Leaders and managers face tremendous pressure to keep their organizations moving forward successfully. It can seem like an impossible task amid economic uncertainty and hyper-competition. The roles of leader and manager tug us in opposite directions: managers seek stability and predictability, and leaders usually opt for turbulence and change. With so many companies asking their best employees to be both leaders and managers, it's no wonder that so much of the business world is dysfunctional. This guidebook explains how leader-managers work-and how to succeed in both roles. You can learn how to leverage competing requirements for leading and managing change; formulate effective operational and developmental strategies; make decisions that address complex challenges and opportunities; and help people through the anxiety and trauma of change. Whether you are a student seeking to understand the workplace, an employee rising up the ranks or an active leader or manager, Strategic Leadership and Strategic Management provides you with tools and knowledge to help your organization succeed.

Strategic Leadership and Strategic Management

Leading and Managing Change on the Edge of ChaosBy Shand Stringham

iUniverse, Inc.

Copyright © 2012 Shand Stringham
All right reserved.
ISBN: 978-1-4759-6431-8

Contents

Introduction...........................................................................................................xiiiChapter 1— Overview of Theory, Models, Metaphors and Paradigms....................................................1Chapter 2— A Systems Thinking Approach to Understanding Organizations.............................................13Chapter 3— The Basics of Strategy: What Does It Mean and Where Does It Come From?.................................27Chapter 4— The Relationship between Organizational Environment and Strategy.......................................41Chapter 5— Understanding Strategic Leadership and Strategic Management............................................51Chapter 6— Organizational Change Models...........................................................................59Chapter 7— Strategic Leadership and Strategic Management: Thinking and Planning Strategically.....................69Chapter 8— Leading Employees through the Psychological Challenges of Change.......................................91Chapter 9— Leading and Managing Change on the Edge of Chaos.......................................................103Chapter 10— A Complexity Approach to Decision Making and Problem Solving..........................................125Chapter 11— How to Avoid Strategic Leadership and Strategic Management Failure....................................157Conclusion.............................................................................................................181End Notes..............................................................................................................187Bibliography...........................................................................................................233

Chapter One

Overview of Theory, Models, Metaphors and Paradigms

The leadership and management literature today is filled with a bewildering assortment of theories, models, metaphors and paradigms that attempt to simplify and explain leadership and management in an increasingly complex organizational environment. Such conceptual tools are fundamental to human thinking and abound in all human cognitive processes. Their use is critical to scientific research and investigation, and they are ubiquitous throughout the social sciences, particularly leadership and management studies. Through these tools, we can communicate more effectively with each other and share human knowledge.

Theories, models, metaphors, and paradigms are all interrelated—different in their substance but complementary in their usage and purpose. Theories formulate explanations about observed phenomena and help us make predictions about future possibilities. Theory is frequently contrasted with practice as its opposite because theory involves no doing apart from itself. Metaphors are implicit comparisons and help us to extend our understanding of the world around us as well and to discover new knowledge. The widespread use of metaphors demonstrates a natural human proclivity for finding resemblances between new experiences and familiar facts. In a similar manner, models provide a structured way of visualizing and explaining how things work and discovering solutions to problems. Metaphors and models may be used to express theoretical formulations but, by themselves, are not considered theory. Paradigms represent specific world views that attempt to link together and explain global observed phenomena. Paradigms help us to understand the world around us but they may also limit our ability to recognize the true nature of that reality. In short, these conceptual tools share complementary roles in pursuing human learning and understanding. It is important to understand their uses and limitations as we begin our review of strategic leadership and strategic management.

Theory

Theory is an ambiguous term. It means different things to different people and there is little agreement even among social scientists about what theory is. With respect to leadership and management studies, theory can be perceived as a kind of conceptualization. Concepts such as leadership, management, organization, power, and bureaucracy, when defined and used in interpretations of empirical or observed phenomena, are frequently equated with theory in the literature. However, these terms are not generally theory but constitute ideas within theories. In a loose sense, any conceptualization or way of thinking about something can be considered theory.

Theories are analytical tools for understanding, explaining, and making predictions about observed phenomena. Theory refers to an explanation of reality based on observations and information available that typically has been tested for validity although not all theories are tested or even can be tested. Theories evolve and change as new information is found and integrated into the current body of knowledge. Theory distinguishes ideas from practice and it frequently implies an idea that isn't certain or a reality that requires explanation.

According to Parson and Shils, there are four distinct levels of theory beginning with its simplest form and moving to the most complex: ad hoc classificatory systems; taxonomies; conceptual frameworks; and theoretical systems.

Ad Hoc Classificatory Systems are the lowest form of theorizing. They consist of identifying arbitrary categories in order to distinguish, organize and summarize empirical observations. For example, the classification of voters based on their response to a simple survey questioning whether or not they support a particular political issue would be an ad hoc classificatory system.

