of the Commons
Individuals use a commonly available but limited resource solely on the basis of individual need. At first they are reward for using it; eventually, they get diminishing returns, which causes them to intensify their efforts. Eventually, the resource is either significantly depleted, eroded, or entirely used up.
Digital agency example: The agency finds a very talented freelance web developer with a very favorable hourly rate who can get things done quickly and effectively. A couple of project managers have great success with him and are able to successfully complete their websites on time. As word spreads, the agency’s project managers all want him on intense, last-minute assignments and vie for his time, inundating him with communication and requests. At first, the web developer is able to handle most requests, but slowly, he becomes overwhelmed and can’t juggle all the tasks, sometimes leading to missed deadlines. Eventually, he asks that he cut back his hours and only work on 1 project at a time with the agency.
Fixes That Fail
A fix, effective in the short term, has unforeseen long-term consequences which may require even more use of the same fix.
Digital agency example: To make up for lost time on a web project, the team decides to hardcode most of the content that was supposed to be editable using a content management system (CMS). After the website is launched, the client asks for a content update of a major section with a very tight deadline which would have been possible using the CMS but must now be hardcoded again in order to make the deadline. Eventually, so much of the website has been hardcoded that the effort to put in the CMS has become very expensive.
Growth and Underinvestment
Growth approaches a limit which can be eliminated or pushed into the future if the firm, or individual, invests in additional “capacity.” But the investment must be aggressive and sufficiently rapid to forestall reduced growth, or else it will never get made. Oftentimes, key goals or performance standards are lowered to justify underinvestment. When this happens, there is a self-fulfilling prophecy where lower goals lead to lower expectations, which are then borne out by poor performance caused by underinvestment.
Digital agency example: With the rapid increase in business, the agency goes out and hires a number of junior-level talent, believing that more bodies will solve the issue of understaffing and resourcing constraints. The agency doesn’t want to take the risk of hiring more senior-level managers who aren’t immediately billable and whose work will primarily by in supervising and training junior-level team members. They decide to push forward and postpone such investments for a later time. The influx of junior talent temporarily alleviates the staffing issues, but then quickly gives rise of quality issues and unhappy clients who complain about the mistakes and lack of experience.
As in the Limits to Growth example, unhappy clients eventually lead to the loss of both reputation and new business as well as employee attrition as nobody wants to be a part of a sinking ship.