Systems Theory (Russell Ackoff)

Systems thinking

Post-war America has been good at producing aphorism-spouting management gurus. Wharton School’s Russell L. Ackoff, who died in 2009 at the age of ninety, was up there with the finest. Ackoff’s major specialisation was systems thinking, especially when related to human behaviour and applied to organisations and institutions. Departing from the concept of the purposeful system, Ackoff and his various co-authors argued that understanding about the aims of such systems can ‘only be gained by taking into account the mechanisms of social, cultural and psychological systems.’ Essentially, Ackoff argued for a holistic approach and a clearer understanding about the true ends, aims or ideals of human-created systems. ‘A system,’ he declared, ‘is more than the sum of its parts; it is an indivisible whole. It loses its essential properties when it is taken apart. The elements of a system may themselves be systems, and every system may be part of a larger system.’ And thus, ‘The basic managerial idea introduced by systems thinking, is that to manage a system effectively, you might focus on the interactions of the parts rather than their behaviour taken separately.’

Citing Ambrose Pierce’s definition of ‘self-evident’ as being ‘evident to one’s self and to nobody else’, Ackoff took the greatest of delight in contradicting the apparently obvious. His works and his sayings are widely available on the internet and are surprisingly, almost shockingly, relevant to managerial and organisational practice. Ackoff himself asked the question as to why, notwithstanding this evident relevance, so few organizations adopted systems thinking. His answer was modern societies’ deeply ingrained culture of avoiding error. Since systems thinking implicitly argues strongly in favour of learning through error, it is avoided. ‘All learning,’ Ackoff declared, ‘ultimately derives from mistakes’:

‘When we do something right, we already know how to do it; the most we get out of it is confirmation of our rightness. Mistakes are of two types: commission (doing what should not have been done) and omission (not doing what should have been done). Errors of omission are generally much more serious than errors of commission, but errors of commission are the only ones picked up by most accounting systems. Since mistakes are a no-no in most corporations, and the only mistakes identified and measured are the ones involving doing something that should not have been done, the best strategy for managers is to do as little as possible.’

Does that sound uncomfortably familiar? Once Ackoff’s aphorisms and examples creep into your consciousness, it is impossible to continue to look at the managerial world in the same way. For instance, he argues that improving the performance of the parts of a system taken separately will not necessarily improve the performance of the whole. The comic example he gives to illustrate his point is the installation of a Rolls Royce engine in a Hyundai, which will probably make the latter inoperable. He further argues that this is why benchmarking almost always fails and this realisation leads him to invent such concepts as the circular organisation, the internal market economy and the multidimensional organisation, the key consideration in all cases being a holistic approach and clarity about ends and purposes.

For Ackoff, to take another characteristic example, educational systems are not dedicated to producing learning by students but, rather, teaching by teachers (and teaching, he subversively argues, is a major obstruction to learning). Similarly, and perhaps most pertinently for organisations and institutions, Ackoff argues that ‘the principal function of most corporations is not to maximise shareholder value, but to maximise the standard of living and quality of work life of those who manage the corporation.’ Cue uncomfortable shifting on seats (or this seat, at least). ‘Providing the shareholders with a return on their investments,’ Ackoff continues, ‘is a requirement, not an objective.’ He recalls the observation of Peter Drucker (another great post-war American management guru) that profit is necessary for a corporation’s existence but not the reason for it.

Once a systems thinking approach has been adopted, it is easier to see why organisations ‘tend to collect activities that they do not have the competence or even the inclination to run well’; why they tend to ‘encourage competition between parts of the corporation and conflict with competitors’; and why ‘managers unintentionally create incentives that result in activities diametrically opposed to their best interests – for example, rewarding themselves for short-term performance, and ignoring the long term…’ Because of this absence of systems thinking, Ackoff argues;

‘Few organisations are ready, willing and able to change in response to unanticipated internal or external changes. They lack the responsiveness of a good driver of an automobile who gets where he wants to go without forecasts of what he will encounter but with the ability to cope with whatever occurs.’

Ackoff’s work is so readily available on the internet, and delivered in such digestible morsels (for example, wikiquotes helpfully lists his aphoristic declarations here: that it is difficult to understand why his thought and theories are so unfamiliar to European audiences. In closing, consider the following almost chilling statement, closely related to the concept of the ‘absurd decision’, considered in the previous essay:

‘The righter we do the wrong thing, the wronger we become. When we make a mistake doing the wrong thing and correct it, we become wronger. When we make a mistake doing the right thing and correct it, we become righter. Therefore, it is better to do the right thing wrong than the wrong thing right. This is very significant because almost every problem confronting our society is a result of the fact that our public policy makers are doing the wrong things and are trying to do them righter.’

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