Welcome to the third
part of my leadership in engineering basics series.
In this part, I will
show you the impact of the systems theory on our daily thinking, acting, and
decision making. In general, systems theory covers several disciplines (social
sciences, economy and engineering) and tries to organize things in structural
operations with feedback lopes, which help to improve the system.
I guess every one of you
got involved in a situation where the laws of systems theory kicked in - either
in private or in business.
What is it exactly that
makes handling such situations so difficult then? Let’s start by presenting
some examples to get familiar with such situations.
I want you to be aware
of certain phenomena that seem at first glance logic, but are in fact wrong
thinking. Here are some examples:
- Cell phone towers located outside of cities: regions which contain valleys and other geographical difficulties for transporting cell phone signals need more cell phone towers. Where should they be placed? On the main square of the village, or outside? Yes/no? When you have a closer look at villages, they have the cell phone towers always outside. The village representatives think that in this way they can better protect the village inhabitants. Nevertheless, this thinking is wrong. Each mobile need to send the signal and the signal is nothing else than a wave. This wave will be transformed to heat (every one of us knows that the ear gets hot after a few minutes of calling). The mobile and the cell phone tower have a sending/receiving relation. In case of placing the tower outside of the town, the mobile will send more waves to achieve a stronger signal. Therefore, more heat will be generated as well. The solution is to put the tower in the center so that the mobile doesn’t need to send a lot of waves to have a strong connection.
- Compounded interest on the stock market: the thinking and forecasting of exponential effects is difficult to understand for humans. However, it has a great impact in the long run if you have an interest of 2% p.a. or 5% p.a. on your investment. Most people ignore the exponential effect of the compounded interest or are not even aware of it.
Apart of those 2
examples, here I present the most important 5 laws regarding the impact of the
systems theory inspired by Peter Senge’s “The Fifth Discipline: The Art and
Practice of the Learning Organization “
1) The solutions from
yesterday are the problems of today: The problems which are surrounding us can be often solved
by just looking at the solution from the past. Example: A well running business complains about a loss in revenues
in the last quarter. Why? Lots of customers used the bonus program which
led to this situation. Sometimes, it is hard to identify if a certain
solution just pushes the problems into another part of the system, because
often the problem solver are not the same as the people who solved it in
the first place.
2) As more as you dig in as harder it gets: A lot of companies know the so-called compensatory
feedback effect. Example: One of
the company’s products loses on attraction and sales decrease. As a
counter measurement, aggressive marketing strategies are applied to
increase sales again. As a result, the advertisement expenses for the
product increase and the sales price decreases. In this way, the company
can win back some customers, but the working capital will decrease.
Therefore, the company will start a cost reduction program and will start
to restructure some departments to cut costs. The quality of services,
such as delivering times of the products will decrease. To sum up: As more effort is put to run after customers
as more customers the company will lose!
3) The behavior improves, before it gets worse: the before mentioned compensatory feedback effect affects
us with a time delay. Example: There was once a cartoon in the New
Yorker: A man is sitting in a chair and is blocked/surrounded by big domino
pieces. He kicks the pieces placed right next to him and these start to
fall. A chain reaction starts and the domino pieces consecutively fall reaching
the other side of the chair, where they hit the man again. This illustrates
that though you can make quick improvements to a given situation, the
damaging impact of the compensatory feedback effect can hit you very hard
in the end!
4) The therapy can be worse than the sickness: For example,
a person has a problem at work and starts drinking alcohol to find new
motivation again. After some time he/she gets addicted to the alcohol and
cannot stop easily anymore. The original problem may have disappeared, but
another much bigger has arisen.
5) And
the most important one in daily business leadership: Cause and effect are not next to each other in time and space.
When we play as children, the problem and solution of a certain thing are
next to each other. But when we grow up and become managers, we still have
this kind of thinking. We believe that when there are problems in the
manufacturing the solution will be as well in the manufacturing. In most
cases, it is in another department. We need to understand that cause and
effect are not placed next to each other, neither in time, nor in space.
Furthermore, Dan Ariely
wrote down in his bestseller ‘The Hidden Forces That Shape Our Decisions
(2008)’ about this phenomenon called predictably
irrational and presented a lot of good examples as well.
With this third part, I
want to close this series for having a basic understanding of leadership with
its principles and actions. We will have some more posts, based on this series.
Greetings,
Herwig
Literature:
[1] Peter Senge: “The Fifth Discipline: The Art and Practice of the Learning Organization “
[2] Dan Ariely: "The Hidden Forces That Shape Our Decisions"
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