Leading at the Edge of Chaos

Daryl Conner

p.v: I do not dispute that leadership may come in many forms at many levels of an organization.  But building nimble organizations, we have learned, requires that change leadership be executed at the most senior corporate levels.

p.vii: change is not an event, it is a process triggered by an event.

p.ix: The trough between two different paradigms is always filled with trepidation because it means that the established way of doing things is no longer viable; at the same time, the new ground rules are not yet clear.  This in-between state creates uneasiness regardless of how negative the old paradigm was perceived to be or how positive the new one may appear.

p.x: When increases in volume, momentum, and complexity of change constantly reach geometric proportions we will have entered the new era that represents the ultimate paradox: “uninterrupted discontinuity.”

p.xi: Unless leaders understand the process people use in addressing transitions in their lives, it is futile for them to think they can positively influence the outcome of important initiatives.

p.4: The more volatile the market, the quicker an organization’s success formula becomes obsolete.

p.6: The ability (or lack thereof) to execute important change decisions is what ultimately separates winners from losers in volatile and uncertain markets.

p.7: It is the general opinion that the primary culprit in these unsuccessful [change] attempts is poor navigation of the psycho-social-cultural inhibitors that block execution.

Most major change projects are launched to secure, retain, or recover some type of competitive advantage.  Because these efforts consume time, energy, and money with no guarantee of results, they should be viewed as risky ventures that are subsidized by shareholders, owners, and other key constituents

p.8: ROC_hg is an objective assessment of whether an adequate amount of goal attainment was achieved for the resources invested.

ROC_hg = Yield from effort (movement) / Execution Costs

Most leaders fail to sufficiently prepare employees for transitions that are essential to the future survival and prosperity of their organizations.

p.9: Nimbleness is the ability for an organization to consistently succeed in unpredictable, contested environments by implementing important changes more efficiently and effectively than its competitors, and thereby maintaining its desired ROC_hg.

p.11: A successful change initiative is one that accomplishes its stated objectives within the time and resource parameters deemed acceptable by whoever is sanctioning the effort.

Organizations can merge and new technology can be installed, but, like a tree falling in the forest with no one to hear, these events are immaterial until they interface with human consciousness.

12: The comfort and solace most of us are so attracted to can only be secured by inhabiting stable environments, but, at the same time, evolution rewards those who can adapt to changing conditions.  IN the midst of this tension, most people will typically choose to stay in situations that are clearly malfunctioning, improper, or even painful, rather than face their fear of ambiguity.

p.16: Senior officers within nimble organizations tend to be brutally honest about the escalation of change they foresee for themselves and those they lead.  … success at the new endeavors will not bring stability, only a more desired version of additional change.

p.18: Learning to decode the symptoms, milestones, cycles, and repetitive themes embedded in change allows you to demystify the process and become better able to manage it.

p.20: When the existing base of knowledge is inadequate to address the issues at hand, new knowledge must be created.  New knowledge requires the successful application of learning.  This, of course, is the antithesis of what most corporate climates foster.

p.21: Because so many variables are interacting during change, what works during one moment in time may not ever be feasible again.  Within any system, large or small, a single variable shifting only slightly can, within five minutes, cause a previously impeccable solution to become useless.

p.22: Systemic change knowledge deals with how everything is connected in some way, and it reflects what is sometimes called the butterfly effect. … Systemic knowledge is devoted to the broader-based impact of a particular change effort.

p.23: Unfortunately, most organization change initiatives result in little, if any, change knowledge gain by the people involved.

p.24: conscious learning about change requires an investment of intent and energy most organizations fail to sanction.

Because it is such a rarity, generic knowledge of change represents an important competitive advantage.  While most companies are learning very little from their encounters with change (or what they do learn is limited to specific or systemic knowledge), organizations that pursue generic knowledge about the implementation of change build an important distinction that will become more and more valuable as their market grows in speed and complexity.

p.25: Many people whose lives have been full of changes are no better prepared for the next major surprise than they were before their first encounter with instability.

