A Leader's Framework for Decision-Making (Cynefin) (HBR, 2007): a new perspective based on complexity science.
The framework sorts the issues facing leaders into five contexts defined by the nature of the relationship between cause and effect. Four of these—simple, complicated, complex, and chaotic—require leaders to diagnose situations and to act in contextually appropriate ways. The fifth—disorder—applies when it is unclear which of the other four contexts is predominant.
Problems can arise in simple contexts: * First, issues may be incorrectly classified within this domain because they have been oversimplified. Leaders who constantly ask for condensed information, regardless of the complexity of the situation, particularly run this risk. * Second, leaders are susceptible to entrained thinking, a conditioned response that 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. If the context changes at that point, a leader is likely to miss what is happening and react too late. In the exhibit “The Cynefin Framework,” the simple domain lies adjacent to the chaotic—and for good reason. The most frequent collapses into chaos occur because success has bred complacency. This shift can bring about catastrophic failure—think of the many previously dominant technologies that were suddenly disrupted by more dynamic alternatives. Leaders need to avoid micromanaging and stay connected to what is happening in order to spot a change in context. By and large, line workers in a simple situation are more than capable of independently handling any issues that may arise. Indeed, those with years of experience also have deep insight into how the work should be done. Leaders should create a communication channel—an anonymous one, if necessary—that allows dissenters to provide early warnings about complacency. Finally, it’s important to remember that best practice is, by definition, past practice. Using best practices is common, and often appropriate, in simple contexts. Difficulties arise, however, if staff members are discouraged from bucking the process even when it’s not working anymore. Since hindsight no longer leads to foresight after a shift in context, a corresponding change in management style may be called for.
Complicated Contexts: The Domain of Experts: Complicated contexts may contain multiple right answers, and though there is a clear relationship between cause and effect, not everyone can see it. This is the realm of "known unknowns". In a complicated context leaders must sense, analyze, and respond. This approach is not easy and often requires expertise: A motorist may know that something is wrong with his car because the engine is knocking, but he has to take it to a mechanic to diagnose the problem.
Because the complicated context calls for investigating several options, good practice, as opposed to best practice, is more appropriate. For example, the customary approach to engineering a new cell phone might emphasize feature A over feature B, but an alternative plan—emphasizing feature C—might be equally valuable.
Working in unfamiliar environments can help leaders and experts approach decision making more creatively. For instance, we put retail marketing professionals in several military research environments for two weeks. The settings were unfamiliar and challenging, but they shared a primary similarity with the retail environment: In both cases, the marketers had to work with large volumes of data from which it was critical to identify small trends or weak signals. They discovered that there was little difference between, say, handling outgoing disaffected customers and anticipating incoming ballistic missiles. The exercise helped the marketing group learn how to detect a potential loss of loyalty and take action before a valued customer switched to a competitor. By improving their strategy, the marketers were able to retain far more high-volume business.
Games, too, can encourage novel thinking. We created a game played on a fictional planet that was based on the culture of a real client organization. When the executives "landed" on the alien planet, they were asked to address problems and opportunities facing the inhabitants. The issues they encountered were disguised but designed to mirror real situations, many of which were controversial or sensitive. Because the environment seemed so foreign and remote, however, the players found it much easier to come up with fresh ideas than they otherwise might have done. Playing a metaphorical game increases managers’ willingness to experiment, allows them to resolve issues or problems more easily and creatively, and broadens the range of options in their decision-making processes. The goal of such games is to get as many perspectives as possible to promote unfettered analysis.
Reaching decisions in the complicated domain can often take a lot of 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 complex context, right answers can’t be ferreted out. It’s like the difference between, say, a Ferrari and the Brazilian rainforest. Ferraris are complicated machines, but an expert mechanic can take one apart and reassemble it without changing a thing. The car is static, and the whole is the sum of its parts. The rainforest, on the other hand, is in constant flux—a species becomes extinct, weather patterns change, an agricultural project reroutes a water source—and the whole is far more than the sum of its parts. 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. That is why, instead of attempting to impose a course of action, leaders must patiently allow the path forward to reveal itself. They need to probe first, then sense, and then respond.
There is a scene in the film Apollo 13 when the astronauts encounter a crisis (“Houston, we have a problem”) that moves the situation into a complex domain. A group of experts is put in a room with a mishmash of materials—bits of plastic and odds and ends that mirror the resources available to the astronauts in flight. Leaders tell the team: This is what you have; find a solution or the astronauts will die. None of those experts knew a priori what would work. Instead, they had to let a solution emerge from the materials at hand. And they succeeded. (Conditions of scarcity often produce more creative results than conditions of abundance.)
Another example comes from YouTube. The founders could not possibly have predicted all the applications for streaming video technology that now exist. Once people started using YouTube creatively, however, the company could support and augment the emerging patterns of use. YouTube has become a popular platform for expressing political views, for example. The company built on this pattern by sponsoring a debate for presidential hopefuls with video feeds from the site.
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%.
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 website. 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% of their time on any project that interested them. One result was a runaway success: the Post-it Note.
Chaotic Contexts: The Domain of Rapid Response: 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--only turbulence. This is the realm of unknowables. (9/11 for example) Here, a leader’s immediate job is not to discover patterns but to stanch the bleeding. A leader must first act to establish order, then sense where stability is present and from where it is absent, and then respond by working to transform the situation from chaos to complexity, where the identification of emerging patterns can both help prevent future crises and discern new opportunities. Communication of the most direct top-down or broadcast kind is imperative; there’s simply no time to ask for input.
Unfortunately, most leadership "recipes" arise from examples of good crisis management. This is a mistake, and not only because chaotic situations are mercifully rare. Though the events of September 11 were not immediately comprehensible, the crisis demanded decisive action. New York’s mayor at the time, Rudy Giuliani, demonstrated exceptional effectiveness under chaotic conditions by issuing directives and taking action to reestablish order. However, in his role as mayor—certainly one of the most complex jobs in the world—he was widely criticized for the same top-down leadership style that proved so enormously effective during the catastrophe. He was also criticized afterward for suggesting that elections be postponed so he could maintain order and stability. Indeed, a specific danger for leaders following a crisis is that some of them become less successful when the context shifts because they are not able to switch styles to match it.
Moreover, leaders who are highly successful in chaotic contexts can develop an overinflated self-image, becoming legends in their own minds. When they generate cultlike adoration, leading actually becomes harder for them because a circle of admiring supporters cuts them off from accurate information.
Yet the chaotic domain is nearly always the best place for leaders to impel innovation. People are more open to novelty and directive leadership in these situations than they would be in other contexts. 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. If you wait until the crisis is over, the chance will be gone.
Leadership Across Contexts: Good leadership requires openness to change on an individual level. 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. Many leaders lead effectively—though usually in only one or two domains (not in all of them) and few, if any, prepare their organizations for diverse contexts.
Decisions in Multiple Contexts: A Leader’s Guide: Effective leaders learn to shift their decision-making styles to match changing business environments. Simple, complicated, complex, and chaotic contexts each call for different managerial responses. By correctly identifying the governing context, staying aware of danger signals, and avoiding inappropriate reactions, managers can lead effectively in a variety of situations.
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, intuition, intellect, and charisma are no longer enough. Leaders need tools and approaches to guide their firms through less familiar waters.
"Understanding Complexity" (sidebar): 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:
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:
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.
Last modified 06 April 2022