A leader’s framework for decision making

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All too often, managers rely on common leadership approaches that work well in one set of circumstances but fall short in others. Why do these approaches fail? The answer lies in a fundamental assumption of organizational theory and practice: that a certain level of predictability and order exists in the world. Circumstances change, however, and as they become more complex, simplifications can fail.

Working with other contributors, we developed the Cynefin (pronounced ku-nev-in) framework, which allows executives to see things from new viewpoints, assimilate complex concepts, and address real-world problems and opportunities. The U.S. Defense Advanced Research Projects Agency has applied the framework to counterterrorism, and it is currently a key component of Singapore’s Risk Assessment and Horizon Scanning program. The framework sorts the issues facing leaders into five contexts defined by the nature of the relationship between cause and effect — simple, complicated, complex, chaotic and disorder.

Using the Cynefin framework can help executives sense which context they are in so that they can make better decisions and avoid the problems that arise when their preferred management style causes them to make mistakes. In this article, we focus on the first four contexts.

SIMPLE CONTEXTS: THE DOMAIN OF BEST PRACTICE
Simple contexts are characterized by stability and clear cause-and-effect relationships that are easily discernible by everyone. Often, the right answer is self-evident and undisputed.

Simple contexts, properly assessed, require straightforward management and monitoring. Leaders assess the facts of the situation, categorize them and then base their response on established practice. Heavily process-oriented situations, such as loan payment processing, are often simple contexts.

Since both managers and employees have access to the information necessary for dealing with the situation in this domain, a command-and-control style for setting parameters works best. Directives are straightforward, decisions can be easily delegated and functions are automated. Adhering to best practices or process re-engineering makes sense.

Nevertheless, problems can arise in simple contexts. Issues may be incorrectly classified within this domain because they have been oversimplified. Second, leaders are susceptible to entrained thinking, which occurs when people are blinded to new ways of thinking by the perspectives they acquired through past experience, training and success. Third, when things appear to be going smoothly, leaders often become complacent. The most frequent collapses into chaos occur because success has bred complacency.

Leaders need to avoid micromanaging and stay connected to what is happening in order to spot a change in context. Leaders should create a communication channel — an anonymous one, if necessary — that allows dissenters to provide early warnings about complacency.

COMPLICATED CONTEXTS: THE DOMAIN OF EXPERTS
Complicated contexts may contain multiple right answers. While leaders in a simple context must sense, categorize and respond to a situation, those in a complicated context must sense, analyze and respond. This approach often requires expertise.

Because the complicated context calls for investigating several options — many of which may be excellent — good practice, as opposed to best practice, is more appropriate.

Entrained thinking is a danger in complicated contexts, too, but it is the experts (rather than the leaders) who are prone to it. When this problem occurs, innovative suggestions by nonexperts may be overlooked or dismissed. A leader must listen to the experts while simultaneously welcoming novel thoughts and solutions from others.

Working in unfamiliar environments can help leaders and experts approach decision making more creatively. Games, too, can encourage novel thinking.
Reaching decisions in the complicated domain can take time, and there is always a trade-off between finding the right answer and simply making a decision. When the right answer is elusive, however, and you must base your decision on incomplete data, your situation is probably complex rather than complicated.

COMPLEX CONTEXTS: THE DOMAIN OF EMERGENCE
In a complicated context, at least one right answer exists. In a complex context, however, right answers can’t be ferreted out. This is the realm of “unknown unknowns,” and it is the domain to which much of contemporary business has shifted.

Most situations and decisions in organizations are complex because some major change — a bad quarter, a shift in management, a merger or acquisition — introduces unpredictability and flux. In this domain, we can understand why things happen only in retrospect. Instructive patterns, however, can emerge if the leader conducts experiments that are safe to fail. Leaders must probe first, then sense and then respond.

Leaders face several challenges in the complex domain. Of primary concern is the temptation to fall back into traditional command-and-control management styles — to demand fail-safe business plans with defined outcomes. Leaders who don’t recognize that a complex domain requires a more experimental mode of management may become impatient when they don’t achieve the results they were aiming for.

If they try to over-control the organization, they will preempt the opportunity for informative patterns to emerge. Leaders who set the stage, step back a bit, allow patterns to emerge and determine which ones are desirable will succeed.

CHAOTIC CONTEXTS: THE DOMAIN OF RAPID RESPONSE
In a chaotic context, searching for right answers would be pointless: The relationships between cause and effect are impossible to determine because they shift constantly and no manageable patterns exist.

In the chaotic domain, a leader’s immediate job is to stanch the bleeding. A leader must first establish order, then sense where stability is present and from where it is absent and respond by working to transform the situation from chaos to complexity. Communication of the most direct top-down or broadcast kind is imperative: There’s simply no time to ask for input.

The chaotic domain is nearly always the best place for leaders to impel innovation. One excellent technique is to manage chaos and innovation in parallel: The minute you encounter a crisis, appoint a reliable manager or crisis management team to resolve the issue. At the same time, pick out a separate team and focus its members on the opportunities for doing things differently.

LEADERSHIP ACROSS CONTEXTS
Truly adept leaders will know not only how to identify the context they’re working in at any given time but also how to change their behavior and their decisions to match that context. They also prepare their organization to understand the different contexts and the conditions for transition between them.

Business schools and organizations equip leaders to operate in ordered domains (simple and complicated), but most leaders usually must rely on their natural capabilities when operating in unordered contexts (complex and chaotic). In the face of greater complexity today, however, leaders need tools and approaches to guide their firms through less familiar waters.

A deep understanding of context, the ability to embrace complexity and paradox and a willingness to flexibly change leadership style will be required for leaders who want to make things happen in a time of increasing uncertainty.