Transition management literacy reflects the basic knowledge and skill level of a person, group, or entire organization regarding the ability to successfully design and carry out prescriptive plans for the execution of major change initiatives. … One of the critical challenges facing leaders today is the dangerously low transition management literacy rate that exists in most organizations.

p.25: Understanding the process by which expectations are constructed, and later are either corroborated or invalidated, is essential to the prospect of leading the change process.

Until they are ascribed meaning (pertinence and intention), data have no practical value.

p.26: The meaning an event has for people is a function of what they perceive to have happened and the positive or negative influence they believe this occurrence has had and/or will have on their future.

p.28: It is not necessary for leaders to be junior psychologists in order to build nimble systems, but without at least a rudimentary grasp of what influences people as they struggle with control and disorder, it will be impossible for senior officers to move past their existing level of unconscious competence.

It is difficult to succeed in situations that are unstable because they tend to be confusing and ambiguous.  This is why we humans are biologically, socially, and psychologically engineered to seek homeostasis whenever possible.

Except for the impact of luck, people can succeed only in environments they understand.

p.30: Confusing and ambiguous situations are frightening to us precisely because they mean we have lost the feeling of having any type of control.

When we resist change, we are not so much in conflict with the new conditions as we are acting out our fear of loosing access to the direct or indirect control we so desperately seek.

p.31: It is a foreign idea that readying ourselves for events we don’t like and can’t stop is another legitimate form of control.

p.33: Major change is so undesirable, most people would prefer to maintain the continuity of a negative, even self-destructive, but familiar situation rather than venture where their predictions are not validated by their perceptions.  Even when the consequences for maintaining the status quo are significant, most people avoid dramatically new, unpredictable circumstances whenever possible

p.36: We struggle with change because we are alive.  This is as true for you as for the people you are attempting to lead.  The only difference is: as they struggle, they will look to you for guidance.  anything less than conscious competence on your part will not suffice.

p.41-43: Nimbleness is the ability for an organization to consistently succeed in unpredictable, contested environments by implementing important changes more efficiently and effectively than its competitors. … Nimble companies and agencies believe they must operate within a sphere of incessant novelty, and they treat their ability to manage the unexpected as a strategic asset.

• Nimble organizations are usually distinctive in their deep sense of shared purpose.
• There is, typically, a strong common believe that, on a frequent basis, the status quo will become prohibitively expensive, driving new change into the system.
• Employees refuse to be trapped by past success or current pathologies.
• Line and staff personnel operate within flexible interpretations of their existing roles and assume they may face completely new job responsibilities on a periodic basis.
• …
• People believe they will earn advancement because of their ability to build knowledge.
• [see the full list in the text]

p.44: In respect to building a nimble operation, your most important leadership task is hiring and retaining the kind of people who can translate the desired vision into tangible reality. Operationalizing the goal of becoming the nimble provider in your market is more dependent on who is on your team than on how they are structured or the responsibilities they are assigned. [cf.: First Who, Then What]

p.45: Nimble operations are by no means void of differing opinions, arguments, and headed conflict.  … They don’t often forget that their adversary in an organizational disagreement is also their partner in success.

p.46:

p.48: Accepting that neither the fight nor the flight alternative is feasible doesn’t mitigate the remaining vagaries and confusion.  There are no pardons from the uneasiness that comes with uncertainty; the discomfort remains intact.

p.49: Courage is not taking action fearlessly.  It is acting despite feeling fearful.  Tolerance for ambiguity means performing well despite the discomfort one is sure to feel when facing the unknown.  It means working with, not somehow sidestepping the distress caused by loss of direct and indirect control.

p.50: By tolerating ambiguity, we delay judging new situations and are more likely to find values in them and to creatively transform them into opportunities.

p.53: Making the right call [between options] is possible only through the pressure and strain generated when diverse views collide in an atmosphere of mutual goals and interdependence.  The tension (i.e.: energy) brought to life by the clash of different viewpoints is an absolute necessity if truly creative alternatives are to result.

