General Index

Index of Figures ....................................................................................................................................... 3 Introduction ............................................................................................................................................. 4 The Learning Organization: Different Views ................................................................................... 7 1.1 Literature Review ....................................................................................................................... 8 1.2 Argote and his Framework ......................................................................................................... 9 1.3 Argyris: Theory in Use and Espoused Theory ......................................................................... 12 1.4 Garvin: Five Activities to define Learning Organizations ....................................................... 14 1.5 Hubers Definition .................................................................................................................... 16 1.6 Levitt and March ...................................................................................................................... 19 1.7 Fiol and Lyless curve .............................................................................................................. 21 1.8 Nonakas Spiral of Knowledge................................................................................................. 24 1.9 Senge and his Five Disciplines ................................................................................................. 28 How to Reach a Learning Organization ............................................................................................. 32 2.1 Literature Review ..................................................................................................................... 33 2.2 Core Competence ..................................................................................................................... 34 2.3 Building Blocks of the organizational learning ........................................................................ 36 2.4 Five Disciplines and tools......................................................................................................... 40 2.5 Personal Mastery tools.............................................................................................................. 44 2.6 Mental Model ........................................................................................................................... 47 2.7 Shared Vision ........................................................................................................................... 49 2.7 Team Learning .......................................................................................................................... 51 Leadership and Innovation .................................................................................................................. 54 3.1 Introduction .............................................................................................................................. 55 3.2 Generative leadership to foster innovation ............................................................................... 56 1

3.3 Create value with know-how in action ..................................................................................... 58 3.4 Leaders innovate with the Theory U ........................................................................................ 64 3.5 Three kind of leaders to build a learning organization ............................................................. 69 3.6 Knowledge asset ....................................................................................................................... 72 The Archetypes ...................................................................................................................................... 76 4.1 Literature Review ..................................................................................................................... 77 4.2 Shifting the burden ................................................................................................................... 78 4.3 Eroding goals ............................................................................................................................ 79 4.4 Escalation.................................................................................................................................. 81 4.5 Tragedy of the commons .......................................................................................................... 81 4.6 Growth and Underinvestment ................................................................................................... 83 4.7 Fixes that Fail ........................................................................................................................... 84 4.8 Limits to growth ....................................................................................................................... 85 4.9 A Global Limits to Growth ....................................................................................................... 90 4.10 Limits to Growth in Listen to Learn ....................................................................................... 92 Impediments and Facilitators .............................................................................................................. 99 5.1 Introduction ............................................................................................................................ 100 5.2 Challenge to Change ............................................................................................................... 101 5.3 Obstacle to Systems Thinking ................................................................................................ 105 5.4 New Knowledge stickiness ..................................................................................................... 107 Case Study Analysis ............................................................................................................................ 113 6.1 Hanover Insurance Company ................................................................................................. 114 6.2 The SHELL case study ........................................................................................................... 131 Conclusion ............................................................................................................................................ 143 References ............................................................................................................................................ 147 2

Index of Figures

Figure 1: Organizational Learning Cycle ................................................................................................ 10 Figure 2: Learning and Change ............................................................................................................... 22 Figure 3: Spiral Evolution of Knowledge and Self- transcending Process ............................................. 25 Figure 4: Core Competencies, University Libraries, University of Nebraska-Lincoln .......................... 35 Figure 5: Casual Loop Diagram .............................................................................................................. 42 Figure 6: Creative Tension ...................................................................................................................... 45 Figure 7: Ladder of Inference.................................................................................................................. 48 Figure 8: Stage of Staff Involvement in Change Process ........................................................................ 50 Figure 9: Skillful Discussion ................................................................................................................... 52 Figure 10: Linking Leadership, Innovation and Complexity .................................................................. 56 Figure 11: The value-creating types ........................................................................................................ 59 Figure 12: The U Process of Presencing ................................................................................................. 65 Figure 13: Leadership Learning Matrix .................................................................................................. 68 Figure 14: Level to see Reality ............................................................................................................... 71 Figure 15: Limits to Growth Template ................................................................................................... 86 Figure 16: BCG Growth-Share Matrix.................................................................................................... 90 Figure 17: Reinforcing trust .................................................................................................................... 93 Figure 18: Resource Depletion ................................................................................................................ 94

Introduction

During my master degree studies I had the opportunity to work in an Audit firm. In such environment I unfortunately shared my days with people which were bored of their daily job, without any enthusiasm nor passion. At the end of my internship I wondered: Does exist a way of working that could make people eager with a better communication and in which risk taking and new ideas together with continual learning and innovation are key elements of the company? William OBrien, CEO of the Hanover Insurance companies says: People enter business as bright, well-educated, high-energy people, full of energy and desire to make a difference; but with the time they lose the commitment, the sense of mission and the excitement with which they started their careers. This dissertation will be based basically on the description and analysis of the Learning Organization: Its pretty complex to easily describe what a learning organization is. Please find here a couple of definitions: Its when organizational leaders stimulate new ways of thinking and acting amongst individuals, groups, and communities (Bontis, Crossan, & Hulland, 2002; Nonaka, 1994). When an organizations capacity to learn, so to acquire, apply, and spread new insights, has been touted as the fundamental strategic capability (Fiol & Lyles, 1985). When leading source of competitive advantage (de Geus, 1988, 1997; Stata, 1989). Place where people continually expand their capacity to create the results they truly want, where new and expansive patterns of thinking are supported, where collective aspiration is set free, and where people are continually learning how to learn together (Senge, 1990). Always OBrien says as well: I talk with people all over the country about learning organizations, and the response is always very positive. If this type of organization is so widely preferred, why dont people create such organizations? I think the answer is leadership. People have no real comprehension of the type of commitment it requires to build such an organization. Although individual members are the mechanisms through which organizational learning generally occurs, the knowledge that individuals acquire would have to be embedded in a supra-individual repository for organizational learning to occur. That is, the individuals knowledge would have to be embedded in the organization so that other members could access it, even if the individual left the organization. The knowledge can be embedded in a variety of repositories or knowledge reservoirs, 4

including tools, routines, social networks and transactive memory systems (Argote and Ingram, 2000; Walsh and Ungson, 1991). A deep overview of the most important and known authors of the Learning Organization will start this chapter. In the second chapter I will illustrate how to reach it through different strategies, tools and skills that employees and especially managers should develop. Learning is an ongoing process which gives to each person satisfaction and reward. It gives the possibility of achieving good performance without any frustration within the organization. In the third chapter I will analyze two strategic concepts that an organization should have in order to develop a successful Learning Organization are: Leadership and Innovation. In order to succeed in competitive environment that operates according to the rule of increasing returns, leaders have to develop another cognitive capability: the skill of feeling and exploit coming opportunities. This skill is a new kind of knowledge creation, which is not easy to replicate especially within big groups. Marion and Uhl-Bien (2001) contend that leadership success doesnt depend only of charisma, strategic insight, or individual power of any leader. Rather, it is attributable to the capacity of the organization to be productive in mostly unknown and non-predictable future states. Leaders must therefore foster the conditions that develop organizational capacity by focusing more on the understanding of patterns of complexity and of manipulation of complex situation than results. In the fourth chapter I will expose the archetypes: a tool that every Learning Organization, in particular in the field of systems thinking, should use to develop a credible and consistent

hypotheses about governing forces of their systems; they are highly effective tools for gaining insight into patterns of behavior and a natural vehicle for clarifying and testing mental models about those behavior. These tools can be used diagnostically or prospectively. In the specific case, I will explain the Limits to Growth Archetypes; we never growth without limits. In every aspect of life, patterns of growth and limits come together within various combination. Sometimes growth dominates; sometimes limits dominate; and often the degree of influence shifts back and forth between them. In the fifth chapter I will consider the impediments that organizations encounter when they decide to develop a learning organization and the facilitators that they can put into effect to simplify the process. Finally, in the last chapter I will describe and discuss about two case studies: Hanover Insurance Company, an organization that have put into act a radical transformation thanks to two leaders that 5

deeply believed that changes are possible and Royal Dutch/Shell, one of the most important example of Learning Organization in which Mental Models are the responsible of his success. Their success came from sharing mental about the company, the competitors and their markets, which resulted in the more common concept of scenario modeling. Other applications of mental models is to be able to anticipate a change in business activity and thus also change the mental model of the company among all employees.

CHAPTER 1
The Learning Organization: Different Views

1.1 Literature Review

In this chapter I will consider eight authors that provide a definition of the Learning Organization. The core of most definitions is that organizational learning is a change within the organization that occurs as the organization acquires experience. The question then becomes: changes in what? Knowledge is the outcome of learning. The core definition of Argote (2011) is that Organizational Learning can be analyzed through a framework which is formed by a context: as a start of an operation for an organization; the organizational context: it affects the experience that the organization acquires and interacts with experience to create knowledge; and finally by the knowledge: the results from organizational learning, embedded in the context and concerns future experience (Argote, 2011). Argyris and Schons (1974) Organizational Learning theory is based on the understanding of two mode of activities: Espoused theories that represent what someone says they would do in a certain situation and comprised their beliefs, attitudes, and values and a Theories-in-use that represent what they actually do. Another important consideration that Argyris (1993) writes is that while in building learning organization we have to be vigilant about detecting and correcting errors, dedicated to producing innovations, and ready to change to meet the demands of the environment, which itself is often changing (Argyris, 1993). David Garvin (1993), professor at the Harvard Business School, writes about three critical question that are still unresolved and must be considered before a company start creating a learning organization; each of these are necessary for an effective enhancement. The first one regards the meaning: we need a plausible, well-grounded, easy-to-apply definition of a learning organization which can be easy to apply. Second one is management: we need better operational guidelines for practice, filled with operational advice rather than high aspirations. Finally, better tools for measurement can assess an organization's rate and level of learning to ensure that gains have in fact been made. You can't manage something if you can't measure it (Garvin, 1993). An entity learns if, through its processing of information, the range of its potential behaviors is changed (Huber, 1991, p.89). This author, reflect on four concept -processes: Knowledge

acquisition is the process by which knowledge is obtained; Information distribution is the process by which information from different sources is shared and leads to new information; Information 8

interpretation is the process by which distributed information is given one or more commonly understood interpretations; and finally Organizational memory is the means by which knowledge is stored for future use (Huber,1991). Two other important authors define learning organizations as follows: Organizations are seen as learning by encoding inferences from history into routines that gui de behavior (Levitt and March,1988, p. 320); the authors believe that Organizational learning is as routine-based, historydependent and target-oriented; Within this perspective on organizational learning learn from direct experience, from the experience of others, and frameworks or paradigms (Levitt and March,1988). Other notable stream of literature write: Organizational learning means the process of improving actions through better knowledge and understanding(Lyles, 1985, p. 803); they will explain us the links between changes in behavior and level of cognitive development. Characterized knowledge-creating companies as places where inventing new knowledge is not a specialized activity; it is a way of behaving, indeed, a way of being, in which everyone is a knowledge worker(Nonaka, 1991, p. 97)1. Nonaka suggested that companies use metaphors and organizational redundancy to focus thinking, encourage dialogue, and make tacit, instinctively understood ideas explicit (Nonaka, 1991). And the last author will be Senge (1994), who popularized learning organizations in his book The Fifth Discipline, described them as places "where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together."'(Senge, 1994, p.1). To achieve these, Senge suggested the use of five "component technologies": systems thinking, personal mastery, mental models, shared vision, and team learning. interprets experience developing conceptual

1.2 Argote and his Framework

Argote (2011) thinks that the context is the start of operation for an organization. The organizational context affects the experience that the organization acquires. The context also interacts with experiences in order to create knowledge. The knowledge that results from organizational learning is

Ikujiro Nonaka, The Knowledge-Creating Company, Harvard Business Review, NovemberDecember 1991, p. 97.

embedded in the context and affects future experience. Thus, the cycle is dynamic and occurs over time. The context includes characteristics of the organization and the environment in which the organization is embedded. The organizational context includes the organizations structure, culture, technology, identity, memory, goals, incentives and strategy. The context also includes relationships with other organizations through alliances, joint ventures, memberships in associations. The environmental context includes competitors, clients, institutions, regulators and so on. It can vary along many dimensions, such as volatility, uncertainty, interconnectedness and munificence. Experience is what transpires in the organization as it performs its task. Experience can be measured in terms of the cumulative number of task performances and interact with the context through learning processes, and translates experience into knowledge. 2 The framework for analyzing organizational learning is shown in Figure 1.

Context

Experience

Knowledge

Figure 1: Organizational Learning Cycle Source: Argote, Organizational Learning: from expertise to knowledge, 2011

The third

research theme focus on learning processes and outcomes of knowledge creation,

retention and transfer.

L. Argote, Organizational Learning: From Expertise to Knowledge, 2011

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Knowledge creation occurs when a unit generates knowledge that is new to it. Emotional ambivalence or negative and positive emotions has been shown to enhance knowledge creation; rewards can also increase knowledge creation. Knowledge retention. Argote and Ingram (2000) conceive the of organizational memory as being embedded in organizational members, tools and tasks and the sub-networks formed by crossing members, tools and tasks. Research on three knowledge repositories or reservoirs is particularly active: members, routines or the task-task network and transactive memory systems or the membertask network. If knowledge is embedded in organizational members, then their turnover should have a deleterious effect on organizations. The other knowledge reservoir is receiving considerable attention is transactive memory3. In organizations with well-developed transactive memory systems (Wegner, 1986; cit. in Argote, 2000), members possess meta-knowledge of who knows what. This meta-knowledge provides individuals access to more knowledge than they individually possess and improves task assignment because members are matched with the tasks they do best as well as enhances problem solving and coordination because members know whom to go to for advice. Research has shown that units with well-developed transactive memory systems perform better than units lacking such memory systems (Moreland and Argote, 2000). Recent research is aimed at understanding the conditions under which transactive memory systems are most valuable (Ren, Carley and Argote, 2006) and improve organizational performance is needed. Knowledge transfer. It happens when the organizations learn indirectly from the experience of other units as well as directly from their own experience (Huber, 1991; Levitt & March, 1988). Learning indirectly from the experience of others, is knowledge transfer (Argote & Ingram, 2000). Empirical work provided evidence of learning from ones own as well as from others experience (Darr, Argote & Epple 1995; Epple, Argote & Devadas, 1991; Zander & Kogut, 1995; Baum & Ingram, 1998; Bresman, in press). A current theme in research on knowledge transfer is identifying factors that facilitate or inhibit knowledge transfer and explain the variance observed in the extent of transfer. These factors
3

A transactive memory system refers to a shared system that individuals in groups and organizations develop to

collectively encode, store, and retrieve information or knowledge in different domains (Wegner, 1987).

