Change Management and Complexity Theory[1]
Dean Styles
Sooty Solutions
Burnaby BC
Abstract. Managing change is a difficult
process in any organization. Change management involves controlling the three
R's of change: Reward, Risk and Rate.
Change always brings with it unknown risks and uncertain benefits. Change control systems can be classified as
optimistic (reward focused), risk-adverse or rate-adverse as they attempt to
find a comfort zone that balances the three R’s. Without an honest review of the organization’s historical record
at implementing change and in the absence of good analysis of each of the three
R’s most organizations will be managing change at a rate that is not optimal
for their situation. In many cases the
approach used for the next change is determined by the success or failure of
the last change and a consistent balance is never attained.
The Inevitability of Change
Change is a necessary outcome of a competitive
environment. Things that appear
unchanging are merely at a point where there is a balance between growth and
decline. When change is aligned to our
goals we say change is good, when it frustrates our goals we say change is bad,
and if we are unwilling to control change we are simply participating in a
change lottery. If we let fate decide
we are like the Lucky Man; “Sometimes I have good lucky and sometimes I have
bad lucky but I am always a very lucky man”.
We can attempt to eliminate all the risks associated with
change by slowing the rate of change.
Analyze every outcome, develop contingencies for every possible failure,
plan the change down to the minutest detail, and drive the change process as if
it were a heavy nail going into hardwood.
This approach ignores the fact that change occurs in a competitive
environment. While we strive to obtain
absolute control in managing our changes the external environment is activating
changes that are not aligned to our goals.
If the external changes are proceeding faster than our change process
whatever we do accomplish will be quickly overtaken and rendered obsolete.
We can attempt to focus only on the rewards of change
cutting our loses as soon as things start to turn bad. Or we could use any number of gambler’s
strategies. For example “doubling up”
translates to “we’re terrible at managing small changes so lets do everything
as one big change”. Increasing the
rate of change to cover up previous change management failures is a recipe for
disaster.
The bottom line is that change is inevitable, change has
little respect for our goals, and we are in a race to implement our changes
before the outside world makes our systems irrelevant. Masters of change do not
see themselves like a chess master moving pieces with predictable rules across
a well-defined arena. Instead they see
themselves as a surfer skimming across surface of a big wave always in control
of their surf board and always with a great deal of respect for the destructive
power of process they have decided to engage.
The Rewards of Change
The rewarding changes fall into two general categories “do
something better” or “do something new”.
Doing something better is deceptively simple; if it takes ten hours to
build a widget and you change the process so it only takes five hours the
change will reward you with lower costs and increased capacity. The deceptive part is in measuring whether
there was actually a reward. If you
sacrifice quality in making your process faster, or burn out your staff, or run
afoul of some environmental regulation your change may provide no gains at
all. For any change that promises
improvement you must measure the situation before and after and must include all
factors including the effects on both suppliers and customers. Most important the measurement must be
end-to-end otherwise you may just be shifting effort and improving subsystem
performance at the expense of the overall system.
If you do something new measuring the rewards are simpler
because the before condition is a zero state.
Moreover doing something new has a lot of intangible benefits; it may
spark innovation in related areas, it may create products in services that
people never knew the needed (and now cannot be without), or it may just break
the ice and encourage people to accept change with less resistance in the
future. As with improvement type
changes it is critical to quantify the rewards. You must ask “are we better after the change than before” and
answer the question with a measurement in dollars.
Many changes are promoted with an inflated promise of
rewards. Often this is not malicious or
a conscious attempt to deceive. Those
proposing the change are naturally optimistic about the outcome. They see resistance to their ideas as simply
a resistance to change that can be overcome by selling harder. Those resisting change will always minimize
the reward and exaggerate the risks.
The negotiation process continues until the agents of change and those
affected by the change find a balance that yields a credible understanding of
the rewards and provides an acceptable level of risk.
The Risks of Change
“If it ain’t broke don’t fix it” is advice handed down from
generations of people who have experienced failed changes. The risks of change are often difficult to
assess or even foresee. It is a
psychological principle that a condition of uncertainly is felt as fear. Fearful people are extremely resistant to
change even if it is clear to them on an intellectual level that the change
will improve their situation. Fear of
fire traps the victim in the burning building.