p.54: An organization’s structure consists of the arrangement of elements such as employees, technology, and capital; or patterns of activities like procedures, process, and habits used to operate its basic business. Self-organization is the ability to create new structural options out of existing resources. [cf.: 7S Model]

p.57: [story of Mt. St. Helen coming back to life]  Because of the interdependent nature of a forest, one form of plant life, regardless of what it is, helps set the stage for another and then another.  …  once true self-direction begins, it usually becomes pervasive within the operation.

p.59: Leaders of nimble organizations have learned that in turbulent waters concrete predictions are unreliable.  They know from experience that, in an unstable business environment, it is useless to try to maintain one’s sense of balance by trying to foresee distinct events.

Instead of trying to predict events, nimble companies focus on developing processes that will allow quick and effective responses to events as they unfold. … it is more important to develop a plan for making key decisions than to know specifically what decision they will face in the future.

p.60: all organizational change efforts imply some kind of movement from one state to another.

p.61: A trip reflects minor changes in a person’s life.  The defining characteristic for this kind of movement is that the traveler is basically the same — only a little older — before and after the excursion.
Journeys … are a transforming experience that defy total predictability. … There may or may not be a clear point of departure, but once the first steps of a journey are taken, the final outcome can be predicted only in the most general terms.  [see chart on p.66 for trip vs. journey comparison]

Trips produce changes in the tangible aspects of our lives, but not in the nature of who we are.

p.65: During major transitions, people experience both trip and journey anxiety.  Management addresses trip fears by answering precise questions about current and expected events.  Leadership responds to journey anxiety by describing the possibilities and probabilities.

The purpose of an organization’s change journey is to advance, over time, the company’s capacity to absorb major disruption. Additionally, a change journey includes preparing an organization for even more challenging turbulence in the future. [cf.: Learning as a Way of Being]

p.67: Resilience is the ability to absorb large amounts of disruptive change without a significant drop in quality and productivity standards.

Five most critical resilience characteristics:

• Positive — Security and self-assurance that are based on a view of the marketplace as complex but filled with opportunity.
• Focused — A clear vision of what must be done to prosper.
• Flexible — A creative ability when responding to uncertainty
• Organized — Structured approaches to managing ambiguity.
• Proactive — Engaging change rather than defending against it.

p.69: [Importance of balance]  If any individual component of a system is weak, the greater system will not be able to respond effectively to the demands of certain situations.

p.72: If your heart isn’t already there, techniques won’t get you where you think you want to go.  Mimicry accomplishes only a shadow of the true goal, and the full intent is never achieved.

p.74: We can sometimes do without actually using the latest models, techniques, or tools, but it would be foolish to be unaware of them.

p.76: To understand the true nature of change requires a view that all existence is constantly engaged in a struggle between order and chaos. [cf.: Leadership and the New Science]

p.77: At the point where order and chaos most closely resemble one another, there exists the greatest possibility for broadening the human capacity to adapt to instability and uncertainty.

p.77: Six degrees of change load  [cf.: Kotter, sense of urgency]

• Complacency
• Continuous Improvement [cf.: Kaizen]
• Intermediate movement
• Paradigm shifts — This results in not a better version of what existed before, but something completely different. … The integrity of an organization’s overall equilibrium is being protected by completely redefining one or more aspects of its operation [cf.: Built to Last]
• Chaos

p.81: How many, and which, subsystems must fail before a primary system slips from order to chaos?

Whether the aftermath of chaos proves to be better or worse for those involved is, of course, subjective and immaterial to this dialogue. Once control is truly lost, it cannot be regained. They dynamics of chaos then take over. [cf. Future Shock diagram]

p.86: Just as some losses are incurred with any investment strategy and a certain number of failures result from innovative solutions, the price for increasing an organization’s ability to accommodate change is always the inclusion of some level of future shock.