11

include: characteristics of the knowledge such as its causal ambiguity4 (Szulanski, 1996; cit. in Argote, 2000); characteristics of the units involved in the transfer such as their absorptive capacity (Cohen & Levinthal, 1990; cit. in Argote, 2000), expertise (Cross & Sproull, 2004), similarity (Darr & Kurtzberg, 2000; cit. in Argote, 2000), or location (Gittleman, 2007; Jaffee, Trajtenberg & Henderson, 1993; cit. in Argote, 2000), and characteristics of the relationships among the units such as the quality of their relationship (Szulanksi, 1996; Zollo & Reuer, in press; cit. in Argote, 2000). Although work on knowledge transfer in the 1990s emphasized cognitive and social factors, recent work also emphasizes motivational factors (Quigley, Tesluk, Locke & Bartol, 2007) as predictors of knowledge transfer. Knowledge transfer typically occurs across a boundary. The boundary could be between occupational groups (Bechky, 2003), between organizational units (Darr, Argote & Epple, 1995) or between geographic areas (Tallman & Phene, 2007). Understanding the translations that happen at the boundary is an important area of current research (Carlisle & Rebentisch, 2003; Carlisle, 2004; Tallman & Phene, 2007). How boundaries affect transfer is an interesting question that has led to seemingly anomalous findings. For example, on the one hand, knowledge transfer is more likely if two units share a superordinate identity and thus are internal to the same boundary (Kane et al., 2005). On the other hand, individuals may value external over internal knowledge (Menon & Pfeffer, 2003). Reconciling this apparent anomaly is an interesting topic for future search.

1.3 Argyris: Theory in Use and Espoused Theory

Learning is an idea in good currency(Argyris,1993, p.1) The quality of learning within a company produces an intellectual capital, crucial in building organization that is vigilant about detecting and correcting errors, dedicated to producing innovations, and ready to change to meet the demands of the environment, which itself is often changing (Argyris, 1993). The author explain that there are at least two ways to correct errors in all organizations. One is to change the behaviour (for example, reduce backbiting and bad-mouthing among individuals), learning that corrects errors by changing routine behavior . This kind of correction needs only single-loop learning. The second way to correct errors is to modify the underlying programme, or master programme, that leads individuals to bad-mouth others even when they say they do not
4

Definition of causal ambiguity will be in the fifth chapter.

12

intend to do so. This is double-loop learning, learning that corrects errors by investigate the underlying values and policies of the organization. If actions are changed without changing the master programmes individuals use to produce the actions, then the correction will either fail or will not persist (Argyris, 1993). An error is any mismatch between our intentions and what actually happens. If a department does not meet its budget, it is a mismatch. If the organization is unable to implement its strategy, that is also a mismatch. Behind this view of learning is a view of human nature and organizations. Human beings design their intentions and their actions. Organizations design their strategies, and they design the implementation of strategy. If this view is correct, then it is also correct that individuals and organizations cannot knowingly design and produce errors. If I say that I am going to upset you and I succeed, then that is a match. If the organization designs a flawed implementation process, carries it out, and it fails, that is a match, too. In these two examples, the intended or unintended consequences occurred as a result of the design that was implemented. Thus we may say that the error occurred by design5 (Argyris, 1993). One cause of designed error is the fact that we are skillful at what we do. Actions that are skillful, work. They are produced automatically, and we pay little or no attention while producing them. Indeed, to pay conscious attention to them could be distracting and lead to a loss of skill. Argyriss and Schons (1974) explain that organizational learning theory is based on the understanding of two (often conflicting) modes of operation: Espoused theories represent what someone says they would do in a certain situation and comprised their beliefs, attitudes, and values. Theories-in-use represent what they actually do. These Theories is the design we found throughout the world. It has four governing values: Achieve your intended purpose; Maximize winning and minimize losing: Suppress negative feelings; Behave according to what you consider rational. The most prevalent action strategies that arise from these Theories are the following: Advocate your position; Evaluate the thoughts and actions of others (and your own thoughts and actions); Attribute causes for whatever you are trying to understand. To explain better the difference between these theories, Argyris (1993) tell us:

C. Argyris, Education for Leading-Learning, Organizational Dynamics, Winter 1993, pp 5-17.

13

When someone is asked how he would behave under certain circumstances, the answer he usually gives is his espoused theory of action for that situation. This is the theory of action to which he gives allegiance, and which, upon request, he communicates to others. However the theory that actually governs his actions is his theory-in-use, which may or may not be compatible with his espoused theory; furthermore, the individual may or may not be aware of incompatibility of the two theories. (Argyris and Schn 1974: 6-7)6. The challenge is to help individuals transform their espoused theories into theories-in-use by learning a new set of skills and a new set of governing values. Effectively, these two modes of operation told individuals how to design their actions and implement their designs. All insights, understandings, attitudes had to pass through the theory-in use in order to become actionable. This is why it is possible to educate individuals to lead-learn by helping them to develop new master programs for action (Argyris, 1993).

1.4 Garvin: Five Activities to define Learning Organizations

David Garvin (1993), professor at the Harvard Business School, writes about three critical issues that are still unresolved and must be addressed before a company start to creating a learning organization; each of these are essential for an effective implementation. First is the question of meaning: we need a plausible, well-grounded, easy-to-apply definition of a learning organization; it must be actionable and easy to apply. Second is management: we need clearer operational guidelines for practice, filled with operational advice rather than high aspirations (Garvin, 1993). Finally, better tools for measurement can assess an organization's rate and level of learning to ensure that gains have in fact been made. Since you can't manage something if you can't measure it, a complete learning audit is a must. That includes measuring cognitive and behavioral changes as well as tangible improvements in results. Once these "three Ms" are addressed, managers will have a solid foundation for promoting learning organizations. Without this groundwork, progress is unlikely to be successful. In order for learning to become a meaningful corporate goal, it must first be understood (Garvin, 1993).

Argyris C., Donald Schon, Theory in Practice, Jossey-Bass, 1974

14

Using these "three Ms" as a framework, Garvin defines learning organizations as skilled at five main activities: systematic problem solving, experimentation with new approaches, learning from past experience, learning from the best practices of others, and transferring knowledge quickly and efficiently throughout the organization. Each step is accompanied by a distinctive mind-set, tool kit, and pattern of behavior. Many companies practice these activities at some level. But few are consistently successful because they rely largely on happenstance and isolated examples. By creating systems and processes that support these activities and integrate them into the fabric of daily operations, companies can manage their learning more effectively (Garvin, 1993). The five main activities are: 1. Systematic problem solving. This first activity remains on the philosophy and methods of the quality movement. Its underlying ideas, now widely accepted, include: Relying on the scientific method, rather than guesswork, for diagnosing problems. Insisting on data, rather than assumptions, as background for decision making. Using simple statistical tools (histograms, Pareto charts, correlations, cause-and-effect diagrams) to organize data and draw inferences. 2. Experimentation. This activity involves the systematic searching for and testing of new knowledge. Using the scientific method is essential, and there are obvious parallels to systematic problem solving. But unlike problem solving, experimentation is usually motivated by opportunity and expanding horizons, not by current difficulties. It takes two main forms: ongoing programs and one-of a-kind demonstration projects. 3. Learning from past experience. Companies must review their successes and failures, assess them systematically, and record the lessons in a form that employers find open and accessible. Unfortunately, too many managers today are indifferent, even hostile, to the past, and by failing to reflect on it, they let valuable knowledge escape. A study of more than 150 new products concluded that the knowledge gained from failures are often instrumental in achieving subsequent successes. In the simplest terms, failure is the ultimate teacher Garvin (1993) said. 4. Learning from others. Of course, not all learning comes from reflection and self-analysis. Sometimes the most powerful insights come from looking outside ones immediate environment to gain a new perspective. Enlightened managers know that even companies in completely different businesses can be fertile sources of ideas and catalysts for creative thinking. 15

According to one expert, benchmarking is an ongoing investigation and learning experience that ensures that best industry practices are uncovered, analyzed, adopted, and implemented. Another, equally fertile source of ideas is customers. Conversations with customers invariably stimulate learning; they are, after all, experts in what they do. Customers can provide up-to-date product information, competitive comparisons, insights into changing preferences, and immediate feedback about service and pattern of use. And companies need these insights at all levels, from the executive suite to the shop floor. 5. Transferring knowledge. For learning to be more than a local affair, knowledge must spread quickly and efficiently throughout the organization. Ideas carry their maximum impact when they are shared broadly rather than held in a few hands. A variety of mechanisms lead to begin this process, including written, oral, and visual reports, site visits and tours, personnel rotation programs, education and training programs, and standardization programs. Each has different strengths and weaknesses. Transfers may be from division to division, department to department, or facility to facility; they may involve senior, middle, or first level managers. A supervisor that have practical knowledge in just-in-time production, for example, might move to another factory to apply the methods there, or a successful division manager might transfer to a lagging division to invigorate it with already proven ideas7 (Garvin, 1993)

1.5 Hubers Definition

An entity learns if, through its processing of information, the range of its potential behaviors is changed (Huber, 1991, p.89). This definition holds whether the entity is a human or other animal, a group, an organization, an industry, or a society. The information processing can involve acquiring, distributing or interpreting information. When the entity is an organization, these processes are frequently interpersonal or social, but they are occasionally more mechanical, and they can often be usefully viewed as logistical processes. Further, learning does not always increase the learner's effectiveness, or even potential effectiveness. Learning does not always lead to veridical knowledge. Sample data are not always representative

D. A. Garvin, Building a Learning Organization, Harvard Business Review, 1993, pp. 78-91

16

and new findings sometimes overturn what was previously "known to be true." Entities can incorrectly learn, and they can correctly learn that which is incorrect. Finally, learning need not result in observable changes in behavior. Change resulting from learning need not be visibly behavioral. Learning may result in new and significant insights and awareness that dictate no behavioral change. In this sense the crucial element in learning is that the organism be consciously aware of differences and alternatives and have consciously chosen one of these alternatives. The choice may be not to reconstruct behavior but, rather, to change one's cognitive maps or understandings (Friedlander 1983, cit. in Huber,1991). More meaning is given to organizational learning by characterizing it in terms of attributes. With respect to the existence of organizational learning, Huber (1991) assumes that an organization learns if any of its units acquires knowledge that it recognizes as potentially useful to the organization. A corollary assumption is that an organization learns something even if not every one of its components learns that something. Huber (1991) identifies four learning-related constructs8: Knowledge acquisition is the process by which knowledge is obtained; many formal organizational activities are intended to obtain information or knowledge. Examples are customer surveys, research and development activities, performance reviews, and analyses of competitor's products. Many informal behaviors also are directed toward obtaining information or knowledge, for example, reading the Wall Street Journal or listening to coffee break "news". Information distribution, according to Huber (1991), is the process by which information from different sources is shared and thereby guided to new information or understanding, even if we have to take into account the fact that organizations often do not know what they know. With regard to the occurrence of the organizational learning, consider that organizational components commonly develop "new" information by assembling together items of information that they obtain from other organizational units, as when a shipping department learns that a lack of problem exists by comparing information from the warehouse with information from the sales department, but organizational units with potentially synergistic information are often not aware of where such information could help, and so do not route it to these destinations. Also, units which might be able to use information working in combination often do not know of its existence or
8

G.P. Huber, Organizational Learning: The Contributing Process and the Literatures, Organizational Sciences, Vol.2,

pp. 88-115, 1991

17

whereabouts. How those who hold non routine information and those who require this information find each other is relatively unstudied, but deserves the attention of researchers interested in organizational learning. Information interpretation, in accordance with Huber (1991), is the process by which distributed information is given one or more commonly understood interpretations. This means that more learning has happened when more varied interpretations have been elaborate, because such development changes the range of the organization's potential behaviors, and when more of the organization's units understand the nature of the various interpretations held by other units. Shared interpretation of new information is influenced by the uniformity of prior cognitive maps possessed by the organizational units, the regularity of the framing of the information as it is communicated, the richness of the media used to transfer the information, the information load on the interpreting units, and the amount of unlearning that might be necessary before a new interpretation could be generated (Huber, 1991). Organizational memory, conforming to Huber (1991), is the means by which knowledge is stored for future use, but everyday experience and some research make clear that the human basis of organizational memories are often less than satisfactory; the problem of poor organizational memory is much more complicated than simple considerations. Everyday observations make clear that personnel turnover produces great loss for the human components of an organization's memory; that non anticipation of future needs for some information creates great amounts of information not to be saved or not to be stored such that it can be easily retrieved, and that organizational members with information needs frequently do not know of the presence or whereabouts of information held or stored by other members. Variables to impact the ongoing effectiveness of organizational memory include membership attrition, information distribution and organizational interpretation of information, the norms and methods for storing information, and the methods for locating and retrieving stored information (Huber, 1991).

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1.6 Levitt and March

Organizations are seen as learning by encoding inferences from history into routines that guide behavior (Levitt and March, 1988, p. 320). Organizational learning is seen as routine-based, history-dependent and target-oriented; Within this viewpoint on organizational learning derives from direct experience, from the experience of others, and interprets experience developing conceptual frameworks or paradigms. Routines and beliefs change in response to direct organizational experience through two major mechanisms. The first is trial-and-error experimentation and the second mechanism is organizational search9. In the trial-and-error experimentation, organizations are described as gradually adopting those routines, procedures, or strategies that lead to favorable outcomes; but the routines themselves are treated as fixed. In fact routines are transformed at the same time as the organization learns which of them to pursue, and discrimination among alternative routines is affected by their transformation. In organizational search, an organization draws from a pool of alternative routines, adopting better ones when they are discovered. A concept that Levitt and March (1988) believe is that organization has a memory, that organizational earning depends on features of individual memories. Routine-based conceptions of learning presume that the lessons of experience are supported and collected within routines despite the turnover of personnel and the passage of time. Rules, procedures, technologies, beliefs, and cultures are preserved through systems of socialization and control. Such organizational instruments not only record history but become its future way, and the details of that path depend significantly on the processes by which the memory is maintained and conferred. Inferences drawn from experience are recorded in documents, accounts, files, standard operating procedures, and rule books; in the social and physical geography of organizational structures and relationships; in standards of good professional practice; and in the culture of organizational stories. But not everything is recorded. The conversion of experience into routines and the reporting of those routines involve costs. The costs are sensitive to information technology, and a common observation is that modern computer-based technology sustains the automation of routines by substantially reducing the costs of recording them.