Fear of losing their job traps the employee in a dead end position. The first law of risk management is that
well informed staff are more willing to accept change but it is critical that
the information leads to a reduction in uncertainty.
Pilots will tell you that every box on their checklist
represents a crashed plane. The risks
of airline flight are perceived to be so great that the law mandates a rigid
risk management process. It is well
known that per mile of travel more people die in automobile crashes than
airplanes yet there is no checklist for you to when you make that trip to the
grocery store. In fact you are sixty
times more likely to die on a motorcycle than in a car. At least there are laws about seatbelts,
energy absorbing bumpers, and airbags for cars. On a motorcycle you are naked to the perils of the road. The second law of risk management is that perceived
risk determines behaviour more than actual risk. The corollary is that risks are perceived as lower when they are
under an individual’s control.
In complex systems processes are interconnected in ways that
provide benefits and involve dependencies that can be hidden and
mysterious. A changed process may not
provide the support or capitalize on the interconnections and therefore lose
out on the resulting benefits. Ecologists
know about interconnected systems especially the classic case where spraying
DDT on mosquitoes actually killed off all the cats, which lead to an explosion
in rat population, and the fleas on the rats lead to an outbreak of bubonic
plague. An integrated supply chain with
just in time deliveries is an environment that ecologists understand better
than business analysts. The third law
of risk management is that interconnected systems exhibit exponentially larger
risks than isolated systems.
The label on the bottle of cleaner insists you try on a
small area to determine if the fabric is colorfast. Pilot projects are a method to uncover hidden risks but only if
the results of the pilot can be used to shut down the project. If the pilot is designed to be stage one of
a planned rollout the focus on the plan will overwhelm all else and the lessons
from the pilot will be ignored. The
disciple of prototyping and pilots is that you must be prepared to assess the
results objectively and beyond the reach of the enthusiasm for the plan. The fourth law of risk management is that a
pilot is a success if you learned something, it is even a bigger success if it
avoided proceeding with a disastrous change.
The Challenger disaster was probably caused by small voids
introduced into the insulating foam during application. Expanding gases in the void caused a small
chunk of foam to fall off damaging a few tiles on the shuttle wing. On reentry hot gases cut through the damaged
tiles like a torch and destroyed the wing.
There are lots of examples of small changes that result in an amplifying
cascade of events resulting in a disaster.
The fifth law of risk management is that there are no small changes.
Later it will be shown that the cascade of small changes
into big problems is more likely to occur as a system moves past its optimum
complexity and into a chaotic state. In
general it is impossible to change manage every small change and there will
always be surprises. Risk management
can only rely on change management to provide an ordered change process. To properly manage risk you also need a
monitoring process that looks for cascading problems and can quickly take
control of the change control system to quench the cascade. The six law of risk management is that
change control is only part of the solution.
The Rate of Change
There is an old saying “in chaos there is opportunity” and
this is true for the lucky few.
Dropping your ice cream in the sand provides a wonderful opportunity for
the ants but it is unlikely to be aligned to your goals. You can start a revolution to end a repressive
government and you may become a general in the new dictatorship. On the other hand if you honestly assess the
situation your outcome is more likely to be “first against the wall”. Chaos chooses its beneficiaries at random
and often it is the survivors of chaos that will be writing the glorious
history. Most of the participants will
be victims.
Chaos is simply a situation where changes that result in
destruction exceed changes that result in creation. Chaos is marvelously exciting and if you ignore the destructive
forces it can be described as a hugely creative time. Many of our great books and art arise from chaotic times but we
are often unaware of what was lost. As
the rate of change increases the destructive forces begin to dominate and productive
efforts are quickly consumed in the turmoil.
There are those that recall a golden time when everything
was perfect and wish such a time would last forever. On closer examination such golden times always had a few things
that needed to be fixed and even those who long for such times would want to
tinker with it. Museums are full of
things that have been stopped in time.
In fact museums expend a great deal of effort in their attempts to stop
time. When there is no competition and
any change is avoided because it is destructive the system enters a state of
stagnation. This is a very effective
strategy for museums and it may also be effective for some business
systems.
Most business processes fall somewhere between chaos and
stagnation. In fact complexity theory
provides a way of looking at what results we can reasonably expect from a
process as we increase the rate of change from stagnation to chaos.