Taxonomies consist of category systems constructed to fit empirical observations so that relationships among categories can be described. Thus, taxonomies are closely related to the empirical world—the categories reflect the reality observed. An example of a simple taxonomy is three types of organizations: corporate, public, and non-profit.

Conceptual Frameworks stand above taxonomies because their propositions summarize and provide explanations and predictions for empirical observations. Conceptual frameworks are a grouping of concepts that are broadly defined and systematically organized to provide a focus, a rationale, and a tool for the integration and interpretation of information. Much of what passes for theory in the social sciences actually consists of conceptual frameworks that direct systematic empirical research. For example, de Bono's Six Thinking Hats provides a conceptual framework for describing the different modes of conscious thought that the human brain might process such as information seeking, instinctive reaction, pessimistic judgment, harmony seeking, creativity, and process organizing.

Theoretical Systems combine taxonomies and conceptual frameworks by relating descriptions, explanations and predictions in a systematic manner. This is the most vigorous level of theory—a system of propositions that are interrelated in a way that permits some to be derived from others. Thus, a theoretical system is one that provides a structure for a more complete explanation of observed phenomena. Theories facilitate discussions about topics of interest because all participants use the same definitions. Thus, theoretical systems are the bread and butter of academic researchers. What may not be so obvious is that leader-manager practitioners also use theoretical systems of a practical sort which help them work through the complexities of the organizational environment and make future projections based on observed data. Examples of leadership-management theories abound including McGregor's Theory X and Theory Y which attempt to explain different approaches to managing employees and the anticipated results or outcomes when employing those strategies.

Some leader-managers view theory as irrelevant to their practical needs in the workplace. This perception relates back to the old tension between theory and praxis. However, as Kurt Lewin once stated in a more positive vein, "There is nothing so practical as a good theory." Theory is not just for academics. It can bring predictability to any field of endeavor. Businessmen and women and other practitioners frequently shy away from anything theoretical because, for them, it connotes something impractical. But, in fact, it is profoundly practical and useful for moving into an uncertain organizational future. Christensen suggests that "... with data or without it, every time managers take an action, and every time they look into the future, they use a theory to guide their plans and actions—because a theory is a statement of what causes what and why."

Christensen and Raynor suggest a three-stage model for developing theory that works equally as well for practitioners as for academic researchers. First, the phenomenon that we want to know more about must be adequately described and characterized. Second, the phenomenon is classified into categories. Categorization is essential to highlight the significant differences in the complex array of phenomena. For example, research and development, production, marketing and sales, and customer service are primary categories of the corporate value chain. Third, a theory is articulated that suggests what causes the phenomena to occur and why. Christensen and Raynor assert that the tentative theory must also demonstrate whether and why the same causal mechanism might result in different outcomes, depending on the category or situation. They also point out that theory making is iterative. As we continuously cycle through the three stages, we constantly update and refine our ability to predict what actions will result in what outcomes and under what conditions and circumstances.

The utility or success of a theory is measured by the accuracy with which it can predict outcomes across the entire range of situations in which we find ourselves. Theories are usually accepted and supported as long as they consistently explain the facts of empirical or observed phenomena. But, as Jules Verne observed in Journey to the Center of the Earth: "Facts are, as usual, very stubborn things, overruling all theories." Thus when the observed reality (fact) is not explained by the currently accepted theory, then a new theory must be developed which does.

For example, in How the Mighty Fall and Why Some Companies Never Give In, Jim Collins addresses a commonly accepted but problematic theory: "We anticipated that most companies fall from greatness because they become complacent—they fail to stimulate innovation, they fail to initiate bold action, they fail to ignite change, they just become lazy—and watch the world pass them by. It's a plausible theory, with a problem: it doesn't square with the data." In response to evidence to the contrary, Collins developed a new theory that suggests that a more likely reason that businesses fail is corporate overreach.

Bottom line: Having a theoretical framework that is coherent, informative, and grounded in actual experience about the dynamics of human action in a turbulent, organizational environment can provide a powerful tool that will have practical uses and implications for responding to complex situations in the workplace. Everyone operates with theories whether they recognize it or not. It is impossible to be without theory, even if many are unarticulated.

Models

Models are simple representations of complex realities. Models tend to increase in complexity and explanatory power as the level of detail in the model increases. Thus, models help to simplify the complexity of the world that we see around us, and facilitate prediction and thus experimentation and validation. Models are used by practitioners and academics alike. Models appear in many forms. They can be physical mockups, design plans, blueprints, flow charts, wiring diagrams or organizational charts. Anytime the lights go down in the corporate conference room and someone begins projecting PowerPoint slides on the wall, you can anticipate a run of models designed to help the meeting participants understand the complexities of the topic being discussed. Sometimes they succeed in that endeavor. Sometimes the effect can be just the opposite.