B. Levitt and J. G. March, Organizational Learning, Annual Review of Sociology, Vol. 14, 1988, pp. 319-340

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Unless the implications of experience can be transmitted from those who experienced it to those who did not, the lessons of history are likely to be lost through turnover of personnel. Written rules, oral transitions, and systems of formal and informal apprenticeships implicitly instruct new individuals in the lessons of history. Even within a consistent and accepted set of routines, only part of an organization's memory is likely to be evoked at a particular time, or in a particular part of the organization. Some parts of organizational memory are more available for retrieval than others. Another concept that Levitt and March (1988) agree is with Dutton and Starbuck: Organizations capture the experience of other organizations through the transfer of encoded experience in the form of technologies, codes, procedures, or similar routines (Levitt and March, 1988). Levitt and March (1988) take into consideration also the ecologies of learning: organizations are collections of subunits learning in an environment that consists largely of other collections of learning subunits (Cangelosi and Dill 1965 in cit. Levitt and March,1988), forming an ecological system of network. The concept of ecology itself is important for networks. It refers to the diversity of partici -pants and their relationships. Creating a healthy ecology in terms of generation of learning and innovation is critical for multi-stakeholder change networks like Global Action Networks (GANs)10. The ecological structure is a complication in two senses. First, it complicates learning, and second, an ecology of learners complicates the systematic comprehension and modeling of learning processes. Ecologies of learning include various types of communication among learners, but the classical type is a collection of competitors. Competitors are connected partly through the diffusion of experience and they are also linked through the consequences of their actions on each other. One organization's action is another organization's outcome. As a result, even if learning by an individual organization were totally internal and direct, it could be comprehended only by defining the competitive structure. Learning itself can be represent as one of the technologies within which organizations develop competence through use and among which they decide on the basis of experience. Last argument traits about learning as a form of intelligence: organizational learning from experience is not only a useful aspect from which to characterize organizational change; it is also an
10

http://networkingaction.net/2010/07/networks-as-ecologies-of-learning-and-innovation/

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important instrument of organizational intelligence; the concept of intelligence is vague when action and learning occur simultaneously at several nested levels of a system (March, 1988). In fact it has become commonplace to emphasize learning in the design of organizations, to explain that some important improvements in organizational intelligence can be reach by giving organizations capabilities to learn quickly and precisely (Starbuck and Dutton, Duncan and Weiss in cit. Levitt and March, 1988); however, the complications in using organizational learning as a form of intelligence are not superficial. Even within a single organization, there are severe limitations to organizational learning as an instrument of intelligence. Learning does not always guide to intelligent behavior. The same processes that yield experiential wisdom bring superstitious learning, competency traps, and erroneous inferences. Problems in learning from experience are expected from inadequacies of human cognitive habits, from features of organization, from characteristics of the structure of experience as the problems of paucity, redundancy, and complexity. There are strategies for correct some of those problems, but ordinary organizational practices do not always produce behavior that conforms to such strategies. For example one response to the paucity of experience is the augmentation of direct experience through the diffusion of routines. Diffusion increases the amount of experience from which an organization draws and reduces vulnerability to local optima (Levitt and March, 1988).

1.7 Fiol and Lyless curve

Organizational learning means the process of improving actions through better knowledge and understanding(Lyles and Fiol, 1985, p. 803), within an organization or a subunit. In the context of organizational learning and adaptation, it is essential to remark the difference between cognition and behavior, exemplifying the two different phenomena, and doing a reliable reflection of the other. Changes in behavior may occur without any cognitive association development; similarly, knowledge may be achieve without any accompanying change in behavior. The links between changes in behavior and level of cognitive development may be delineate in the Figure 2. Small changes in behavior do not tend to lead about major cognitive development. The change may be too gradual for distinct associations to emerge; nor do major changes in behavior mean equally large advances in cognitive development. In fact, one school of thought propose that

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action-taking creating change may not be motivated by cognitive growth but merely by a need to do something. In fact much stability and unchanging behavior within an organization can lead to stagnation rather than cognitive growth, the opposite extreme may occur to be an overload for organizational members11.

Figure 2: Learning and Change Source: Lyles and Fiol, Organizational Learning, 1985

In according to Lyles and Fiol (1985), a number of strategic implications may be remarked when viewing a firm's position with regard to change and learning and with regard to fit with the environment: For instance, Position A is typical of many bureaucratic firms in which success programs have been firmly engrained: no new learning takes place, no attempts are made to change and no incentive or need for either change or learning. In fact, Position A may be appropriate in a stable and predictable environment as happens for example in public service organizations.

11

M. A. Lyles and C. M. Fiol, Organizational Learning, The Academy of Management Review, Vol. 10, 1985, pp. 803-

813

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On the other hand, Position B represents firms that keep taking actions, changing strategies, and restructuring but with very little learning taking place. The actions are not based on learning or knowledge of what will work. The result its production of shocks for the organization with little resulting sense of direction. Position C produces few changes, but these embody meaningful learning tools. Change created meaningful change in the cognitive development of the organization. New beliefs and interpretive schemes are developed. Position C may be most relevant in a turbulent environment in which renewal and innovation are crucial for survival, but too much modification would cause a loss of the sense of direction of the organization. Finally, Position D, with its high propensity to change and to learn, may be appropriate in a moderately turbulent environment. The internal complexity and dynamism of such an organization, make it difficult to support in a large amount of stress from the external environment. Within the category of cognition development it is possible to identify a hierarchy based on the level of perception and association building. There are two general levels: lower- and higher-level learning. Lower-level learning occurs within a given organizational structure, a given set of rules. It leads to the development of some rudimentary associations of behavior and outcomes, but these usually are of short duration and impact only part of what the organization does. It is a result of repetition and routine and involves association building. The apparent control over the environment is more characteristic of lower and middle levels of management than of upper levels, but lower-level learning should not be confused with lower levels within the organization. Any organization level may be involved with this process of learning. The desired consequence of lower-level learning is a particular behavioral outcome or level of performance. Though there may be far-reaching effects, the focus of this learning is on the immediate effect on a particular activity or facet of the organization (Lyles and Fiol, 1985). Higher-level learning, on the other hand, aims at adjusting overall rules and norms rather than specific activities or behaviors. The associations that result from higher-level learning have long term effects and impacts on the organization as a whole. This type of learning occurs through the use of heuristics, skill development, and insights. It therefore is a more cognitive process than is lower-level learning, which often is the result of repetitive behavior. The context for higher-level learning typically is ambiguous and vague, with repetitive and meaningless behavior. This ambiguity and environmental complexity characterizes upper management levels of the organization 23

where decision making norms are at least partially determined, that is, where higher-level learning usually occurs (Lyles and Fiol, 1985).

1.8 Nonakas Spiral of Knowledge

Ikujiro Nonaka characterized knowledge-creating companies as places where inventing new knowledge is not a specialized activity; it is a way of behaving, indeed, a way of being, in which everyone is a knowledge worker (Nonaka, 1991, p. 97). This author suggested that companies adopt metaphors and organizational redundancy to focus thinking, encourage dialogue, and make tacit, instinctively understood ideas explicit. Nonaka (1994) have as central theme the concept that organizational knowledge is created through a continuous dialogue between tacit and explicit knowledge. The nature of this dialogue is examined and four patterns of interaction involving tacit and explicit knowledge are identified. He argues that while new knowledge is characterized by individuals, organizations play a critical role in articulating and amplifying that knowledge. So, there are two kinds of knowledge: explicit knowledge and tacit knowledge. Explicit knowledge can be expressed in words and numbers and shared in the form of data, scientific formulae, specifications, manuals, and the like. This kind of knowledge can be readily transmitted between individuals formally and systematically. Tacit knowledge is highly personal and hard to formalize, making it difficult to communicate or share with others. It is deeply rooted in an individual's actions and experience as well as in the ideals, values, or emotions he or she embraces (Nonaka, 1994)12 There are two dimensions to tacit knowledge. The first is the technical dimension, which comprise the kind of informal personal skills or crafts often referred to as "know-how." The second is the cognitive dimension. It consists of beliefs, ideals, values, schemata, and mental models which are deeply ingrained in us and which we often take for given. While difficult to articulate, this cognitive dimension of tacit knowledge shapes the way we perceive the world. A theoretical framework is developed by Nonaka (1994) which provides an analytical perspective on the constituent dimensions of knowledge creation. This framework is then applied in two operational models for facilitating the dynamic creation of appropriate organizational knowledge.

12

I. Nonaka and N. Konno, The Concept of Ba: Building a Foundation for Knowledge Creation, 1994

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Figure 3: Spiral Evolution of Knowledge and Self- transcending Process In this framework (Figure 3) knowledge creation is a spiraling process of interactions between explicit and tacit knowledge. The interactions between these kinds of knowledge guide to the creation of new knowledge. The combination of the two categories makes it possible to visualize four conversion patterns. Figure 3 shows the characteristics of the four steps in the knowledge conversion process. Each of the four conversion modes can be understood as processes of selftranscendence. 25

Socialization. According to Nonaka (1994), socialization involves the sharing of tacit knowledge between individuals. The term socialization is to emphasize that tacit knowledge is exchanged through joint activities, such as being together, spending time, living in the same environment, rather than through written or verbal instructions. Long years of apprenticeship allow newcomers to understand others' ways of thinking and feeling. Tacit knowledge can only be shared if the self is liberated to become a larger self that includes the tacit knowledge of the other. For example, the larger self-mean that we empathize with our colleagues and customers, rather than sympathizing with them. In short, self-transcendence is fundamental to sharing individual tacit knowledge. In practice, socialization involves obtaining knowledge through physical proximity. The process of acquiring knowledge is largely sustained through direct interaction with suppliers and customers. Capturing tacit knowledge talking around inside the company is another process of acquiring knowledge. Information is accessed at the actual job site within the company and the latest available information is collected. Disseminating tacit knowledge is another key aspect of socialization. The process of transferring one's ideas or images directly to colleagues or subordinates means to share personal knowledge and create a common place. Externalization. Externalization requires the expression of tacit knowledge and its adaptation into comprehensible forms that can be understood by others writes Nonaka (1994). During the externalization stage of the knowledge-creation process, an individual commits to the group and thus becomes one with the group. The sum of the individuals' intentions and ideas become combined with the group's mental world. Thus, self-transcendence is a key to group integration and conversion of tacit knowledge into explicit knowledge. In practice, externalization is supported by two key factors. First, the articulation of tacit knowledge, that is the conversion of tacit into explicit knowledge; it involves techniques that help to express one's ideas or images as words, concepts, figurative language (such as metaphors, analogies, or narratives), and visuals. Dialogue, so listening and contributing to the benefit of all participants, supports externalization (Nonaka, 1994). The second factor involves translating the tacit knowledge of customers or experts into readily understandable forms. This may require reasoning or creative inference. 26

Combination. Combination includes the conversion of explicit knowledge into more complex sets of explicit knowledge. Nonaka (1994) explain that in this stage, the key issues are communication and diffusion processes and the systemization of knowledge. In practice, the combination phase relies on three processes. Capturing and integrating new explicit knowledge is essential. This might involve collecting externalized knowledge (e.g., public data) from inside or outside the company and then combining such data. Second, the dissemination of explicit knowledge is based on the process of transferring this form of knowledge directly by using presentations or meetings. Here, new knowledge is spread among the organizational members. Third, the editing or processing of explicit knowledge makes it more usable (e.g., documents such as plans, reports, market data). Internalization. Finally, the internalization of newly created knowledge is the conversion of explicit knowledge into the organization's tacit knowledge. This requires the individual to recognize the knowledge relevant for one's self within the organizational knowledge. That again requires finding one's self in a larger entity. Learning- by-doing, training, and exercises allow the individual 10 access the knowledge realm of the group and the entire organization. In practice, internalization relies on two dimensions. First, explicit knowledge has to be embodied in action and practice. Thus the process of internalizing explicit knowledge realize concepts or methods about strategy, tactics, innovation, or improvement. For example, training programs in larger organizations help the trainees to understand the organization and themselves in the whole. Second, there is a process that represents the explicit knowledge by using simulations or experiments to trigger learning by doing processes. In summary, the model describes a dynamic process in which explicit and tacit knowledge are exchanged and transformed. The four modes of knowledge creation allow us to develop the actualization of knowledge within social institutions through a series of self-transcendental processes (Nonaka, 1994).

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1.9 Senge and his Five Disciplines

Peter Senge, who writes about learning organizations in his book The Fifth Discipline, described them as places where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together (P. Senge, 1990, p.3). To achieve these, Senge suggested the use of five "component technologies": personal mastery, mental models, shared vision, team learning and Systems Thinking, the fifth discipline. Personal Mastery: begins by becoming committed to lifelong learning, and is the starting point of a learning organization. Personal Mastery involves being more realistic, focusing on becoming the best person possible, and aspiring for a sense of commitment and excitement in our careers to facilitate the realization of potential (Senge 1990). Mental Models: must be managed because they do preclude new powerful insights and organizational practices from becoming implemented. The process starts with self-reflection; unearthing deeply held belief structures and generalizations, and understanding how they dramatically control the way we operate in our own lives. Until there is realization and a focus on openness, real change can never take place (Senge 1990). Building Shared Visions: visions cannot be formulate because they always begin with the personal visions of individual employees, who may not agree with the leader's vision. What is required is a genuine vision that evoke commitment in good times and bad, and has the power to bind an organization together. As Peter Senge contends, building shared vision fosters a commitment to the long term (Senge 1990). Team Learning : is important because modern organizations work on the basis of teamwork, which means that organizations cannot learn if team members do not come together and learn. It is a process of expanding the ability to create desired results; to have a goal in mind and work together to attain it (Senge 1990)13. To create a learning organization is required effective leadership, which is not based on a traditional hierarchy, but rather, is a mix of different people from all levels of the system, who guide in different ways (Senge 1996)14. Systems Thinking : the ability to see the big picture, and to distinguish patterns instead of conceptualizing change as isolated events.
13 14

Peter Senge, The Fifth Discipline: The Art and Practice of the Learning Organization, 1990 Senge P., Leading Learning Organizations, Training & Development, Vol. 50, No. 12, 1996, pp. 36-40.