This is the shape of a shark’s tooth or a sand dune found in
an excellent book on complexity by Mitchell Waldrop[2]. When there is no change there
are no results. Similarly when the rate
of change is so high the forces of destruction completely dominate the forces
of creation there are also no productive results. Between stagnation and chaos there is an optimum point of
complexity where the balance between creation and destruction maximizes the
adaptive and productive capabilities of the system.
The sand dune shape has other things to tell us. It takes a lot of change to get a stagnant
system moving so it can be productive.
Moreover the benefits appear slowly and a great deal of risk must be
suffered before increasing the rate of change starts to pay off. If you are presented with a stagnant system
that is becoming obsolete the risk of rapid evolutionary change (lots of new
features in the next version) is almost as great as that of revolutionary
change (replace the system completely).
At the optimum point a small increase in the rate of change
can result in a precipitous drop into chaos. Change cascades are commonly seen at this point. A small change does not have time to diffuse
its effects through the system before it is disrupted. The disruption creates its own change
cascade and the whole process rapidly becomes unmanageable. Past the optimum point traditional
prescriptive change management processes cannot keep up with the rate of
change. The system must be continuously
monitored to watch for change cascades.
The chaotic region is very creative but not very
productive. To maximize the benefits
groups operating past the optimum point must be in continuous contact with
groups operating in more stable environments.
A good way to do this is have project leaders build core teams in the
chaotic region then bring these teams back along the complexity curve as they
move from research, to prototyping, to development, implementation and
operation.
Stagnant systems are also essential to business
operations. We keep seven year old
financial records in a safe unchanging place just in case the tax department
comes calling. We keep medical records
well beyond the death of the individual for similar reasons. The overriding focus of archived information
is data integrity. Any change to
historical records must overcome extensive reviews and large administrative
barriers that are the key method of protecting this data. Even data errors need to be protected from
change. Decisions made on the basis of
these errors would be perplexing if the errors were repaired.
Businesses will typically have systems that are operating
over the range of the rate/complexity curve.
The problem is to tailor change management so it is appropriate to the
environment.
Legacy Systems
From their location it is clear that Legacy system and
archived data need very rigid change control procedures. The first and only answer to many change
requests is no. Attempting to repair a
system in this region will typically find no one willing to provide
support. Others will deny knowledge of
the system just to avoid becoming trapped in a dead end job that will probably
disappear when the legacy system is finally removed from service.
The most common problem with legacy systems is that many of
these systems are never declared as legacy.
Critical support staff, those who keep the legacy system operating, are
told the system will be kept operational forever. The smart ones will escape the sinking system creating a huge
dependency on those who remain. Once
the systems are final shut down the legacy support staff are often unfamiliar
with current systems and their greatest fear is confirmed as they are forced to
exit the company.
The best approach is to make an early declaration of legacy
status for systems that are reaching the end of their life cycle. The declaration brings with it a very
bureaucratic change control process that slows the rate of change into
stagnation. This minimizes risks, cuts
costs, preserves the integrity of the system, and provides stability for all
the interconnections to other systems.
The legacy declaration will have a major impact on support
staff. Support staff often have
knowledge of critical business processes and system connectivity that is
difficult to recover if the staff leave the system. The path for most of the support staff will involve moving them
incrementally up the complexity curve to the next operational system. They will quickly forget the legacy system
and switch loyalties to their new system.
The few that are left behind with the legacy system must
remain loyal to the maintenance of the legacy system or it will fail. The natural home for these people is in
research. By placing these staff in
research they will have no other operational system to capture their loyalty,
their research activities are interruptible if a failure occurs on the legacy
system, and they are rewarded for taking care of a dead system by training and
exposure to leading edge technologies.
Of course if they prove themselves to be unable to learn the new technologies
or adapt to the research environment you always have the option of laying them
off when the legacy system is shut down.
Operational Business Systems
As we move up the complexity curve we get to systems that
are main support of business operations.
These systems must be stable because without them the business will shut
down. They must also change at the same
rate as the business. Change management
is a balancing act and these systems must be closely linked to the challenges
and completive threats encountered by the business. If the business changes the systems must change in lock step.