Box somewhat humorously asserted that "essentially, all models are wrong, but some are useful." Models indeed have their uses and limitations. The Bonini Paradox explains the difficulty in constructing models or simulations that fully capture the workings of complex systems. The paradox can be explained as follows—The simpler the model, the easier it is to understand, but the greater the possibilities are for omissions of important details and distortion of the reality it attempts to explain. As a model of a complex system becomes more detailed and complete, it becomes more accurate or precise in its explanatory power, but it also becomes less easily understood. It also becomes entirely unwieldy—as the model represents more and more information, it moves away from representation toward total replication and we begin to drown in detail. The model builder then has the responsibility to construct the model appropriate to the phenomenon being represented and appropriate to the target audience's level of understanding.

Eckstein suggests that models could become conceptual traps if some inessential part is mistaken for a key feature of the theory it represents. A researcher could become distracted by extraneous issues in an attempt to make the model fit the facts (or vice versa) and thus be led into unproductive efforts, all because of the basic error of confusing the model with the theory itself or, to put it in other words, of mistaking the vehicle for the journey.

We use models frequently to trying to explain organizational phenomena and predict future business and market performance. Models abound in the management, leadership, and organizational literature. An excellent example of such a model is Lewin's change model: Unfreeze-Move-Refreeze. The model was developed in the late 1940s and still enjoys considerable acceptance and popularity today, strong testimony of the model's usefulness and precision. In Leading Change, John Kotter discusses an eight-step change model that expands on Lewin's model in explaining why many companies fail in their change initiatives. In the book, How the Mighty Fall: Why Some Companies Never Give In, Collins introduces a five-phase model that accounts for the fall of a prestigious group of corporate giants. Collins acknowledges that the model isn't perfect but it does do a good job of identifying traps that these corporations fell into. He also suggests that the model, again not perfect, can be used to predict the future demise of corporations that follow along a similar path. Based upon what Collins learned from his research in developing the model, he also asserts that "decline can be avoided" and that "whether you prevail or fail, endure or die, depends more on what you do to yourself than on what the world does to you."

A business model is a type of model that describes how the firm will deliver value to customers to compete successfully against the competition in today's turbulent marketplace. Business models are not static affairs. To remain effective, they must evolve and keep pace with the rapid rate of change in the marketplace. Osterwalder and Pigneur suggest that in today's volatile business environment, a host of new, innovative business models are emerging as entirely new industries take shape and old ones crumble. Many firms are faced with trying to compete using dated business models and are "struggling feverishly to reinvent themselves." In "Reinventing your Business Model," Johnson, Christensen and Kagermann state: "... truly transformative businesses are never exclusively about the discovery and commercialization of a great technology. Their success comes from enveloping the new technology in an appropriate, powerful business model." They further suggest that an effective business model consists of four interlocking elements: customer value proposition (CVP), profit formula, key resources, and key operational and managerial processes. These elements correspond to the components of a strategy and thus a business model is part of business strategy. We will discuss the basics of strategy in greater detail later in Chapter 3.

Metaphors

Metaphors are visual images we are familiar with that provide useful insights about complex realities. For instance, we might say that business is very much like a football game, or today's organizational environment is very much like white-water rafting. These visual images can be useful in better understanding the complexities of business but they can also distort perceptions and give us false readings about their true nature and possibilities. We throw metaphors around all the time in our conversations in organizational settings. Here are just a few examples to give you an idea—"competition is like a chess match", "traveling a rocky road", "arm wrestling," "batting ideas around", "striking out", "hitting a home run", "the ball is in your court", "white-water turbulence"—the possibilities are endless.

Organization researcher Gareth Morgan proposed the simple premise that all theories of organization and management are based on implicit images or metaphors that lead us to see, understand, and manage organizations in distinctive yet partial ways. He further proposed that the use of metaphor implies ways of thinking and ways of seeing that pervade how we understand our world generally.

Morgan points out that metaphor always produces a kind of one-sided insight. By highlighting certain interpretations, metaphors tend to force other views or interpretations into a background role. Thus metaphors always create distortions. Metaphor uses suggestive images to create what Morgan describes as "constructive falsehoods" which, if taken literally, or to an extreme, become absurd.

Morgan's premise that all theory is metaphor has far-reaching implications. We need to understand that any metaphor that we bring to the study of leadership, management, organization, and strategy, while capable of creating valuable insights, will also be incomplete, biased, and potentially misleading.

To illustrate, consider the classical metaphorical notion that "the organization is a like a machine." This metaphor may create valuable insights about how an organization is structured to achieve optimal, predetermined results. But the metaphor is incomplete and biased. It ignores the human aspects of organization and elevates the importance of organizational structures. The metaphor is also misleading—the organization is not a machine and can never really be designed, structured, and controlled as a system of inanimate, mechanical parts. Thus, Morgan suggests that metaphor is inherently paradoxical. It can create powerful insights that also become distortions, as "the way of seeing created through a metaphor becomes a way of not seeing."

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