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Systems theorys ability to comprehend and address the whole, and to examine the interrelationship between the parts provides, for Peter Senge, both the incentive and the means to integrate the disciplines. Three things need noting here. First, systems theory looks to connections and to the whole. In this respect it allows people to look beyond the immediate context and to appreciate the impact of their actions upon others (and vice versa). To this extent it holds the possibility of achieving a more holistic understanding. Second, while the building blocks of systems theory are relatively simple, they can build into a rather more sophisticated model than are current in many organizations. Senge argues that one of the key problems with much that is written about, and done in the name of management, is that rather simplistic frameworks are applied to what are complex systems. The systems viewpoint is generally oriented toward the long-term view. Thats why delays and feedback loops are so important. In the short term, you can often ignore them; theyre inconsequential. They only come back to haunt you in the long term (Senge 1990). Systems thinking needs the other four disciplines to enable a learning organization to be realized. There must be a paradigm shift - from being unconnected to interconnected to the whole, and from blaming our problems on something external to a realization that how we operate, our actions, can create problems (Senge 1990). To summarize, a learning organization is not the mindset that it is only senior management who can and do all the thinking for an entire corporation. Learning organizations challenge all employees to use into their inner resources and potential, in hopes that they can build their own community based on principles of liberty, humanity, and a collective will to learn. To create a culture and environment that will act as the foundation for a learning organization begins with a shift of mind - from seeing ourselves as separate from the world to connected to the world (Senge 1996,37; cit. in Mason, 2011).15 Senges contribution propose that organization members must engage in a process of learning to understand their own system, rather than relying upon expert consultants. To do this, he designs learning laboratories facilitated computer simulations that enable people to improve their mental models of how parts of their organization interact (Isaacs and Senge, 1992). Senge calls these simulations management practice fields, as, with them, managers can develop their thinking through trial and error without being hampered by the real-life consequences of actual decisions.
15

Moya K. Mason, What is a Learning Organization?, 2011

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A central objective of such an intervention is to allow organizational members to discover how their own thinking creates some of the problems they face. Thus, Senge combines technical models with the softer concepts of vision and personal growth, as he maintains that technical issues are not easily remedied by technical solutions. This is because of the tendency for people to attribute causality to factors outside themselves and thus to fail to see their own causal role in creating or exacerbating problems. Senges core message is that witho ut individuals learning to shift their own ways of thinking about systems, organizations will be ineffective. Thus, fostering an experience of accountability for results is a central component of the intervention. Senges approach includes involving people throughout an organization, despite the fact that the system dilemmas uncovered relate to policy issues addressed primarily by top management. His belief that participation in diagnosis should occur organization-wide is driven by his commitment to team learning and shared vision. The support of a team is needed to deal with the central threatening message of systems thinking; that our actions have created our reality (Senge, 1990 in cit. A. Edmondson and B. Moingeon,1998)16. A theoretical concern is thus how participants new insights into causal dynamics can be translated productively into action. 1.9.1 Is a Sixth Discipline Possible? Mellas Control Systems If learning organizations increment their survival capabilities to the extent they are able to successfully respond to environmental disturbance and if the capacity to react depends on the extent to which they quickly learn as unitary systems making the network of their process even more productive, its clear that they learn to the extent they can set objectives, change these into coherent and shared individual objectives, verify their achievement, and consider the necessary actions at the group and individual level to determine and eliminate the deviations from the target objectives (Mella, 2012). Control systems cannot be understood exclusively by looking at the world, since observation is prevalently linear, through causes and effect and open linear chains. It is essential to observe the world through Systems Thinking, giving potent conceptual tools for understanding both the balancing loops that maintain the values of certain variable stable and the operational mechanisms to recognize these variable and keep them under control (Mella, 2012).
16

A. Edmondson and B. Moingeon, From Organizational Learning to the Learning Organization, 1998

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Where control systems are? They are everywhere, inside of and around us. We must be capable to identify them both by zooming out toward a broader horizon, to comprehend the extreme variety, richness and importance of the macro control system, and by zooming in toward the finer detail, to understand the infallible efficacy of the micro control systems that are so essential to life (Mella, 2012). This is precisely the logic of control; as the author Mella writes: the role of the Sixth Discipline could be to contribute to the building of the learning organizations, thus leading to the education and discipline of control at all levels in order to transform the organization into Control Systems. The control discipline of the individual, the collectivity and the organizations in the ecosystem, the discipline of the present and future of our world (Mella, 2012, p.121). Its important to remember that control systems, and the models that illustrate them, must capture the essential aspects of the physical reality they represent. Control assumes that the control system includes at least the variables that characterize reality and admits the same range of variation, so that it react to all the dynamics they present and reduce the deviation with respect to the systems objectives, or constraints. If the control system cannot take on the states of the reality to control, then the control must necessarily fail as soon as the real states can no longer be represented by the system (Mella, 2012).

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CHAPTER 2
How to Reach a Learning Organization

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2.1 Literature Review

Considering the authors explored in the first chapter, I want take into account some of them to establish how an organization can develop an Organizational Learning and so the competence that it have to possess and the process and steps that it have to do. As Argyris (1993)17 argued: most people define learning too narrowly as mere problem solving and so they focus on identifying and correcting errors in the external environment. Solving problems is important. But if learning has to persist, managers and employees must also look inward. They need to reflect critically on their own behavior, identify the ways they often inadvertently contribute to the organizations problems, and then change how they act. In particular, they must learn how the very way they go about defining and solving problems can be a source of problems in its own right. That happens because they have never learned how to learn from failure. Thats means that in an Organizational Learning we will found skills as problem solving, ability to look inward and the capacity to learn from an unsuccessful. As seen at pag. 15, a notable stream of literature believe that: Three critical issues must be addressed before a company can truly become a learning organization; first is the question of meaning: a well-grounded, easy-to-apply definition of a learning organization; second comes management: clearer operational guidelines for practice; and finally, better tools for measurement can assess an organization's rate and level of learning. Using these "three Ms" as a framework, learning organizations is defined as skilled at five main activities: systematic problem solving, experimentation with new approaches, learning from past experience, learning from the best practices of others, and transferring knowledge quickly and efficiently throughout the organization. And since you can't manage something if you can't measure it, a complete learning audit is a must. That includes measuring cognitive and behavioral changes as well as tangible improvements in results (Garvin, 1993, p.1)18. Other author, for example Senge (1990)19, about leadership writes: Our traditional view of leaders is a special people who set the direction, make the key decisions and energize the group, is deeply rooted in individualistic and non-systemic worldview. Instead leadership in learning organization
17 18

Chris Argyris, Teaching Smart People How to Learn, REFLECTION, Volume 4, Number 2, 1993 David A. Garvin, Amy C. Edmondson, and Francesca Gino, Is Yours a Learning Organization?, Harvard Business Peter Senge, The Leaders New Work: Building Learning Organizations, Sloan Management Review, 1990

Review, 2008
19

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center on subtler and ultimately more important work. In a learning organization, leaders role differs dramatically from that of charismatic decision maker. Leaders are designers, teachers, and stewards. These roles require new skills: the ability to build shared vision, to bring to the surface and challenge prevailing mental models, and to foster more systemic patterns of thinking. Leaders in learning organizations are responsible for building organization where people are continually expanding their capabilities to shape their future: leaders are responsible for learning (Senge, 1990, p.2-3). Tools and strategies developed by this author will be of guidance of our further examination of Learning Organization.

2.2 Core Competence

Core competencies are the skills, knowledge, and personal attributes that contribute to an individual's success in a particular position. To be useful, the competencies must relate to the organizational goals, objectives, and strategies. They are the knowledge and skills that make the organization a success and help the organization change to meet a changing environment (Giesecke, 1999)20. At the University of Nebraska-Lincoln, development of core competencies was done as part of the ongoing process of transforming the organization into a learning organization. Core competencies for UNL are: analytical skills, problem solving, decision making, communication skills, creativity/innovation, expertise and technical knowledge,

flexibility/adaptability, interpersonal/group skills, leadership, organizational understanding and global thinking, ownership/accountability/dependability, planning and organizational skills, resource management and service attitude/user satisfaction. Each core competency includes a brief definition and examples of behavioral indicators or key actions for the particular competency (see figure 4).

20

Joan Giesecke and Beth McNeil, Core Competencies and the Learning Organization, University of Nebraska

Lincoln, 1999

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Competence are the skills, technical knowledge, and personal attributes that contribute to an individuals success in a particular position. These cose competencies apply to all library staff, although some aspects of each of the competencies may not apply to every staff person. Analitical Making Recognizes patterns, draws logical conclusions, and make recommendations for action. Uses a wellordered approach to solving problems and sound judgement in making decisions despite obstacles or resistance. Communication Skills Listens effectively, transmits information accurately and understandably, and actively seeks constructive feedback. Creativity/Innovation Looks for opportunities to apply new and evolving ideas, methods, designs, and technologies. Expertise and Technical Knowledge Demostrates broad, in-depth, and up-to-date Skills/Problem Solving/Decision

Interpersonal/Group Skills Builds strong work relationships with a sensitivity to how individuals, organizational units, and cultures function and react. Establishes partnerships at all levels and across department and functional lines to achieve optimum results. Leadership Sets and models high performance standards

characterized by integrity. Earns trust and respect of other by coaching, inspiring, and empowering teams of people to achieve strategic objectives. Organizational Thinking Demonstrates an understanding of the institution in its entirety and works to achieve results across Understanding and Global

disciplines, departments, and functions. Develops and maintains supportive relationship across the

organization. Ownership/Accountability/Dependability Accepts responsibility for actions, results, and risks. Gets the job done. Planning and Organizational Skills Anticipates and predicts internal and external change, trends, and influences in order to effectively allocate resources initiatives. Resource Management Demonstrates a consistent focus on minimizing expenses while maximizing results. Service Attitude/User Satisfaction Understands and meets the needs of users and addresses their interests and the concerns of those affected. and implements appropriate library

knowledge of pertinent fields and awareness of current technology. Flexibility/Adaptability Performs a wide range and tasks, responds to changes in direction and priorities, and accepts new challenges, responsibilities, and assignments.

Figure 4: Core Competencies, University Libraries, University of Nebraska-Lincoln Source: Core Competencies and the Learning Organization, J. Giesecke, 1999

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Organizations need to learn more than ever as they confront these mounting forces. Each company must become a learning organization. The result was a compelling vision of an organization produced from employees skilled at creating, acquiring, and transferring knowledge. These people could help their firms improving tolerance, foster open discussion, and think holistically and systemically. Such learning organizations would be able to conform to the unpredictable more quickly than their competitors could (Garvin, 1993).

2.3 Building Blocks of the organizational learning

Organizational research over the past two decades has revealed three broad factors that are essential for organizational learning and adaptability: a supportive learning environment, concrete learning processes and practices, and leadership behavior that provides reinforcement. We refer to these as the building blocks of the learning organization (Garvin, 1993). Each block and its discrete subcomponents, though vital to the whole, are independent and can be measured separately. Garvin (1993)s tool21 is structured around the three building blocks and allows companies to measure their learning proficiencies in great detail. As you shall see, organizations do not perform consistently across the three blocks, nor across the various subcategories and subcomponents. That fact suggests that different mechanisms are at work in each building-block area and that improving performance in each is likely to require distinct supporting activities. Companies, and units within them, will need to address their particular strengths and weaknesses to equip themselves for long-term learning. Because all three building blocks are generic enough for managers and firms of all types to assess, our tool permits organizations and units to slice and dice the data in ways that are uniquely useful to them. They can develop profiles of their distinctive approaches to learning and then compare themselves with a benchmark group of respondents. To reveal the value of all these comparisons, lets look in depth at each of the building blocks of a learning organization (Garvin, 1993).

Building Block 1: A supportive learning environment As Garvin (1993) explain, an environment that supports learning has four distinguishing characteristics.

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David. A. Garvin, Building a Learning Organization, Harvard Business Review, 1993

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Psychological safety. To learn, employees cannot fear being marginalized when they disagree with an authority figures, ask nave questions, own up to mistakes, or present a minority viewpoint. Instead, they must be comfortable expressing their thoughts about the work at hand. In this unit, it is easy to speak up about what is on your mind; if you make a mistake, it is often held against you; people in this unit are usually comfortable talking about problems and disagreements; people in this unit are eager to share information about what does and doesnt work; keeping your cards close to your vest is the best way to get ahead in this unit (Garvin, 1993). Appreciation of differences. Learning occurs when people become aware of opposing ideas. Recognizing the value of competing functional mental attitude and alternative worldviews, increases energy and motivation, lead to fresh thinking, and prevents lack of energy. Differences in opinion are welcome in this unit; unless an opinion is consistent with what most people in this unit believe, it wont be valued; this unit tends to deal with differences of opinion privately or off-line, rather than addressing them directly with the group; In this unit, people are open to alternative ways of getting work done (Garvin, 1993). Openness to new ideas Learning is not simply about correcting mistakes and solving problems. It is also about crafting novel approaches. Employees should be encouraged to take risks and explore the untested and unknown. In this unit, people value new ideas. Unless an idea has been around for a long time, no one in this unit wants to hear it; in this unit, people are interested in better ways of doing things; people often resist untried approaches (Garvin, 1993). Time for reflection. People in this unit are overly stressed; despite the workload, people in this unit find time to review how the work is going; in this unit, schedule pressure gets in the way of doing a good job; in this unit, people are too busy to invest time in improvement; there is simply no time for reflection in this unit. All too many managers are judged by the number of hours they work and the tasks they reach. When people are too busy or overstressed by deadlines and scheduling pressures, however, their ability to think analytically and creatively is compromised. They become less able to diagnose problems and learn from their experiences. Supportive learning environments allow time for a pause in the action and encourage thoughtful review of the organizations processes (Garvin, 1993). 37

The result will be that people started to collaborate throughout the organization to talk about and change behaviors, policies, and systems that put patients at risk. Over time, these learning activities give measurable reductions in preventable weakness at the institution.

