Wednesday, October 1, 2008

Don't Hit the Iceberg

Dealing with Crisis and
Uncertainty - A Change Management Approach

For the last weeks, there has been one single issue that dominates all the media: the world financial crisis. What we know by now is that it will impact all of us, all companies and all governments. What we don't know is how much the crisis will affect us, and exactly when it will hit us individually.

With this article, I try to approach the issue of dealing with a high degree of uncertainty from an organizational change perspective.

One of my favorite models of change management is the disagreement/uncertainty matrix of Ralph Stacey. Stacey has proposed a two-dimensional matrix that introduces as a tool to deal with change and complexity: Certainty and Agreement.

Certainty depends on the quality of the information base that facilitates individual and joint decisions in organisations. Rational management has tried hard to decrease uncertainty by introducing tools like fishbone analysis, the Boston Matrix, customer research, etc. And, in fact there are many day-to-day decisions in management, where analytical decision making is highly successful. There are, however, many situations in which decision is made on assumptions. Depending on the number of stakeholders involved, the projected time frame, the susceptibility of the project to external influence factors, etc., projects might become very complex and it becomes impossible to realistically predict outcomes.

Modern social systems such as organisations are mainly self-organised on the base of negotiation processes. The degree of agreement among the people directly involved on what should be done ("the truth") with respect to the implementation methodology of a project is an important factor determining success.

We are entering a period of time in which high degrees of uncertainty and disagreement will be the norm. If you look at Stacey's matrix in the above mentioned article, this is the area called "Edge of Chaos".

Edge of Chaos is a term that is used frequently in complexity theory and describes the margin of complex systems - the transition state between order and chaos. At the edge of chaos, only a little amount of energy is needed to break the equilibirum of a system. The fall of the Berlin wall on November 9 1989 was such a moment in history, when an entire political system collapsed
in one night. The same happened to some financial institutions recently.

However, at the edge of chaos, organizations can move into a more stable condition, into a new state of equilibrium. Stacey's model tells us how - we have to increase either certainty or agreement (or both variables). What options do we have to do so?

Increase of agreement

1. Transformational leadership. True leaders take tough decisions but communicate them wisely, engage other people in dialogue and inspire them to take decisions, too. If your people see you walking the extra mile, they will do, too.

2. Communicate deeply but quickly. In times of crisis people's fears matter to an organization even more than they should during "normal" times. If everybody in an organization believes being on a sinking boat, they will disengage thus increasing the vulnerability and accelerating the downward spiral of the organization. This is the opposite of what we intend to do in Appreciative Inquiry: instead of increasing the positive image that people hold of their
organization, the negative perception intiates a circle of scepticism, pessimism and finally cynicism, Mechanisms for constant multi-level dialogue need to be implemented to help people assuming ownership for breaking the vicious circle of pessimism and loss of confidence. Crisis communication has to be concise but use different channels and apply a broad variation
of tools.

Increase of certainty

1. Deep analysis and radical honesty. Think of the Titanic: "At around 11:30 p.m., lookout Frederick Fleet stared into the mind-numbing darkness. It had been a miserable night in the crow's nest, scanning for something that would be nearly impossible to notice because of the calm sea. Normally, there would be small waves breaking against the sides of the icebergs, but the sea was so calm tonight that there were no waves. Also, the lookout's binoculars had disappeared after the ship departed from Southampton, so the visibility of the feared icebergs was limited even further." (from: Don't hit the iceberg.Do everything possible to increase the visibility of what is happening. Tell people what you are actually doing to prevent the ship from sinking. Encourage honesty and transparency. Reward messengers instead of shooting them.

2. Short feedback loops. Have regular, short meetings, involving different circles. Get feedback on how your interventions into the system have increased agreement and certainty of the organization. Use tools for scenario analysis but don't be blinded by the results. Explore radical approaches and counter-approaches. Decide based on these feedback loops.

3. Use neutral facilitators for meetings. In crises, people tend be guided by their assumptions and have difficulties to challenge those. An external, strictly neutral facilitator can help to map out different assumptions and guide teams to productive outcomes.

Change Facilitation s.r.o. will soon launch our new product: "Leading
in times of crisis". For more information, please contact Holger at

1 comment:

John Stauffer said...

Very interesting post. I had never heard of the edge of chaos theory. Certainly seems relevant given the last few weeks.


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