In a world defined more by its variations than its redundancies, the Nimbleness required for an organization to remain viable can only be achieved by embracing the very state we humans fear.  We must inoculate our companies with just the right amount of future shock to prevent a more lethal case of adaptation deficiency that we can survive.

p.87: What is required is an unwavering commitment to the pursuit of extending the limits of transition capability.

If leaders are overly sensitive to these expressions of discomfort, they will mistakenly come to rely too much on the “I’m-frustrated-and-unhappy” scale to determine the limits of change people can successfully undergo.  Most of us can adjust far better than our tears, pleas, and threats would suggest.  [cf.: Heifetz]

p.89-90: All games have certain characteristics:

• Purpose – from frivolity [gossip] to ROI
• Rules – explicit to implicit
• Time boundaries – brief to lifetime
• Spatial parameters – desktop to corp. structures, to global markets
• Prizes
• Intensity – from “fun” to “warfare”
• Emotional reactions – pleasure to pain
• Prescribed number of players
• Intentionality – conscious (promotions) to ingrained (sibling rivalry)
• Language
• Roles

p.91: Regardless of their composition, place of origin, or substance, paradigms eventually outlive their viability. … Paradigms don’t just materialize out of thin air; they are a response to people trying to make sense of their world.

p.95: Today’s leaders must learn to break the habit of depending on luck and unconscious competence and instead rely on the more effective Human Due Diligence approach.

p.96: Human Due Diligence … assumes people have an elastic but, at any point in time, finite reservoir of adaptation resources.

p.100: [HDD] is a blend of management science, psychology, anthropology, and group dynamics

p.101: Change management … although still a relatively new tool in the executives survival kit, it already shows signs of faltering as a reliable mechanism for dealing with what it was supposed to address — the human side of major transitions.

The people problems associated with executing change today are no longer as responsive as they once were to the change management approach.  In a relatively brief period of time, this orientation toward organizational transitions rose and is now in the process of being discarded as the darling of those who think of themselves as architects of organizational transitions.

p.103: before committing substantial amounts of time and money to a companywide restructuring effort or to the installation of a major new information system, senior management is obligated to conduct a thorough probe of all the critical variables that could impact the success of the venture.

[Critical question]: “Do we have or can we attain the human capacity to successfully execute the changes vital to our future?”

When a ceaseless advance of ambiguity and uncertainty looms, operating with inadequate speed and agility to carry out important decisions is no different than having an insufficient water supply when crossing a desert.  Nimbleness and water represent strategically important resources that must be acquired, stored, treasured, and used with discretion.  HDD is simply a structured and disciplined way to bring about this nimble quality.

p.110: [market pressure vs. employee push back]  The two sides must be seen as representing a dilemma to be managed [cf.: Beyond Rational Management] not a problem to be solved and eliminated.  The task is paradoxical in nature, not linear.  Both must be pursued simultaneously.

Despite all the rhetoric about participation, in order to protect themselves from the growing ease with which employees offer their options and ideas, many executives have all but shut down the corridor between themselves and their employees’ useful input.  (cf.: Building Blocks of Empowerment)

p.111: Remember, magnitude is discretionary in that management must make a decision to implement a change before it is added to the actual transition burden for an organization.

p.112: Far fewer undertakings that start at the top of an organization ever make it intact to the last level of gatekeepers.  In fact, the least reliable group to ask about how much change is really taking place in an organization is senior management.

The number of unfamiliar ideas for change that an organization chooses to materially pursue constitutes the real volume of its changes, not how many ideas were floating around the organization.

p.113: Contrived vs. Genuine momentum

Just because a person who has a strong capacity to absorb disruption and who can operate in ambiguous situations happens to also be the CEO, this does not necessarily mean that the rest of the organization is similarly prepared.

p.114: Genuine momentum is characterized by correct, timely, and minimally biased information about current and future market dynamics.

p.115: The complexity of a change effort is measured by the quantity, variety, and clarity of information needed to describe it.

