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Anatomy of Agile Enterprise

Janne J. Korhonen

Challenges for the Decade, Part 3: Leadership

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The increasingly interlinked and coevolutionary nature of extended enterprise entails a number of challenges. In this series of blog posts, I am addressing some of these challenges in terms of strategy, governance, leadership and enterprise architecture, and outlining rules for the whole new ball game that ensues.


Limits of Logical Thinking

Formal logical thinking is confined to closed systems that cannot size up non-physical moving targets. In itself, it allows for transformational thinking only to a limited degree. Developmental psychologist Otto Laske argues that transformational thinking transcends formal logic and requires dialectical apparatus. Whereas in formal logic, non-A is discarded by saying that it is "false", in dialectical thinking non-A is an "antithesis" to A that drives towards a higher level "synthesis" that embraces both A and non-A.

According to Laske, this inclusion of non-A in A goes to the core of open, living systems that always include contradictions and things "other" than what the system in its present form openly manifests. Transformation of such a system is a developmental movement across time that explodes any closed system in its entirety. It cannot be predicted with logical thinking relying on lagging (past-oriented) indicators.

Systemic rethinking of process and value streams, developing new products and services, discovering new markets, creating new business models, understanding different stakeholder agendas, partaking in worldwide networking, and developing and pursuing alternative strategic plans -- these are all transformational thinking exercises of various degrees that cannot be successfully conducted by using formal logical thinking as most people and organizations presently do.

Logical thinking views change as something external that can be "managed" or as something imposed from the outside that needs to be adapted to. Dialectic thinking, in contrast, regards unceasing change as an intrinsic part of reality that can be directed to developmental ends.

Inside-Out Approach to Leadership

Today's leadership and executive development programs are usually based on formal logical thinking or integrative thinking at best. They are constrained by rational organizing principles, logical hierarchies and other obstacles for presuppositionless thinking. They also approach leadership development from the outside in: 1) identify a leader's external challenges, 2) determine the competencies required to meet these challenges effectively.

In recent years, an inside-out approach has also emerged, focusing on the mental and emotional capacities needed for effective leadership. From this perspective, at least two notable books have been written that reveal findings about the relationship between psychological development of adults and leadership effectiveness:

  1. "Leadership Agility--Five Levels of Mastery for Anticipating and Initiating Change" by William B. Joiner and Stephen A. Josephs
  2. "Action Inquiry--The Secret of Timely and Transforming Leadership" by Bill Torbert
Neither of the books makes references to Laske's work or dialectical thinking, but they do recognize vertical leadership development through recognizable stages that enable the leaders to operate successfully in increasingly complex situations.

Aligning Accountability and Capability: Requisite Organization

The recognition that both the complexity of work and the capability of people occur at distinct levels is in the core of Elliot Jaques' Stratified Systems Theory that defends hierarchy as a natural form of social organization, reflecting the discontinuous steps in the nature of human capability. In what Jaques calls the "Requisite Organization", levels of work complexity, measured by the required time span of discretion in a role, are aligned with respective human capability levels to support effective managerial accountability.

Jaques maintains that the role complexity increases discontinuously in specific steps at time spans of 1 day, 3 months, 1 year, 2 years, 5 years, 10 years, 20 years and 50 years. These breakpoints stratify varying kinds of work into natural layers, or "strata", in the hierarchy. A role falling into any given stratum should report to a role in the next stratum up. When roles are placed requisitely, an organization is likely to function effectively. When they are too close or too far, dysfunction is inevitable. Problems also arise when a person is in a role at a level higher or lower than his or her current capability or when there are too many or too few layers.

Jaques' theories are directly at odds with the mainstream management doctrines that stress teamwork and call for the removal of management layers. These "touchy-feely" approaches to management, Jaques argues, are fundamentally misguided, disastrous and dangerously wrong. The hierarchy, per se, is not bad, but organizational dysfunctions can be traced to poor structure that prevents employees from working at their full potential.

The only lasting solution is to define roles by clear levels of work complexity (Accountability Architecture) and match each level with people cognitively and socio-emotionally equipped to do their jobs (Capability Architecture). A properly structured Requisite Organization can release energy and creativity and improve morale. And, indeed, the few companies that have applied RO principles have reported marked increases in productivity and profits as well as happier and more dedicated employees.

Extended Enterprise Calls for Post-Heroic Leadership

Both "Leadership Agility" and "Action Inquiry" acknowledge a marked shift from Achiever to Catalyst (from heroic to post-heroic leadership), or from Achiever to Individualist (from conventional to post-conventional action logic), respectively. Interestingly, these shifts seem to be in perfect line with Laske's conjecture that the underlying inquiring system changes from Understanding (based on formal logic) to Reason (based on dialectical logic) between the IV and V strata of Jaques' Requisite Organization, which is the demarcation line between the self-contained businesses and the wider ecosystem. This would further support the notion that the extended enterprise environment calls for qualitatively different kind of leadership.

At the first post-conventional level, the leader must, at least, be able to:

  • Have a wide-angle view on the health of the natural environment and the well-being of the larger society.
  • Create visions that challenge commonly held assumptions.
  • Focus more on both present and historical context.
  • Move through different time frames with ease.
  • Think globally, regionally, and locally all at the same time.
  • Recognize different frames of reference and respective biases.
  • Let go of defense mechanisms.
  • Accept mixed feelings and inner conflicts.
  • Be attracted by difference and change more than by similarity and stability.
  • Create empowering environments.
  • Exhibit visionary leadership.

Strategic leadership in the extended enterprise context calls for the kind of systemic and transformational thinking that few leaders possess. Both Joiner & Josephs and Torbert report that only about 10 % of leaders are functioning at the post-heroic/post-conventional levels.

An enterprise may want to measure its leadership capabilities and align the leaders with appropriate accountability levels. Particular attention needs to be paid in appointing the leaders at higher echelons. What usually happens when a CEO's capability fails to match the accountability level is that the whole company is shrunk down to his/her own level. The leader's ability to conceive transformational systems can be decisive of whether the company is a "keystone" or just a marginal player in the overall ecosystem.

Janne J. Korhonen provides insights into how information technology can be applied strategically to catalyze organizational change and responsiveness. Drawing from both theory and practice, he discusses agile enterprise and its governance.

Janne J. Korhonen

Janne J. Korhonen is an independent business and IT consultant,specializing in enterprise architecture, business process management,service-oriented architecture and pertinent governance models. He has over ten years of experience as an architect and consultant in a variety of extensive and mission-critical IT projects. With strong theoretical underpinnings, his consulting encompasses systemic co-development of business, organization and information technology.

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