Building Block 2:Concrete learning processes and practices The second block that Garvin (1993) explains is that a learning organization is not cultivated effortlessly. It arises from a series of concrete steps and widely distributed activities, not unlike the workings of business processes such as logistics, billing, order fulfillment, and product development. Learning processes involve the generation, collection, interpretation, and dissemination of information. They include experimentation to develop and test new products and services; intelligence gathering to keep track of competitive, customer, and technological trends; disciplined analysis and interpretation to identify and solve problems; and education and training to develop both new and established employees. For maximum impact, knowledge must be shared in systematic and clearly defined ways. Sharing can take place among individuals, groups, or whole organizations. Knowledge can move laterally or vertically within a firm. The knowledge-sharing process can, for instance, be internally focused, with an eye toward taking corrective action. Right after a project is completed, the process might call for post audits or reviews that are then shared with others engaged in similar tasks (Garvin, 1993). Alternatively, knowledge sharing can be externally oriented for instance, it might include regularly scheduled forums with customers or subject-matter experts to gain their perspectives on the companys activities or challenges. Together, these concrete processes ensure that essential information moves quickly and efficiently into the hands and heads of those who need it. We can resume all this block in some important steps that will help us to develop it easily; Education and Training Newly hired employees in this unit receive adequate training, while experienced employees in this unit receive periodic training and training updates, training when switching to a new position and training when new initiatives are launched. Of course training is valued; and as we can see time is made available for education and training activities (Garvin, 1993). 38

Information Transfer This unit has forums for meeting with and learning from experts from other departments, teams, or divisions; experts from outside the organization; customers, clients and suppliers. Information is regularly shares with networks of experts within the organization and with networks of experts outside the organization; this unit quickly and accurately communicates new knowledge to key decision makers and conducts post-audits and after-action reviews. Experimentation This unit experiments frequently with new ways of working and new product or service offerings. In this unit there is a formal process for conducting and evaluating experiments or new ideas and frequently it employs prototypes or simulations when trying out new ideas (Garvin, 1993). Information Collection This unit systematically collects information on competitors, customers, economic and social trends, technological trends and there is a comparison between its performance with that of competitors. Analysis This unit engages in productive conflict and debate during discussions, seeks out dissenting views during discussions, dont revisits well-established perspectives during discussions, frequently identifies and discusses underlying assumptions that might affect key decisions and dont pays attention to different views during discussions. Perhaps the best known example of this approach is the U.S. Armys After Action Review (AAR) process, now widely used by many companies, which involves a systematic debriefing after every mission, project, or critical activity. This process is framed by four simple questions: What did we set out to do? What actually happened? Why did it happen? What do we do next time? (Which activities do we sustain, and which do we improve?) In the army, lessons move quickly up and down the chain of command, and laterally through sanctioned websites. Then the results are codified by the Center for Army Lessons Learned, or CALL. Such dissemination and codification of learning is vital for any organization (Garvin, 2008, p. 4-5).

Building Block 3: Leadership that reinforces learning The last block that D.A. Garvin (1993) writes about, is that organizational learning is strongly influenced by the behavior of leaders. When leaders actively question and listen to employees 39

people in the institution feel encouraged to learn. If leaders signal the importance of spending time on problem identification, knowledge transfer, and reflective post-audits, these activities are likely to flourish. When people in power demonstrate through their own behavior a willingness to entertain alternative points of view, employees feel emboldened to offer new ideas and options. Harvey Golub, former chief executive of American Express, was renowned for his ability to teach employees and managers. He pushed hard for active reasoning and forced managers to think creatively and in unexpected ways. Here there are some characteristics and skills that the leader must have to build a learning organization: Managers invite input from others in discussions, acknowledge their own limitations with respect to knowledge, information, or expertise; ask probing questions, listen attentively, encourage multiple points of view. Managers have to provide time, resources, and venues for identifying problems and organizational challenges and for reflecting and improving on past performance (Garvin, 1993). The three building blocks of organizational learning reinforce one another and, to some degree, overlap. Just as leadership behaviors help create and sustain supportive learning environments, such environments make it easier for managers and employees to execute concrete learning processes and practices smoothly and efficiently. Continuing the virtuous circle, concrete processes provide opportunities for leaders to behave in ways that foster learning and to cultivate that behavior in others (Garvin 1993).

2.4 Five Disciplines and tools

Another author that I want take into account its of course Peter Senge (1994), that with his Fieldbook22 help us to put in practice all the theories. In fact I want to report all the strategies that for Senge are important to build an Organizational Learning. Senge focuses attention on systems thinking he considers the fifth and most important discipline for building Learning Organizations. Systems thinking is a large and fairly body of methods, tools and principles all oriented to looking at the interrelatedness of forces and seeing them as a part of a common process.

22

Peter Senge, The Fifth Discipline Fieldbook, 1994

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A good systems thinker, particularly in an organizational setting, is someone who can see four levels operating simultaneously: events that happens in the organization that can carry on some problems; pattern of behavior, so the process that develops this problem, a sort of model building; systems, so the repeating of the model in the time; and mental models, such belief and actions that organization put in act even if nobody have decided in the organization. An author that have developed and amplified this methods is Mella (2012)23 with Systems Thinking Intelligence in Action, 2012 : I believe that Systems Thinking is based on five fundamentals Rules: the first rule, whose application requires constant practice, obliges us to see the trees and the forest. To understand reality we must not limit ourselves to observing only individual objects, elements, or entities; it is necessary to see even the larger groupings that these compose, attributing to them an autonomous meaning. The converse process is also true: we cannot limit ourselves only to considering an object in its unity but must force ourselves to see its component parts. This rule, which is at the basis of Systems Thinking, can be translated as follows: if we want to broaden our intelligence we must develop the capacity to zoom between wholes and components(Mella, 2012, p. 9). The Tools of systems thinking are: causal loop diagrams, archetypes and computer models. The process of organizational change is not top-down or bottom-up, but participative at all levels. This is possible because archetypes and other system-oriented tools have put system dynamics language into the hands of teams and on the walls of meeting rooms, where they can energize organizational learning at all levels. In each team have to be represented all functions, and gain clearance from top management to propose cross-functional solution, regardless of sensitivities and politics. No area of the organization can be off-limits or protected. A casual loop diagraming (Figure 5) uses the casual links from one element to another with a flexible structure. Casual loop diagrams show the character of the relationship between each pair of concepts, represents cause-and-effect relationship. The labels on system diagrams represent variable. Changing any variable will produce change in any variable in the loop. The arrow indicate influence or causality, not merely chronology or order (Senge, 1994).

23

Piero Mella, Systems Thinking. Intelligence in Action, Springer-Verlag, New York, 2012

41

Figure 5: Casual Loop Diagram Source: http://en.wikipedia.org/wiki/User:Apdevries/System_dynamics

The model of Figure 5 can be ameliorated specifying the sense of variation of each pair of variables connected by an arrow (Mella, 2012). The process to develop a casual loop diagram it might typically include many steps. Select a problem and gather data about it; identify key variable, so the factors vital to understanding the problem; understand the behavior of those key variables over time; map the casual links between key variables, identifying the most significant relationships; the diagrams can have as many or as few elements as you needs to capture what is happening in the system; and to provide an appropriate level of detail for effective communication with your audience. There have to be a map of the system as the group can see it. Using a computer model as a system, so the organization can see what happens when it takes these assumption to logical conclusion. This makes modeling an extremely valuable form of inquiry because it provides new ways to test hypotheses before acting of them, and gives us the basis to design learning laboratories that serve as transforming environments for a team or organization. In practice, models have been used to show how systems structures directly produce patterns of behavior, you can test whether a structure replicates the performance that was observed in the real world, explore how behavior will change when different aspects of the structure are altered, unveil points of leverage that might otherwise be ignored and engage reams in a deeper set of systems learning and allow them to experiment with the consequences of their thinking (Senge, 1994). The difficulty of systems modeling comes not so much from learning to use the computer software, but from learning to represent current reality faithfully: continually testing and researching our 42

assumptions until

the computer model reflects our best understanding and behaves with a

reasonable amount of accordance and credibility is necessary step for a good simulation. Many people think that somehow using the computer will take care of those assumption magically, but the opposite is true. When we move to the computer we have many more assumptions to make, and we must express them in quantitative, numeric terms. In a few rare cases, the formulas are straightforward and self-evident. But in most business problems, we must codify ambiguous decision rules and actions in quantitative relationships. Numerous software programs (simulation tools) have been created to simulate the behavior of systems with a high number of variable, which has made it relatively easy to move from Casual Loop Diagrams to numerical simulation models without having to write the system of equations that link the variables in the tail of the arrows with those in the head in the CLD (Mella, 2012, p.93), and there are many simulation software tools as: Powersism (www.powersism.com), MyStrategy (www.strategydynamics.com/mystrategy/), Excell Software (www.excelsoftware.com/), iThink e stella (www.iseesystems.com/idex.aspx).

Someone can learn to use ithink in a few hours, but how long does it take to learn to design a model which produces usable results and advances a teams learning? That is why there is a more formidable learning curve here. Archetypes are the translation of generic structures, mechanisms and common seen behaviors that happens in an organizations. They are accessible tools with which manager can quickly construct credible and consistent

hypotheses about the governing forces of their systems. Archetypes are also a natural vehicle for clarifying and testing mental models about those systems. They are powerful tools for coping with the astonishing number of details that frequently overwhelm beginning systems thinker. There are different archetypes like Limits to Growth, Fixes That Backfire, Tragedy of the Common and so on, that in the next chapter I will explain. Of course each individual have to choice an archetype give to trust to intuition at first. Some people worry that they will apply the wrong archetype, misdiagnose the problem, and make things worse; but in practice, this doesnt happen, because by definition, people initially pick archetypes that hold interest for them. They have to read through examples of each archetypes in action. Keep alert for 43

the stories which seem to be analogously to his own story, no matter how different circumstances may be. Generalizing your story can help to place it. A good strategy is not to settle on one answer right away, but to look at your situation through the lens of several different archetypes. Two or three fit together, each highlighting a different aspect. Then we have to try to match the elements of our story to the archetype. Start with the core or governing loop, the loop which seems to drive the behavior of the system. This loop often closely matches the pattern of behavior over time, and often depicts what people in the system are paying the most attention to. If the story implies more variables than the template has, go ahead and draw in extra boxes. Any loop may have any number of elements. Draw arrows to show the direction of movement in the loops, give variable names which represent levels of activity which may go up or down sometime in the future, even if that movement seems implausible to you now. Its particularly important to include any elements which are at least partly under his influence because may influence the whole system. Its important to dont force the story into a template if it doesnt fit; just switch to another archetypes. Anyway I will talk about the different archetypes in the next chapter.

2.5 Personal Mastery tools

A striking number of business people tell that of the learning disciplines of the author Senge6, they are most drawn to personal mastery. They want not only to increase their own capabilities, but improve the capabilities of the other people around them. They recognize that an organization develops along with its people. Some of them recognize the central tenet of this discipline: no one can increase someone elses personal mastery. We can only set up conditions which encourage and support people who want to increase their own. The central practice of personal mastery involves learning to keep both a personal vision and a clear picture of current reality before us. Doing this will generate a force within ourselves called creative tension(Figure 6). Tension seeks resolution, help us to move closer to what we want.

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Figure 6: Creative Tension Source: The Fifth Discipline Fieldbook, Peter Senge, 1994

People who are convinced that a vision or result is important, who can see clearly that they must change their life in order to reach that result do indeed feel compelled. They have assimilated the vision not just consciously, but unconsciously, at a level where it changes more of their behavior. All of this produces a sustained sense of energy and enthusiasm, which produces some tangible results, which can then make the energy and enthusiasm stronger. If the result will be an organization full of people who come to work enthusiastically, if we know that they will grow and flourish, how we can develop this discipline? There are different tools and exercises that we can use to reach a personal mastery; one of this concern to write on a paper or in a notebook few ideas about aims. No one else need ever see them. Playfulness, inventiveness and spiritedness are all helpful. Then we have to create a result: recall an image or memory meaningful that can be a favorite spot in nature, image of an animal, or a significant event. Imagine achieving a result in your life that you deeply desire. Ignore how possible or impossible this vision seems. Imagine yourself accepting, into your life, the full manifestation of this result. Describe in writing the experience you have imagines, using the present tense, as if it is happening now. Now, did you articulate a vision that is close to what you actually want? There may be a variety of reason why you found it hard to do and the person can ask yourself: I cant have what I want, I want what someone else want, It doesnt matter what I want, I am afraid of what I want. The response to that is to say, Suppose you had a vision of greatness: what would it be? A vision exists within each of us, even if we have not made it explicit or put it into words. A vision statement is an expression of hope, and if we have no hope, it is hard to create a vision. 45

Now we have to describe our personal vision like that we can complete the picture of what we want through answering to the question about the self-image, the relationship, the work, the community, about the life purpose. Then we have to ask ourselves which aspect of these vision is closest to our deepest desires asking ourselves these questions: If I could have it now, would I take it?, Assume I have it, what does that bring me?. We could find out that many components of our vision lead us to the same three or four primary goals, going deeply to become aware of them. This exercise can be very effective when practiced with a trustworthy partner. Taking turns, lead each other through the question, gently prompting each other to understand, avoiding the temptation to lead other people to a vision that we prefer. Saying nothing about the kind of vision because is personal. This exercise tends to lead people to feel a sense of mutual respect and even kinship, an inevitable by-product of hearing someone elses deepest wishes. Another exercise that can link our personal vision to the organizations potential, help people to align the organizations purpose with their own and to prepare individual groundwork for creating a shared vision is identify the personal values of each person and then build a vision for the organization through asking about the reputation that the enterprise may have, the contribution that could make, what kind of products or services, the value and the mission that could have, and so on. This exercise will be done once a year to say simply, Let me look at what I want, as part of my personal vision right now. And let me look at where my current reality is now. Another way to encouraging persona mastery in the organization is innovations in infrastructure; when organization embrace personal mastery they are compelled to rethink their investment in developing the capabilities of employees. This doesnt just involve an investment of money, the organization must invest intelligence, time and attention. In practice the organization could develop a transformation and discovery department, a supplier of lifelong learning for people who want pursue their personal vision. For example, I want to be a better public speaker and develop a more compelling stage presence, I take acting public speaking lesson, because I know that it could give me a value added. A T&D department could help the organization becoming much closer to its customers, there not will be a senior manager who typically approve training programs, but individuals and team who articulate what they need to know. This T&D department would customize its offering, using many more outside courses and trainers, and computer-aided learning, evaluating their success based on whether they actually 46

transformed the learners, leaving them more capable then before. Discovery would not mean teaching people how to discover. The training department would actively engage in discovering itself: continually anticipating peoples needs and interest. A new performance appraisal systems, where a manager would ask question that draw aspiration like: What do you need from the company to help?, What do I do, as your supervisor, that gets in your way?, What do you want to accomplish here this year?. Now a junior manager might say his desires, and the supervisor will help him to develops his skills to cover the mansion. For some managers, this type of appraisal represents a leap of faith: that what people want for their own careers would also be best for the organization. For individuals, it implies a much deeper level of responsibility: its the employees own task to see what they want, and to see current reality clearly, including the organizations need for what they might have to offer.