UNDERSTANDING COMPLEXITY
Complexity is more a way of thinking about the world than a new way of working with mathematical models. Over a century ago, Frederick Winslow Taylor, the father of scientific management, revolutionized leadership. Today, advances in complexity science, combined with knowledge from the cognitive sciences, are transforming the field once again.

Complexity is poised to help current and future leaders make sense of advanced technology, globalization, intricate markets, cultural change and much more. In short, the science of complexity can help all of us address the challenges and opportunities we face in a new epoch of human history.
A complex system has the following characteristics:
– It involves large numbers of interacting elements.
– The interactions are nonlinear, and minor changes can produce disproportionately major consequences.
– The system is dynamic, the whole is greater than the sum of its parts and solutions can’t be imposed; rather, they arise from the circumstances. This is frequently referred to as emergence.
– The system has a history, and the past is integrated with the present; the elements evolve with one another and with the environment; and evolution is irreversible.
– Though a complex system may, in retrospect, appear to be ordered and predictable, hindsight does not lead to foresight because the external conditions and systems constantly change.
– Unlike in ordered systems (where the system constrains the agents), or chaotic systems (where there are no constraints), in a complex system the agents and the system constrain one another, especially over time. This means that we cannot forecast or predict what will happen.

One of the early theories of complexity is that complex phenomena arise from simple rules. Consider the rules for the flocking behavior of birds: Fly to the center of the flock, match speed, and avoid collision. This simple-rule theory was applied to industrial modeling and production early on, and it promised much; but it did not deliver in isolation.

More recently, some thinkers and practitioners have started to argue that human complex systems are very different from those in nature and cannot be modeled in the same ways because of human unpredictability and intellect. Consider the following ways in which humans are distinct from other animals:

– They have multiple identities and can fluidly switch between them without conscious thought. (For example, a person can be a respected member of the community as well as a terrorist.)
– They make decisions based on past patterns of success and failure, rather than on logical, definable rules.
– They can, in certain circumstances, purposefully change the systems in which they operate to equilibrium states (think of a Six Sigma project) in order to create predictable outcomes.

Leaders who want to apply the principles of complexity science to their organizations will need to think and act differently than they have in the past. This may not be easy, but it is essential in complex contexts.

THE CYNEFIN FRAMEWORK
The Cynefin framework helps leaders determine the prevailing operative context so that they can make appropriate choices. Each domain requires different actions. Simple and complicated contexts assume an ordered universe, where cause-and-effect relationships are perceptible and right answers can be determined based on the facts. Complex and chaotic contexts are unordered — there is no immediately apparent relationship between cause and effect and the way forward is determined based on emerging patterns. The ordered world is the world of fact-based management; the unordered world represents pattern-based management.

The very nature of the fifth context — disorder — makes it particularly difficult to recognize when one is in it. Here, multiple perspectives jostle for prominence, factional leaders argue with one another and cacophony rules. The way out of this realm is to break down the situation into constituent parts and assign each to one of the other four realms. Leaders can then make decisions and intervene in contextually appropriate ways.

TOOLS FOR MANAGING IN A COMPLEX CONTEXT
Given the ambiguities of the complex domain, how can leaders lead effectively?

– OPEN UP THE DISCUSSION. Complex contexts require more interactive communication than any of the other domains. Large group methods (LGMs), for instance, are efficient approaches to initiating democratic, interactive, multidirectional discussion sessions. Here, people generate innovative ideas that help leaders with development and execution of complex decisions and strategies.For example, “positive deviance” is a type of LGM that allows people to discuss solutions that are already working within the organization itself, rather than looking to outside best practices for clues about how to proceed. The Plexus Institute used this approach to address the complex problem of hospital-acquired infections, resulting in behavior change that lowered the incidence by as much as 50 percent.

– SET BARRIERS. Barriers limit or delineate behavior. Once the barriers are set, the system can self-regulate within those boundaries. The founders of eBay, for example, created barriers by establishing a simple set of rules. Among them are pay on time, deliver merchandise quickly and provide full disclosure on the condition of the merchandise. Participants police themselves by rating one another on the quality of their behavior.

– STIMULATE ATTRACTORS. Attractors are phenomena that arise when small stimuli and probes (whether from leaders or others) resonate with people. As attractors gain momentum, they provide structure and coherence. EBay again provides an illustrative example. In 1995, founder Pierre Omidyar launched an offering called Auction Web on his personal Web site. His probe, the first item for sale, quickly morphed into eBay, a remarkable attractor for people who want to buy and sell things. Today, sellers on eBay continue to provide experimental probes that create attractors of various types. One such probe, selling a car on the site, resonated with buyers, and soon automobile sales became a popular attractor.

– ENCOURAGE DISSENT AND DIVERSITY. Dissent and formal debate are valuable communication assets in complex contexts because they encourage the emergence of well-forged patterns and ideas. A “ritual dissent” approach, for instance, puts parallel teams to work on the same problem in a large group meeting environment. Each team appoints a spokesperson who moves from that team’s table to another team’s table. The spokesperson presents the first group’s conclusions while the second group listens in silence. The spokesperson then turns around to face away from the second team, which rips into the presentation, no holds barred, while the spokesperson listens quietly. Each team’s spokesperson visits other tables in turn; by the end of the session, all the ideas have been well dissected and honed. Taking turns listening in silence helps everyone understand the value of listening carefully, speaking openly and not taking criticism personally.

– MANAGE STARTING CONDITIONS AND MONITOR FOR EMERGENCE. Because outcomes are unpredictable in a complex context, leaders need to focus on creating an environment from which good things can emerge, rather than trying to bring about predetermined results and possibly missing opportunities that arise unexpectedly. Many years ago, for instance, 3M instituted a rule allowing its researchers to spend 15 percent of their time on any project that interested them. One result was a runaway success: the Post-it Note.

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