The Butterfly Effect: Managing Your Organization as a System

Because most things in life are part of larger systems, some seemingly trivial events can have significant impact. For example, in 1961, mathematician and meteorologist Edward Lorenz took a shortcut in entering data in a weather prediction model. He innocently entered .506 instead of the full numeric value of.506127, and the result was a completely different weather prediction. In a 1963 paper, Lorenz commented that if the theory were correct, “one flap of a seagull’s wings could change the course of weather forever.” He later changed that metaphor to a butterfly, and now the phenomenon is widely labeled the “butterfly effect” – where seemingly little events can lead to more significant changes to the larger system.

Though I’m a little cautious to source Wikipedia, here is the definition of the Butterfly Effect: “The butterfly effect refers to the idea that a butterfly’s wings might create tiny changes in the atmosphere that may ultimately alter the path of a tornado, or might delay, accelerate, or even prevent the occurrence of a tornado in another location. The flapping wing represents a small change in the initial condition of the system, which causes a chain of events leading to large-scale alterations of events. Had the butterfly not flapped its wings, the trajectory of the system might have been vastly different. While the butterfly does not ‘cause’ the tornado in the sense of providing the energy for the tornado, it does ‘cause’ it in the sense that the flap of its wings is an essential part of the initial conditions resulting in a tornado, and without that flap, that particular tornado would not have existed.”

So the whole concept of the Butterfly Effect (which is similar to the Domino Effect) relies on the notion that everything is part of a larger system – in which small changes in part of a system can result in larger changes to other parts of that system.

Consider a ball rolling down a hill. If you start the rolling at the top of the hill rather than 20 feet from the top, or even five feet from the top, the change in velocity will determine how far it can roll. Similarly, if there are changes in wind speed, surface tension, or any number of other variables, the eventual landing spot of that ball will change.

Or consider the impact that small changes in our climate are having on various ecosystems. An increase of only 1 to 1.5 degrees Fahrenheit of warming is causing: changes in vegetation (notice the slightly longer growing season in Minnesota?!); wildlife to migrate to different habitats (notice how Canadian Geese don’t always migrate south now?); icecaps to melt, which is causing oceans to rise (which has a huge impact on worldwide shoreline, particularly in coastal cities); ocean waters to warm (which is killing coral reefs as well as certain plankton, which impact marine life’s shelter and food sources). Not to get into the politics – or even scientific root causes – of global warming, but the simple event of increasing worldwide temperatures by even 1 or 2 degrees is having dramatic effects on many ecosystems.

Or consider the impact of too much use (and not enough regulation) of mortgage-backed securities. People across the world began to enjoy a false sense of wealth as their real estate values artificially increased last decade. Many would take on increasing levels of debt (and so would our banks), but when several triggers impacted the system (oil price increases, monetary policy easing, and federal budget deficits, to name a few), the system began to unravel and real estate (and stock market) values began to plummet, which in turn caused a slowing in economic output, which led us into a worldwide recession. Many would argue that we have not addressed the underlying issues that caused the 2008-10 recession, and with additional factors beginning to emerge (instability in Europe, for example), we could be in for more tough economic times in the future. Yes, the worldwide economy is a highly interconnected system.

Most things in our lives are parts of larger systems, where various parts of the system interact and affect various other parts of the system. “Systems thinking,” then, is the process of understanding how things influence one another within a whole.

  • In nature, systems thinking examples include ecosystems, in which various elements such as air, water, movement, plants, and animals work together to survive or perish.
  • In the human body, various systems work together to sustain life. For example, the cardiovascular system (with the heart, veins, arteries, and blood) carries oxygen and nutrients throughout the body; the neurological system supports movement, response to stimulus, and decision making; the digestive system (mouth, esophagus, stomach, intestines, etc.) supports digestion; and so forth. If any one of these systems (or any part of any one of these systems) is not working properly, the body suffers disease, disability, or some form of sub-optimization that affects lifestyle or life in general.
  • In automobiles, various systems work to enable the car to operate – the fuel system, the transmission system, the braking system, the heating/cooling system, the GPS navigation system, and so forth. All parts of the car work in combination to make the vehicle operate, and if any one of them to fails, the car will not perform (or not perform well).
  • In organizations, systems consist of people, information, and processes that work together to make an organization healthy or unhealthy.

Organizational systems theory dates back several decades, traced to early work of experts such as Deming, Ackoff, Senge, and Wheatley, among others. Collectively, these experts believed that organizations were highly complex systems, and that managers should therefore manage organizations as systems rather than only focusing on its individual parts. In fact, these experts believed managers should view problems as parts of an overall system, rather than only reacting to specific events, failures, or process problems (the result of which could contribute to unintended consequences).