Eventually, all living systems either grow and become more complicated and perplexing, or they die.

Generally speaking, as the complexity of the changes an organization attempts to increase, so does the rate of failure.

p.117: The most reliable predictor of commitment is the price people believe they will pay if they fail to achieve their change. … The success of any major change effort is directly tied to the severity of the price for the status quo.

p. 117: Burning Platforms. …
A metaphor for the tough decisions leaders must make about which change initiatives to pursue as business imperatives and which ones to forgo because they are really no more than good ideas.

p.119: People don’t have to face a life-threatening situation or organizational insolvency before they will support efforts at fundamental change.  What is required is an unusual level of resolve: the determination, fortitude, and steadfastness to no longer pay what has become an inordinate price for the status quo.  [cf.: Kotter, Urgency]

p.121: The burning-platform story is about resolve, not peril.

Despite the commitment rhetoric that may have been thrown about, if an endeavor fails to achieve its stated objective and management believes that it can pay what is perceived to be no more than a moderate amount for the collapse, the project is doomed.

There is a greater likelihood that managing the human risk of change will be included in an organization’s success formula if the consequences for the project’s failing represent a personal burning-platform situation for the leader.

p.124: Responsibility for accelerating an entire organization’s capacity to absorb major change starts at the top — not near the top, at the top.  Board members must declare Nimbleness a critical issue worthy of their vigilance, then hire and retain senior executives capable of meeting the challenge.

p.125: [robbing Peter to pay Paul] when we move assets from one category to another, overall capacity is not enhanced; it is actually diffused. … shifting a key asset from one vital part of the organization to another only perpetuation the illusion of adequacy.  The borrowed asset sets up yet another deficit that must be eventually filled from some other source.

p.126: When the majority of an organization’s legends are based on stories about extraordinary heroic efforts instead of competence and courage, this usually means it has become culturally acceptable to participate in deficit spending of key resources.

The optimum time to invest in building a stronger capacity to digest the human reaction to transition is before you reach the critical threshold for chaos.

p.127: Concrete, sustained change is typically the result of focused attention and dedicated resource allocation. … For this reason, successfully implemented change initiatives typically represent a concentration of energy and attention that can only come at the expense of other existing or prospective projects.

The decision to dedicate resources is more about saying “no” than saying “yes.”

p.128: When senior officers are faced with the need to introduce more change than their organizations can adequately absorb, it becomes critical that they place all the various current and prospective initiatives into one of three categories.

p.129: Vigilance must be unrelenting, to be sure that, first and foremost, the organization can successfully execute its business imperatives.  Only if this can be accomplished with the remaining adaptation capacity can top priority good ideas be considered.

p.130-132: Task List [make this its own page]

p.137: As the magnitude of change and the consequence for poor implementation continue to escalate, analysts will face fewer and fewer situations where they can afford not to take the human element into account.

p.138: Many responsibilities come with membership on a board of directors, but none is more important than the selection of the people to serve in key senior-level positions for the organization.

p.147: [Key questions for leaders about change]:

• How important are the attitudes and feelings people have toward a specific initiative?
• Under what circumstances would you require a thorough diagnosis of how employees will react to a particular project before any news of it is announced?

These kinds of questions, when properly answered and interpreted, help us gain insights into leaders’ perspective on the nature and significance of the human aspects of organizational change.

p.150: The perpetual unrest era of change, just now emerging, is characterized not by step increments of advancements, but by geometric explosions in both the magnitude of disruptions being encountered and the price being paid for failing to execute key corporate initiatives.  This second era represents a paradigm of unending transitions where quantum-leap changes occur frequently and are designed to completely break from the previous integrated order and structure of how things operated.

Rational Leaders

p.156: Rational leaders are not well-suited for complex environments where participation and commitment are necessary for change to succeed.