2.6 Mental Model

Mental models are the images, assumptions, and stories which we carry in our minds of ourselves, other people, institution, and every aspect of the world. Mental model determine what we see. Human being cannot navigate through the complex environments of our world without cognitive mental maps; and all of these mental maps by definition, are flawed in some way. Difference between mental models explain why two people can observe the same event and describe it differently; they are paying attention to different detail. The core task of this discipline is bringing mental models to the surface, to explore and talk about them with minimal defensiveness, to help us see its impact on our lives, and find ways to create new mental models that serve us better in the world (Senge, 1994). Before to explain the different tools, we need a scenario where work with mental model can take place; one of the most influential such innovation, scenario planning, has become increasingly widespread and diverse in the last few years. Scenario work encouraging people to look outward, using stories of the future to surface assumptions about business and political forces of the present.

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Figure 7: Ladder of Inference Source: The Fifth Discipline Fieldbook, Peter Senge, 1994

Mental models work is also very central to the design of learning laboratories. When the reflection and inquiry who are the two skills exercises are built into them, laboratories become mental model practice fields, where people develop the skills to talk about their assumption in real time. The ability to achieve the results we truly desire is eroded by our feelings: our beliefs are the truth, the truth is obvious, our beliefs are based on real data and that the data we select are the real data. The ladder of inference explains why most people dont usually remember where their deepe st attitudes came from. This model explain how we arrive in certain conclusion, it is developed in this step (Figure 7): We start with the observable data; We select some details; We added some meanings of our own, based on the culture around us; We moved rapidly up to the assumptions about situation in which we are; We arrive to a conclusion, adopting our beliefs about the world; We take action based on our beliefs.

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We cant live our life without adding meaning or drawing conclusion. But we can improve our communications through reflection, and by using the ladder of inference in three ways: Becoming more aware of our thinking and reasoning with reflection; Making our thinking and reasoning more visible to other with advocacy; Inquiring into others thinking and reasoning with inquiry.

Embedded into team practice, the ladder becomes a very healthy tool, the people can see the links of their reasoning. They may be agree or not with you, but they can see how you got there. Another tool to use to become aware of the tacit assumptions which govern our conversation and contribute to blocking our purpose in real-life situations, and to develop a way of talking about those tacit assumptions more effectively is The Left-Hand Column, method developed by Chris Argyris and Donald Schon (1974). This tool is very simple to use: we have just to select a difficult problem we have been involved with during the last month or two, the kind of tough, interpersonal difficulty that many of us try to ignore, writing a brief paragraph describing the situation. Then we have just to take several pieces of paper and draw a line down the center: in the right part we have to remember what we are said in that unproductive conversation, or we have to imagine the conversation that we would have if we brought up the problem. In the left part we have to write what we were thinking and feeling, but not saying. Now we have to reflect using the left-hand column as a resource; we can learn a great deal just from the act of writing out case, putting it away for a week, and then looking at it again. The case becomes an artifact through we can examine our own thinking, as if we were looking at the thinking of someone else.

2.7 Shared Vision

Today many leaders seek to achieve the commitment and focus that come with genuinely shared vision. Unfortunately, too many people still think that vision is the top leaders job. Individual leaders vision may succeed in carrying an organization through a crisis. But there is a deeper challenge: we have to create a sense of purpose that binds people together and propels them to fulfill their deepest aspirations. Catalyzing peoples aspirations doesnt happen by accident; it requires time, care and strategy. The discipline of building shared vision writes to Senge (1994) is centered around a never-ending process.

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Figure 8: Stage of Staff Involvement in Change Process Shared vision strategies should be developmental. Every stage of the process should help build both the listening capacity of the top leaders, and the leadership capacities of the rest of the organization, so that they can move together to the next stage. To include most of the practical realities people face, Peter Senge (1994) identified five potential starting points; every organization is already predisposed to one of them (Figure 8). The five stage are: Telling: The boss knows what the vision should be, and the organization is going to have to follow it; Selling: The boss knows what the vision should be, but need the organization to buy in before proceeding; Testing: The boss has an idea about the vision should be, or several ideas, and wants to know the organizations reactions before proceeding; Consulting: The boss is putting together a vision, and wants creative input from the organization before proceeding; Co-creating: The boss and members of the organization, through a collaborative process, build a shared vision together. In Figure 8, showing the five stages, the further to the left, the more the organization depends on a strong leader to tell everyone what the shared vision should be. The further to the right, the more 50

leadership, direction-setting, and learning capacity the organization as a whole must have. Here, the boss is less the person with the answer, and more the convener of a robust process. Any organization which does not adopt a somewhat formal, concerted shared vision process will probably find itself following the path of least resistance: down toward the left, falling back to the telling orientation. The boss will gradually become more authoritarian, and the rest of the organization more passive. But if we climb toward co-creating, then each stage adds to our ability to reach the next stage. The bosss capacity to listen, and the organizations capacity to develop aspiration, gradually reinforce and complement each other. To reach the fifth stage need an organization whose leaders and members understand this is ready to benefit from a co-creating shared vision process. Co-creating places every member in a creative orientation. Team articulate their sense of common purpose: are they here to serve customers, to produce better products, or to serve the organizations other members? As team define what is primary importance in their work, a new hierarchy of meaning emerges for the organization as a whole. For mastering this stage, we need to start with our personal vision, like that we will begin to see the organization become a tool for peoples self-realization, rather than a machine theyre subjected to. We have to stop thinking to the organization as a thing to which we are subservient. We have to treat everyone as equal. In this exercise the boss get only one vote; we have to seek the alignment, not the agreement; encouraging interdependence and diversity, avoid sampling, people have to speak only for themselves and of course we have to focus on the dialogue, not just to the vision statement.

2.7 Team Learning

The essence of team learning use the concept of alignment as distinct from agreement. Alignment means functioning as a whole. Building alignment is about enhancing a teams capacity to think and act in new synergistic ways, with full coordination and a sense of unity, because team members know each other. Anyone doing serious work in team learning should be familiar with the key reflection-and-inquiry skills of the mental models discipline of Senge (1994): balancing advocacy with inquiry, seeking to bring the tacit assumptions of the left-hand column to the surface, and becoming aware of the assumptions and beliefs that link what we see to what we conclude. 51

Team learning transform skills into capabilities; they become collective vehicles for building shared understanding. Team learning also draws upon the skills of shared vision, particularly in building shared aspiration and on systems thinking as vehicle for surfacing how one sees the world.

Figure 9: Skillful Discussion Source: The Fifth Discipline Fieldbook, 1994

Improved conversation is the primary medium with which management team build all of these capabilities. Specially, the most effective practice that Senge (1994) knows for team learning emerges from two conversational form: dialogue and skillful discussion (Figure 9). David Bhom tells us that a dialogue can be among any number of people, not just two. Even one person can have a sense of dialogue within himself, if the spirit of the dialogue is present. The picture of image that this derivation suggests is of a stream of meaning flowing among and through us and between us. This will make possible a flow of meaning in the whole group, out of which will emerge some new understanding. It's something new, which may not have been in the starting point at all. It's something creative. And this shared meaning is the 'glue' or 'cement' that holds people and societies together. In a dialogue, however, nobody is trying to win. Everybody wins if anybody wins. In a dialogue, there is no attempt to gain points, or to make your particular view prevail. Rather, whenever any mistake is discovered on the part of anybody, everybody gains. It's a situation called win-win, in which we are not playing a game against each other but with each other. In a dialogue, everybody wins(Bohm, 1996, p.7). From the standpoint of building shared meaning within team or between teams, traditional discussion is dangerously oriented toward advocacy. People discuss to win; while skillful discussion involve intention: the team intends to come to some sort of closure, either to make a 52

decision, reach agreement, or identify priorities. Along the way, the team may explore new issue and build some deeper meaning among the member. But their intent involves convergent thinking. Skillful discussion incorporates some of the techniques and devices of dialogue and action learning, but always focused on task. Meeting have agendas, people leave with priorities and work assignment in hand. Nonetheless, the team also learn to make their thought processes visible, to surface and challenge assumptions, and to look more closely at sources of disagreement. Gradually, within their team setting, they improve the quality of their collective thinking and interacting. For a team which practices this discipline, it is helpful to have a reason to talk and learn, a need to solve a problem, the collective desire to create something new. Team need to set up their own ground rules for conversation. Once the rules are set by consensus, it is important for the team to discuss how it will deal with violation. These rules are meant to help the team shape its conversation, not as an end in themselves.

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CHAPTER 3
Leadership and Innovation

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3.1 Introduction
What is the impact of top management leadership style on organizational learning? And can the learning organization help the firm to innovate? Joseph Jaworski and Claus Otto Scharmer, in Leadership in new economy (2000), think that new economy can be characterized by five trends that have profound implications for leaders in every industry: Vast globalization The primacy of networking and connectivity Steady de-materialization of products into knowledge Speed as the prime source of competitive advantage The widening dominance of winner takes most modes of competition (increasing returns; Arthur 1996). In essence, these five trends are resettle the foundational concepts of time (speed: instantaneous), space (global connectivity), structure (networks), matter (dematerialization), and competition (increasing returns economics) on which the economy manages. As a consequence, leaders and managers have to adapt to a whole host of new ground rules for business. In order to realize in competitive environments that operate according to the rule of increasing returns, leaders have to create another cognitive capability: the capacity to sense and actualize emerging futures. This capacity develops a new kind of knowledge creation, one that no one really understands how to reproduce or apply, and particularly in larger companies (Jaworski and Scharmer, 2000)24. Marion and Uhl-Bien (2001) contend that leadership success is not determined upon the charisma, strategic insight, or individual power of any given leader. Rather, it is imputable to the capacity of the organization to be productive in mostly unknown, future states. Leaders must therefore encourage the conditions that develop that organizational capacity, centering the attention on understanding the patterns of complexity and manipulating the situations of complexity more than results (B. C. Brown, 2010)25.

24

Joseph Jaworski and Claus Otto Scharmer, Leadership in New Economy: Sensing and Actualizing Emerging Futures,

2000
25

B. C. Brown, Complexity Leadership, 2010

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3.2 Generative leadership to foster innovation

Surie and Hazy (2006) create a framework to encourage innovation through the generative leadership. This leadership approach develop the context for stimulating innovation in complex systems. They contend that generative leadership is a process for controlling complexity and institutionalizing innovation that balances connectivity and interaction between individuals and groups. Generative leaders do not pay attention on developing individual traits or creativity amongst those they work with, but rather develop the conditions that nurture innovation.

Figure 10: Linking Leadership, Innovation and Complexity Source: Surie and Hazy, Generative Leadership: Nurturing Innovation In Complex Systems, 2004

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Generative leadership persuades a continued focus on problem solving and innovation by facilitating interactions while regulating complexity; this necessitates controlling the context for innovation to structure various aspects of interactions in assistance of evolutionary processes. Consequently, generative leaders focus on processes that impact the following five aspects of interactions: Interaction experiencing. Since innovation occurs largely within one-to-one interactions, one idea building on another in untested variations, fostering system-wide innovation necessitates regulating interactions to ensure that all or most interactions are experienced by participants as dyadic even if they are one-to-many or many-to-one. By using symbolic language or interpreting events in a meaningful way, generative leaders can communicate to groups in ways that allow individuals to experience the communication as personalized. Generative leaders set the stage for interactions and promote clear and effective communication between groups and individuals that reduce and absorb complexity. Consequently, even lower-level members of the organization can contribute to innovation (Surie and Hazy, 2004) Interaction aligning. Interactions must also be aligned toward the achievement of system goals so that knowledge gained through interactions can be selected and applied to problem solving. Generative leaders ensure that goals are specified in advance to ensure that all group members participating in the innovation project are aware of them (Surie and Hazy, 2004). Interaction speed. Generative leaders exhibit openness to collaboration and emphasize the use of technological tools that enhance the effectiveness of connections and interactions. Increasing the speed of interactions raises the amount of information available within a given period to enhance problem solving and task performance (Surie and Hazy, 2004). Interaction partitioning. Generative leaders focus their attention to allocating resources dynamically across sub-systems and operate to manage the interfaces between them. He help to limit the impact of interactions to a subset of the system when conducting experiments, and thus limit the consequences of mistakes or underdeveloped ideas that may result in complexity catastrophes. Generative leaders also recognize that complex tasks must be sub-divided into simpler tasks and performed in independent modules to enable collaborative interactions without overloading the system. Therefore, they encourage parallel experiments to be carried out independently without adversely affecting the system while ensuring adherence to quality and other relevant parameters for sub-system output. However, partitioning interactions may constrain communication and inhibit opportunities for further novelty. Generative leaders guard against these constraints on innovation by ensuring that 57

evolving needs inform partitioning decisions and that partitioned sub-systems remain linked to the information flow through periodic information exchange (Surie and Hazy, 2004). Interaction leveraging. Interactions that yield significant information or insights leading to innovation are a scarce resource. Generative leaders ensure that this resource is leveraged effectively by retaining and reusing knowledge or ideas generated through such interactions in other interactions in a wide variety of contexts. Their work demonstrates how leaders can leverage these mechanisms to catalyze the environment for innovation to arise.26

3.3 Create value with know-how in action

In order to create value, know-how per se is unlikely to be sufficient. It can only create value if it is executed at a particular point in time which ultimately confers a value advantage. This source of advantage is know-how-in-action, which Swart (2011) define as a routine in practice which consists of specific actions, by specific people, in specific places and times. Value creation is therefore the outcome of activity, and hence the focus with respect to knowledge should not be on knowledge as a static resource, or indeed on know-how alone, but on know-howin-action (KHiA). Thus we shift the focus from knowing about things to the doing of activities which, importantly, is time-sensitive. That is, given the focus on the interaction between knowing and other artifacts we have to take a time-sensitive view. This can be viewed as taking a time-slice through a series of interactions in, for example, a team meeting. I am not interested in the resources that work together over an abstract period of time, such as a project lifecycle, but the focus needs to be in each of the sets of interactions in one time frame. This is the first step to understanding how knowing generates value. But, what are the different ways in which KHiA can generate value? This description will permit us to dismantle the interplay between KHiA and other artefacts and will develop a framework of multiple options that people can invoke to create value. Swart (2011) identify four value-creating types: clones, talent rich, resource rich and synergists, which represent multiple options which people can invoke when creating value (see Figure 11). In each value

26

G. Surie and J. K. Hazy, Generative Leadership: Nurturing Innovation In Complex Systems , 2004

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creating type there are some examples of the situations that individuals and organizations enact in order to pay attention to the power dynamics. This allows my analysis of how knowing creates value to be interactionist and politically appreciative.