I’m sure you’ve seen examples of myopic thinking within organizations. Take, for instance, an organization that introduces a new product without fully considering the impact of existing products? Or a certain engineering team reacting to a design defect by changing a spec, but not considering what impact that might have on the overall product performance (quality, warranty claims, customer complaints in the call center)? Or manages who change a staffing schedule because of workforce shortages without considering customer traffic patterns or the impact on direct customer service?

A systems perspective is based on the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation. And a systems perspective focuses on cyclical, rather than linear, cause and effect relationships within and between organizations.

This is where I believe many organizations struggle: they don’t have the measurement systems or the general insights to understand how certain decisions create impacts within and outside the organization and/or how changes to parts of the system impact (positively or negatively) other parts of the system. Surgeons would never just start cutting on various body parts without considering the impact on the heart, brain, and other various organs and systems! So why do managers sometimes make changes to processes, technology, workforce policy, customer-facing processes, and so forth without first gathering requirements and then studying the impacts of various potential changes to the system?

I believe that successful management of overall organizational performance requires synthesis, alignment, and integration of the organization’s various parts. According to the Baldrige framework:

  • “Synthesis means looking at your organization as a whole and building on key organizational attributes, including core competencies, strategic objectives, action plans, and work systems.
  • “Alignment” means using the key linkages between areas of an organization – between its leadership system, planning process, customer focus processes, workforce processes, operations, and other processes – to ensure consistency of plans, processes, measures, and actions. The result of better alignment is more predictable and ever-improving outcomes.
  • “Integration” builds on alignment, so that the individual components of an organization’s performance management system operate in a fully interconnected manner and deliver anticipated results.

For an organization, then, having a systems perspective means several things:

  • that senior leaders focus on strategic directions and customer/stakeholder needs.
  • that strategies are linked with work systems and key processes.
  • that an organization’s resources are aligned to strategic objectives to improve overall performance.
  • that senior leaders monitor, respond to, and manage performance based on data – on results; in fact, that workers are all levels of an enterprise use measures, indicators, and organizational knowledge to make decisions and to improve the processes used throughout the system.
  • that organizations can learn: they operate as a closed loop systems, where data and information inform decision making so that processes can be adjusted, strategies can be “course-corrected,” and core competencies can be fully leveraged.

In essence, a systems perspective means managing your whole organization, as well as its individual components, to achieve success.

But that is hard to do, because 1) most of us were never trained in systems theory and really don’t have the tools to manage organizations as systems, and 2) systems are inherently complex and our brains, as powerful as they are, are wired to handle comprehension of only parts of systems rather than viewing things in three, four, and five dimensions (recall Senge’s “Fifth Dimension” book that was all about systems thinking).

So what are managers to do? It sounds a little self-serving, but enlightened leaders from higher performing organizations (or at least those who aspire to be higher performing) use organizational assessments based on validated best practices to diagnose their systems – to verify what is working well in their systems and identify and prioritize opportunities for improvement. Much like an annual physical for your organization, these assessments uncover blind spots, redirect resources, inform planning, and refocus efforts on the most important areas of your organizational system.

There are many such diagnostics out there, but PEN offers three assessments based on the proven “Criteria for Performance Excellence” of the Baldrige Performance Excellence Program:

  • the comprehensive MN/SD/ND Performance Excellence Award (that offers a very thorough evaluation of the system with teams of trained Evaluators) – this offers the deepest, richest learning experience for the organization and its leaders, and motivates sustained improvement at all levels of the enterprise;
  • a Consultative Assessment (which leverages management experts, who help leaders identify their organization’s improvement opportunities) – this is a “short cut” assessment, but still helps leaders identify where they should focus their organizational energy; and
  • a self assessment (which finds strengths and improvement opportunities through the collective lens of an organization’s workforce) – this is the quickest and easiest assessment, which provides a roadmap for immediately improving organizational performance.

All three assessment processes are based on a validated set of best practices from leading organizations across the US; all three are diagnostic in nature and help inform leaders of where in their system they need to focus their attention and resources; all three promote organizational learning; and all three assist with resource optimization, process improvement, and improved and sustained results.

So the bottom line is this: your organization is a complex system, filled with hundreds – if not thousands – of independent work systems and processes, each designed to produce a set of outputs that presumably move the organization forward. In order to manage and improve – or at least better understand – the dynamics of your organization, leaders should have a framework to put those processes into context within the larger system, so that resources are optimized, negative consequences are minimized, and results are improved and sustained.

Part of PEN’s mission is to help leaders better understand their systems so that performance excellence can be achieved and sustained. So like the butterfly, whose single wing flap could cause (or divert) a tornado several hundred miles away, a leader’s decision to begin managing their organization as a system could (positively) change the trajectory of their enterprise’s performance. All stakeholders in your system – your customers, workers, owners, partners – would benefit from that seemingly “little” decision.

Yours in Performance Excellence & Happy Thanksgiving!

Brian S. Lassiter
President, Performance Excellence Network (formerly Minnesota Council for Quality)

Catalyst for Success for 26 Years!