Change management policy in this region is heavily affected
by the nature of the business. If you
sell paper products your business environment is relatively stable. The lined three hole punched paper you are
selling today is practically identical to that you sold thirty years ago. Your rate of change will be determined by
computer technology not the business environment. If you manufacture cars your business environment is nearly
chaotic. New competitors, new
suppliers, new markets, and new marketing strategies are appearing in rapid
succession. In this case your computer
systems must be very nimble and your change control process must not interfere
with getting the right system in place to meet the business challenges.
Software Development
The goal of software development is to build something
new. A secondary goal is to ensure the
tools you use to build a new business system are absolutely current when you
commission the system. A two year development
process starting with a two year old database product may find it can no longer
get support for the four year old database software when the system is made
operational. Moving to the latest tools
perhaps even beta versions of those tools is a fact of life in software
development. Any change control system
must recognize this source of change and adapt to the disruptions and chaos it
brings to the software development process.
Software development must also keep up with changes in the
business environment. Once again the
rate of change in the business will determine the impact of this source. For our paper supplier the impact will be
minimal. For our car manufacturer there
is a serious risk that the software development team will deliver a new
business system that is designed to operate in a business environment that no
longer exists.
Software development must encourage creativity. Building something new is a very creative
activity. If the change control process
provides no outlet for creative expression the resulting systems will be less
effective than they could be. On the
other hand if the change control process caters to creative individuals the
result will be chaos.
Software development should operate at the sweet spot on the
complexity curve to get the most out of the time and resources it
consumes. Change control managers need
to develop a sixth sense of where their team is on the curve. In slow moving business environment the
change manager can allow more staff creativity and work with tools closer to
the leading edge. If the team is mostly
junior and the business environment is chaotic then stricter more bureaucratic
change control processes must be used.
If your team is technically senior and in tune with the business needs
your change control procedures can very informal. Change control manager must be most flexible in this region.
Research and Testing
Surprisingly there is a real need for change control in this
region but its focus moves from controlling change to communicating
changes. A testing lab is a chaotic
place where the rate of destruction is expected to approach the rate of
production but that does not mean we cannot snatch the productive bits from the
environment before chaos destroys them.
Even here chaos must proceed in an orderly fashion. Lab systems must be allocated to development
teams, equipment moves must be coordinated, teams must keep the lab clean of
clutter, and licensing conditions of products must be maintained even as
hardware platforms are wiped clean and reloaded. Especially critical is a strict adherence to strategy of backing
up and keeping safe all important test results and copies of in-house developed
software tools. Control policies are
means used to keep the chaos contained and backup polices are the means used to
snatch the results of creative effort out of the chaos.
The change control process is expected to fail on a regular
basis in this region it is after all accepted as a region of chaos. The goal of change control is to protect as
much of the creative work as possible without getting in the way of the
creative energy. Focusing on change
control failures will be the quickest way to cripple the creative engine.
Summary
The change manager must have respect for the force of change
to be effective. They must see
themselves as a surfer skimming across the surface of a big wave in complete
control of their surf board but always aware of the destructive force of the
wave. They must understand that
productivity and results have a non-linear response to the rate of change. Change control managers need to develop a
sixth sense of where their team is on the curve and understand how to set a
change rate that is appropriate for the team.
The change manager must be flexible in their approach. When the rate of change exceeds the ability
of the system or the team to adapt the change manager must become bureaucratic
and unbending. When the team is not
living up to its creative potential the change manager must allow an outlet for
creative energy. As far as possible the
change manager needs to put the responsibility for managing change into the
hands of individual team members by rewarding those who behave with increased
freedom and punishing those who abuse their freedom with increased supervision.
Steps to evaluate your response to change:
- what
are the expected rewards
- what
are the expected risks based on a reasonable assessment of the risk
- what
is the worst case scenario and can you survive it if you hit bottom
- where
are you on the rate/complexity curve and where should you be
- what
can you do to minimize risk as you move toward the optimum complexity
point
The complexity curve gives an expected benefit for a given
rate of change. Reward versus effort
analysis tells you if the change will be valuable. Assessing risk as if you had to buy insurance to cover the risk
will give you comparable risk cost.
Finally balancing the reward, risk and rate components should maximize
the effectiveness of your change management process.
[2] Waldrop, M. Mitchell, Complexity: the Emerging Science at the Edge of Order and Chaos. New York : Simon & Schuster, 1992.
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