Bolt-on Leaders

p.161: They start openly declaring (1) an increased value for building a nimble work setting and (2) the importance they place on taking a more professional approach to the psychological issues that arise when change is introduced.  Senior officers who come to these conclusions but are uneducated as to what they should do, or who know what to do but refuse to pay the full price for resolution of these issues, are called “Bolt-On” leaders.

p.162: The Bolt-on approach is based on a belief that an organization’s inability to execute important initiatives is primarily due to knowledge deficits.  The Bolt-on leader thinks it is his or her responsibility to provide employees with education that addresses what they don’t understand about managing and absorbing change.

p.163: They typical Bolt-on leader cares enough about the impact employees could have on the success of important initiatives to train them, but not enough to track the utilization of what they learn. … These leader’s lack of attention to application may appear to contradict earlier statements about their attentiveness to the human side of change.

p.164: Acknowledging or avoiding reality is immaterial to its existence and effect on people.  Recognizing or ignoring the critically important role played by the human factors of change in no way diminishes the existence or impact.  What is assured is that if these issues are identified and dealt with appropriately, the prognosis for success is increased.  If they are shunned, the forecast usually worsens.

p.166: With Bolt-on leadership, the key determinants for using change management concepts and techniques are often serendipity, friendliness, and politics — not the most comforting foundation, if what is at stake is the execution of a critically important change project.

The Integrated Leader

p.171: The cornerstone of the Integrated style of change leadership is the respect and prominence placed on the psycho-social-cultural issues associated with accomplishing important initiatives.

p.172: “What are you going to do to make sure our return on investment in change (ROC_hg) is not hindered by poor execution?”

p.173: Whatever a leader considers critical to running his or her business becomes a nonnegotiable part of how the organization functions.  Leaders systematize what they really want to see happen; they embed these things into the fabric of their business.

Planning how to reduce resistance and increase commitment is essential to the success of major change.

The Continuous Leader in the Era of Perpetual Unrest

p.179: The continuous leader will engage the challenge from a fresh perspective.  He or she will view all three issues — what should be change, why it should be done, and whether the necessary resources are available — as secondary to a more important question: Can the organization maintain its ability to absorb all the major disruptions (known and unknown) necessary to remain competitive?

p.180: For the Continuous leader, what is paramount is not whether the organization can execute any current, singular change efforts, but whether it can sustain in the future an unending avalanche of dramatic, overlapping alterations in its key success factors.

p.181: The Continuous executives maintain oversight responsibility to ensure the attention paid to any one project never supersedes maintaining the organization’s overall ability to maneuver and respond to the next set of change demands, lurking just around the corner.

p.183: Being in control means being able to make sense out of what you perceive to be happening.

Leadership’s Personal Resilience

p.189: In order to hold the enterprise on the brink of chaos, your own capacity to thrive in the midst of disruption cannot be compromised. … consistently display certain resilient habits of mind — characteristic approaches to unfamiliar and uncomfortable situations that maximize your ability to perform during chaos.

• Positive: identify opportunities in turbulent environments and have the personal confidence to believe you can succeed.
• Focused: maintain a clear vision of what you want to achieve
• Flexible: draw upon internal + external resources to develop creative, pliable strategies for responding to change.
• Organized: use structured approaches to managing ambiguity, planning, and coordinating effectively in implementing their strategies.
• Proactive: engage action in the face of uncertainty, taking calibrated risks rather than seeking comfort.
  p.192: The failure to capitalize on an opportunity through inaction based in risk aversion can be extremely costly, in terms of both lost opportunity and the resources spent to build plans that become obsolete before they can be tried.

p.194: [good news / bad news]: Because of your resilience, you are likely to set a pace that others cannot match.  Situations that look like exciting challenge to you are actively uncomfortable for many others.  It is probably difficult for you to view things from a less resilient perspective and see how disruptive certain changes are.

Your challenge is to maximize the resilience of those around you while continuing to refine your own skills.  Two aspects of your own role that can support these efforts: (1) modeling resilience and (2) shaping a resilient system.