Figure 11: The value-creating types Source: J.Swart, Thats why it matters: How Knowing creates value, 2011

Clones In this context, we represent equivalent KHiA in combination with equivalent embedded resources. If we were to observe across a particular setting, for example organizations in one industry, their KHiA could be similar or perhaps standardized, for example the registration of legal documentation for merger and acquisition contracts would be similar across law firms. The author identify that the way in which each individual acts will vary (each personality may differ) but these variations do not pay any relative value advantages. Similarly, their embedded artefacts would be effectively equivalent in their contributions to value creation. It is possible that these artefacts might be actually

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identical to other contexts, especially if they have been standardized, e.g. procedures for processing medical negligence claims. The KHiA amongst a group of law firms which give employment law services may converge to the norm that here the explicit knowledge in the form of precedents is standard across firms. However, the way in which these precedents are applied and how clients cases are approached (tacit routines ) become similar as lawyers move between firms and as clients come to expect certain standards. The cross-boundary working pressures therefore develop industry-level tacit routines which would provide industry average performance. This is an advantage in itself because it helps to guarantee survival and a particular market position but it does not represent a position of comparative advantage. Likewise, a group of skilled painters using a similar oil-painting technique, practicing their skill together and who have access to the same network of client relationships may produce similar quality paintings27. Resource rich In resource-rich value-creating situations contextually equivalent KHiA is performed together with embedded artefacts that are exceptional to generate above average value. Take a group of sculptors in Africa whose craft is wood-sculpting. If one group of sculptors has access to supplier networks from which they can source higher quality wood, such as poplar, which does not crack with carving, they will generate contextually superior wood carvings which will incur a relative advantage, i.e. selling at higher prices. Similarly, organizations can generate unique and valuable artefacts (Barney, 1986, 1991) such as a desirable brand. A mobile phone call center with a relatively strong brand relies on undifferentiated KHiA resources such as call-center operators who merely enact/read a script. Whether these resources remain unique will be determined both by the efforts of other organizations in the same contextual space and efforts by the focal organization to sustain these advantages through continuous amiliorations, e.g. through enhancing organizational capabilities. In this interaction-type organizations may invest heavily in developing exceptional processes and systems that improve efficiency and/or effectiveness. The managerial challenges here support from the codified quality of the resources. If these resources can be understood and implemented across the firm, they can probably just as easily be carry into effect by another organization. We must assume that there are other required resources that prevent firms from replicating the entire business

27

J.Swart, Thats why it matters: How Knowing creates value, 2011

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model. It is the how these resources are enacted and combine, i.e. their configuration, which is difficult to replicate, even though the specific resources may be explicit and codified. The power-relationships in this value-creating type are, according to the author, interesting wherein owners of the exceptional resources, such as the wood providers in the case of the sculptors above or the organizations that are perceived to be powerful given their brand will search for maximize their future value. The question is, however, how far to push this notion of power given that these owners/organizations will be aware that, even though their know-how resources are equivalent, they cannot create value without the KHiA resources. That is, the wood needs to be transformed into a carving and the powerful brand needs to be enacted as a product or service. This too will be in the mind of the individual owners of know-how. Once again the context will have an impact on how power games are played by the various actors. However, careful analysis of strong brand organizations, e.g. Virgin, Nike, Coca-Cola, seems to suggest that the organizations often maintain an upper hand in the bargaining position, thereby locking individual know-how into embedded organizational processes over a long period of time. This increases the advantage to the firm, i.e. strengthens the embedded resources, and it does so without the organization having to pay extraordinary costs for the value which it is generating. However, given my argument that these organizations are likely to generate more value, individual bargaining or collective actions may lead to employees being relatively well rewarded. The individual KHiA enacted at a particular point in time may only furnish to value creation which is equivalent to that of an organization in the previous (equivalent) type, but the individual owners of know-how may well be able to capture relatively more value, as the internal environment may be relatively more beneficent. These firms may absorb captured value in the form of organizational slack. A benign resource environment may guide to the tolerance of underperforming individuals and the paying of above market wages, both evidence of unproductive slack. However, these relatively exceptional revenues could be productively assimilated in future orientated activities like R&D, training and by encouraging innovation through creative processes such as skunk works, think tanks and experimentation (Swart, 2011). Talent rich This value-creating type is characterized by exceptional KHiA and contextually equivalent artefacts. Take the example of law firms offering employment law services where statutory procedures (artefacts) are equivalent and held constant, for example the tribunal procedures are identical across all employment law practices. Differential value will only be produced when exceptional talent, such as client relationship skills or additional human resource know-how, is combined with the 61

equivalent artefacts. It is important to note that not all employment law practices will be able to capture exceptional legal know-how and the firms which have access to exceptional KHiA will be in future advantageous positions. In addition organizations develop exceptional KHiA through either deliberate or emergent development processes. KHiA advantages may contain tacit elements that could be barriers to imitability (Dierickx and Cool, 1989 cit. in Swart, 2011), which would enable advantaged firms to sustain their talent rich status. Exceptional KHiA may be transferable to other organizations, i.e. the skilled performers may be able to move to another firm and function effectively. However, these resources are more likely to be valuable in a particular context, i.e. an organization or industry. This would make it very difficult for competing organizations to replicate the entire value system in another context. If the firm possesses unique and valuable tacit knowledge resources the managerial challenges here would stem from the tacit quality of these resources. The organization may become dependent on a few tacitly skilled individuals who may sense this dependence and seek to bargain on the basis of the value that they perceive to produce (Swart, 2007 cit. in Swart, 2011). KHiA is likely to be context specific and would have been developed through experience within a given context. For example, account executives in a small advertising agency may have a unique way in which they contract with clients and in the wider supporting and market research services that they offer. The firm may not have exceptional embedded artefacts due to its particular brand, which may not be that wellknown. Here the advantage is generated from valuable and unique KHiA which varies from that in other advertising agencies. This means that the individual account executives in the development of their skills would have had to sacrifice some firm mobility by acquiring firm specific rather than more generic occupational knowledge and skills (Swart, 2011). Synergists In this particularly advantageous value-creating type exceptional KHiA is combined with contextually excellent artefacts. Take, for example, a skilled heart-surgeon who can work with a worldclass supporting team of nurses; she will perform relatively better than her peer group of surgeons, i.e. save more lives. Similarly, professional services firms rely on experienced professional staff, such as rain-makers, track record and knowledge retrieval systems to produce exceptional client value. All of these resources work together to provide to value creation; there is a high degree of internal and external casual ambiguity (Bowman and Swart, 2007 cit. in Swart 2011). The surgeon interacts with the exceptional skilled team which has established exceptional operating procedures over time to produce exceptional results. However, a less-skilled surgeon who has access to the 62

same embedded artefacts may not have the same results. Similarly, creative organizations which perform situations near chaos (Osborn and Hagedoorn, 1997 cit. in Swart, 2011) dispose KHiA which cannot be codified. Agencies which can codify their creative guidance processes deliver more accurately to client requests, operate more efficiently and improve client retention. These explicit knowledge resources are rare within the industry and furnish organizations with a value-generation advantage which may be sustained until such time as competing organizations develop sets of exceptional resource configurations. Alternatively, these processes favors co-exist with other, inimitable resource advantages like reputation, and rival firms are unable to repeat these configurations. The power dynamics in this value-creating type will be influenced by the degree to which the exceptional embedded artefacts are perceived to be significant in the value-creating process. For example, if a car manufacturer comprehends its brand to be the most powerful contributor to value creation it probably will not accredit sales success to the differentiated performance of the sales force. Alternatively, where resource interactions are complex and interactive, the ambiguity produced provides fertile ground for interpretation amongst stakeholders (Coff, 1999 cit. in Swart, 2011). Organizations that generally perform to be characterized by this configuration would be, for example, strategy consultancy firms which create solutions based on client-specific problems. The approach would be to hire highly experienced human capital and to develop a strong culture practice, i.e. the consultancy approach. Here the KHiA is contextual and co-constructed, thereby enabling the firm to generate above average revenues. The dominant knowledge management approach here would be to create firm-specific know-how and embedded resources which result from idiosyncratic learning processes (Barney, 1991; Bowman and Swart, 2007; Crossan et al., 1999 cit. in Swart, 2011). The bargaining positions of individuals may be weakened provided the exceptional resources which they use at a given point in time within the specific organizational context. For example, an investment banker in one of the newly emerging big four firms may be familiar that they would not be able to perform as expert, or generate as much value, if they were operating as a sole practitioner. Hence, the power of the brand would have a direct impact on how this actor perceives his/her bargaining position. The perception of power and ownership of KHiA and embedded resources in each value-generating type therefore influences directly on the outcome of the value-creation process. The further theoretical and practical implications of both the power dynamics and the value-creating typology are considered next (Swart, 2011) 63

3.4 Leaders innovate with the Theory U

Theory U is the foundation for a process built on 15 years of action research by Scharmer (2010) . Its a tested instrument for learning and leading change in individuals, groups, organizations and larger systems. The basic premise of Theory U is r = f(a). The reality (r), that a system of players enacts, is a function of the awareness (a) that these players operate from (Scharmer, 2010). Most people relate to the future by reflecting on the trends of the past. The future, from this view, is an extension of the past, but what Scharmer (2010) has learned from studying leaders, innovators, and creative people is that they connect the emerging future in a deeper level. They see the emerging future as an advent, a becoming something profoundly new. To relate with such a field of emerging future opportunity we have to open up, let go of the past, and adapt in to what we feel is a field of future possibility, something that might be possible, something that we could bring into reality, a future that would be very different from the past (Scharmer, 2010). Scharmer (2010) calls this deeper learning from the emerging future presencing. Presencing blends the two words presence, the now, and sensing, the capacity to detect what is to come, to sense with your heart. Presencing means to sense an emerging future possibility and then to act from that state of awareness in the now (sensing and actualizing emerging futures).

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Figure 12: The U Process of Presencing Source: O. Scharmer, (2010) Figure 12, summarizes the process of accessing this deeper source of creativity and knowledge called the U Process of the author Scharmer, (2010)28, because it follows three basic movements in the shape of a U: 1. The first movement (moving down the left side of the U) is about opening up and connecting horizontally. This stage is about interrupting old habits of judgment, by locating you in places of high potential, and immersing yourself in these places while listening with your mind and heart wide open (observe, observe, observe). 2. The second movement (at the bottom of the U) is about going to a place of tranquility and connecting vertically to the deeper sources of knowing and self-knowing: who I am and what am I here for? What difference I want to make in the world? This stage is about deep reflection and about support ones deeper inspirational and intuitive knowledge to emerge.

28

O. Scharmer, The Blind Spot of Institutional Leadership: How To Create Deep Innovation Through Moving from

Egosystem to Ecosystem Awareness, 2010

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3. The third movement (moving up the right side of the U) is about acting in the now : using rapid-cycle prototyping to examine emerging future possibilities by doing something together, which then produces feedback that helps generate new iterations of the initial prototype until it arrive to a form that all stakeholders feel good about. Summarizing the U Process of the author and its underlying premises (Theory U) there will be these following seven propositions: 1. The essence of 21st-century leadership is about transferring the fields of collective attention and intention. The leaders work in our age is to shift the fields of attention from egosystem awareness to ecosystem awareness. We attend this way, therefore it emerges that way. 2. That leadership process needs three movements: a. establishing a horizontal connection (observe, observe, observe); b. establishing a vertical connection (connecting to Source); c. acting from what emerges in the Now (acting in an instant). 3. To stabilize this deep innovation process within and across institutions, leaders require a new social technology that allows them to tune three instruments: a. the Open Mind; b. the Open Heart (or emotional intelligence); c. the Open Will (or spiritual or self-intelligence). 4. The most important tool in this leadership technology is the emerging Self: the leaders highest future possibility. Theory U is founded on the assumption that each human being and each human community is not one but two: one is the current self, the person that exists as the result of a past journey; the other is the Self, the self that we could develop into the result of our future journey. Presencing is the process of the (current) self and the (emerging) Self listening to each other. 5. The deeper levels of the U Process are well known to many expert innovators and leaders. They say, Sure. I know this way of operating from my own peak performance expe riences. I know it from people whom I consider highly creative. But then, when asked if thats how things happen in their own institutions, they roll their eyes and say, No, hell, its different. Were not operating at peak performance at all. So why is that? Why is the U Process of presencing the road less traveled in our current world of institutions? Because the moment you commit yourself to follow this path, you meet three enemies, or three sources of resistance: 66

a. the Voice of Judgment; b. the Voice of Cynicism; c. the Voice of Fear; each of these blocks the entry to one of the three instruments that are required to access the bottom of the U (Open Mind, Heart, and Will). (Scharmer, 2010,p. 7-8). 6. On the right-hand side of the U, the process of the model is slowed down by three dysfunctional (but common) patterns of behavior: a. abstract thought that is disconnected from action (analysis paralysis); b. mindless action that is disconnected from reflection (lack of learning); c. too much noise in our communication patterns (blah-blah-blah). 7. The massive leadership challenges of our time need leaders and institutions to extend their vocabulary from level 1 and 2 responses to level 3 and 4 responses; for example, to convert their institutions from egosystem awareness to ecosystem awareness. On levels 1 and 2, people, teams, organizations, and systems are completely isolated from one another (transactional relationships). On levels 3 and 4, these boundaries of separation fail and begin to form a single field of cross institutional awareness, learning, and leadership (transformational relationships) (Scharmer, 2010). What would it take to build that missing collective leadership capacity discussed above? It would require us to broaden our concept of leadership (from few people at the top to all change makers across all institutions in a system) and to deepen it (from What and How to the Source level of leadership action). It would also require us to radically rethink and reinvent the entire delivery system of leadership learning in todays society.

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Figure 13: Leadership Learning Matrix Source: O. Scharmer (2010) Scharmer (2010), develops the Leadership Learning Matrix above (Figure 13), that maps nine spaces of leadership learning. They are described by three types of knowledge (technical, relational, self-knowledge) and three levels of systems intervention (focusing on the individual, the institution, or the whole system). Most of the current delivery system of leadership learning bring into focus on the first row (technical knowledge) and the first column (the individual). Together they combine probably 85% of all leadership and learning activities today. The real congestion in all this deeper systemic change efforts (across all systems and sectors) is not on the top left but on the bottom right side of the matrix: relational and transformational capacity structuring that not only touches individuals but engages and empowers the entire system. Thats the real congestion today. And thats where we have almost no effort going on (Scharmer, 2010). The leadership capacity that Scharmer (2010) believes is necessary is one that arises when leaders see and sense together what is going on. The U Process does not decrease different institutional 68

interests and views. Instead, it gives to different people a way to deal with their differences in an open-minded and collaborative way. As one of the Emerging Leaders Innovate Across Sector (ELIAS) participants said at the end of the program: I no longer work for my company. I am working from my company (Scharmer, 2010).

3.5 Three kind of leaders to build a learning organization

Leadership in learning organization centers on subtler and ultimately more important work In a learning organization, leaders roles differ dramatically from that of the charismatic decision maker. Leaders are designers, teachers, and stewards. These roles require new skills: the ability to build shared vision, to bring to the surface and challenge prevailing mental model, and to foster more systemic patterns of thinking. In short, leaders in learning organizations are responsible for building organizations where people are continually expanding their capabilities to shape their future, leaders are responsible for learning (Senge 1990, p.3)29. Developing an organizations culture and modeling its evolution is the unique and essential function of leadership. In a learning organization, the critical roles of leadership have antecedents in the ways leaders have contributed to build organizations in the past. But each role acquire on new meaning in the learning organization and demands new skills and tools (Senge 1990). Leader as design The functions of a leader as design are rarely visible; they arise behind the scenes. The consequences that appear today are the result of work done long time ago, and work today will confirm its benefits far in the future. Those who aspire to guide out of a desire to control, or gain fame, or simply to be at the center of the action, will obtain little to attract them to the quiet design work of leadership (Senge 1990). The first task of organization design concerns designing the governing ideas of purpose, vision, and cores value by which people will live, says Hanovers OBrien. The second design task includes the policies, strategies, and structures that translate guiding ideas into business decisions. The dynamic business environment and the commitment of learning organization have the task to engage people at all levels now make it clear that this second design

29

P. Senge, The Leaders New Work: Building Learning Organizations, Sloan Management Review, 1990

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task is more indirect. According to Mason and Mitroff, the key is not getting the right strategy but fostering strategic thinking. More important is the need to achieve insight into nature of the complexity and to formulate concepts and world views for coping with it. Behind appropriate policies, strategies, and structures are important learning processes; their creation is the third key design responsibility in learning organizations. This does not exonerate senior managers of their strategic responsibilities. Actually, it intensify and extends those responsibilities (Senge 1990). Leader as teacher Leader as teacher doesnt signify leaders as authoritarian expert whose job is to teach people the correct view of reality. Rather, it is about sustaining everyone in the organization, oneself included, to gain more insightful views of current reality. This is in line with a popular emerging views of leaders as coaches, guides, or facilitators. In learning organizations, this teaching role is created further by virtue of explicit attention to peoples mental models and by influence of the systems perspective. The role of leader as teacher begins with bringing to the surface peoples mental models of important issues. No one carries an organization, a market, or a state of technology in his or her head. What we sustain in our heads are assumptions. These mental pictures of how the world works have a significant influence on how we see problems and opportunities, identify courses of action, and make choices. Leaders as teachers sustain people restructuring their views of reality to see beyond the superficial conditions and events into to see beyond the superficial conditions and events into the important causes of problems and therefore to see new possibilities for shaping the future. Specially, leaders can have influence over people to view reality at three distinct level: events, patterns of behavior, and systemic structure (Figure 14) (Senge 1990).

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Figure 14: Level to see Reality Source: Senge, The Leaders New Work: Building Learning Organizations, Sloan Management Review, 1990

The key question becomes: where do leaders predominantly focus their own and their organizations attention? (Senge 1990, p.6). Normally, contemporary society give importance primarily to on events, to short-term, explaining what happens in terms of those events. These event explanations destine their holders to a reactive stance toward change. Pattern-of-behavior explanations are more unusual, in contemporary culture, than event explanations, but they do occur. trend analysis is an example of seeing patterns of behavior, give ones impression of the events in a context of long-term and assessing their implications. They at least propose how, over time, we can respond to shifting conditions. Systemic, structural explanations go even further by addressing the question: what causes the patterns of behavior? (Senge 1990, p.6). These are the most powerful. Only they address the underlying causes of behavior at a level such that patterns of behavior can be modified. Leaders of our current institutions give their attention on events and patterns of behavior, and, under their influence, their organizations do likewise. That is why contemporary organizations are predominantly reactive, or at best responsive rarely generative. On the other hand, leaders in 71

learning organizations pay attention to all three levels, but bring into focus especially on systemic structure; teaching the people of the organization to do likewise (Senge 1990).

Leaders as Steward This is the most important role of leadership, in fact the roles of designer and teacher are almost a matter of attitude, whereas this one is a critical attitude for a learning organizations. While stewardship has long been recognized as aspect of leadership, its source is still not widely understood. Leaders sense of stewardship act on two levels: stewardship for the people they lead and stewardship for the larger purpose or mission that carry on the enterprise. The first type arise from a strong appreciation of the impact ones leadership can have on others. People in a learning organization are more vulnerable because of their responsibility and sense of shared ownership. Appreciating this naturally give a sense of responsibility in leaders. The second type of stewardship arise from a leaders sense of personal purpose and engagement to the organizations larger mission. Leaders engaged in creating learning organizations naturally feel part of a larger purpose that goes beyond their organization. They are part of remodeling the way business operate, not form a vague philanthropic urge, but from a conviction that their efforts will perform more productive organizations, able to reach higher levels of organizational success and personal satisfaction than other traditional organizations (Senge 1990).

3.6 Knowledge asset

Innovative companies tend to share two dominant characteristics according to Slater (2008)30. First, they employ a high proportion of scientific, technical or engineering personnel. The second is that, due to relatively short product life cycles, new product development is the foundation for reaching and sustaining competitive advantage in these firms. According to the author, it give the impression that the second factor, new product development, has guided to an increased quantity of literature on the predictors of successful new product programme performance. Many appear to support the following as reliable predictors of whether a companys new product development process is successful:

30

S. Slater, Learning How to Be Innovative, Journal Compilation, London Business School, 2008

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 Extent to which emerging products are perceived as satisfying customer needs Superiority over competitive offerings Focused commitment of personnel and R&D resources to the new product development initiative Functional diversity in the new product development team Proficiency with which the firm generates and screens ideas Complementarity between the requirements of the new product development initiative and the firms capabilities of delivering sufficiently to meet demand (Slater, 2008). However, a missed area that have many of these characteristics of successful product development programs is the firms stock of knowledge assets and its knowledge management program. Competitive advantage is based on the deployment of valuable, rare, and hard to imitate resources. One class of resources that adapts this definition is knowledge assets. Market-based knowledge assets include knowledge of customer needs, preferences, buying processes and likely responses to promotional features, sales, or pricing moves, and competitors capabilities and strategies. Such market knowledge is valuable to the extent that it leads to the efficient improvement of products that are based on in-depth knowledge of customer needs and whose benefits can be effectively communicated to the members of appropriately selected target markets. Market knowledge assets tend to be rare because of the complex processes that are needed to create them. Market knowledge is also difficult to imitate since it is an invisible asset and has a relatively short half-life, particularly in dynamic markets. A firms stock of market knowledge assets refers to the amount or extent of these assets that the firm possesses (Slater, 2008). There are two important strategies to produce market knowledge: knowledge generated through firm-market interactions, and knowledge discovered from market experiments. A market-connected knowledge generation strategy focuses on acquiring information about customers expressed and latent needs as well as competitors capabilities and strategies; both are procured through firm-customer interactions. This knowledge contributes to focus on the product development efforts of the business, enables the business to develop strong relationships with key customers and contributes insight into opportunities for market development. Market-connected organizations create new knowledge about market requirements and how to best meet or exceed them through superior capabilities at market sensing, customer linking and channel bonding (Slater, 2008). 73

Proactively market bring into focus firms that utilize techniques such as structured customer visit program to thoroughly understand the customers environment and needs, lead-user research and close observation by prepared anthropologists of customers use of products or services in normal routines (Slater, 2008). Successful innovators undertake low-cost market experiments to gain information from the results of those experiments. Experimentation signifies trying ideas to create superior customer value that are outside of the organizations normal routines, assessing the knowledge generated from those experiments and tending for consensus on the meaning of the results. A readiness to experiment is a manifestation of entrepreneurial values that include innovation, risk taking and competitive aggressiveness. Experimentation is essential to the development of new successful products, particularly in dynamic environments in which customers have difficulty combining fundamental needs or understanding the benefits of a new technology or new product to themselves (Slater, 2008). One approach that the author takes into consideration is the probe and learn process in which the initial product is only the first step in the development process, not its culmination. In this case, the initial product is a prototype that evolves into the foundation for subsequent, more refined generations that follow. Experimenting and exploring with early versions provides useful knowledge only when learning from the experience occurs by identifying and examining the reasons for failure and a refined version of the product and/or marketing strategy are developed. Companies such as Motorola, General Electric, and Corning maintain strong market positions by utilizing this process. More recently, Google has instituted a fail fast strategy: launch, listen, improve, launch again. Douglas Merrill, a Google vice president for engineering, explained the companys approach this way: The thing with experimentation is that you have to get data and then be brutally honest when youre assessing it. Failure may be the enemy of efficiency, but its an effective way to learn (Slater, 2008). As important as knowledge generation is that the information created will not be of limited value but shared across the organization and linked with other information to create organization-level knowledge assets. Indeed, some say that effective knowledge management needs a boundary less organization, which takes good ideas from disparate functions and outside organizations and uses them in many areas.

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The knowledge and the know-how of their workforce are not too often used to the maximum possibilities, isolated in departments and functional units. Knowledge-creating firms actively sustain knowledge sharing across people, departments and divisions. Mentoring, communities of practice (company-wide groups that meet in person and online to share knowledge) and action-learning teams that put people together from several disciplines (manufacturing, sales, marketing, legal, finance to solve particular problems) are three valuable ways to propagate knowledge throughout the organization take advantage of teamwork, transformational leadership, trust, reward systems and all the tools that the organizational learning have (Slater, 2008).

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CHAPTER 4
The Archetypes

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4.1 Literature Review

The word comes from the Greek archetypes, meaning first of its kind. A tool of the field of systems thinking, systems archetypes were created at Innovation Associates in the mid-1980s. At that time, the study of systems dynamics was based on complex casual loop mapping and computer modeling, using mathematical equation to describe the relationship between variables. Charles Kiefer, I.A.s president, proposed to try to convey the concept more simply. Jennifer Kemeney developed eight diagrams that would help catalogue the most commonly seen behaviors (Senge, 1994)31. Archetypes are accessible tools with which managers can quickly construct credible and consistent hypotheses about governing forces of their systems, are highly effective tools for gaining insight into patterns of behavior and a natural vehicle for clarifying and testing mental models about those behaviors. The archetypes can be applied in two ways - diagnostically and prospectively. Diagnostically, archetypes help managers recognize patterns of behavior that are already present in their organizations. They serve as the means to gain insight into the underlying systems structures from which the archetypal behavior emerges. This is the most common use of the archetype. Archetypes are effective tools to begin answering the question, Why do we keep seeing the same problems recur over time?. Archetypes are also used prospectively for planning. As managers set down the means by which they expect to perform their organizational ends, the archetypes alert managers of future unintended consequences, they challenge managers to take into account the merits of fundamental solutions by making time an explicit variable in decision making and they can be employed to test whether policies and structures under consideration may be modifying the organizational structure in such manner as to produce the archetypal behavior. If managers find this to be the case, they can take remedial action before the changes are adopted and embedded in the organizations structure (Braun, 2002)32. There are several different archetypes that are generally acknowledged as forming the set of tools that reveal patterns of behavior in systems. After illustrating some of them and I will bring particularly focus on The Limits to Growth Archetype.
31

P. Senge, Kleiner, A., Roberts, C., Ross, R., and Smith, B., The Fifth Discipline Fieldbook: Strategies and Tools for

Building a Learning Organization, New York: Currency Doubleday, 1994

32

W. Braun, The System Archetypes, 2002

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4.2 Shifting the burden

Shifting the Burden is the first of several archetypes that demonstrate the tension between the attraction (and relative ease and low cost) of creating symptomatic solutions to visible problems and the long-term impact of fundamental solutions aimed to underline structures that are creating the pattern of behavior in the first place. The tension between the two is understandable. Long-term solutions tend to demand deep understanding and learning about the problem considered, take a long time to set down, require a relatively large, up-front commitment of funds, and test managers patience. All this in a urgency from many angles which demand that managers fix problems quickly and move on. The essence of Shifting the Burden is that the symptomatic solution33 had its influence with seemingly happy immediate results. As this correction is applied at a more extended level, fundamental long-term corrective measures are practiced less. Over time, the mechanisms of the fundamental solution may deteriorate or become disables, leading to even greater reliance on the symptomatic solution and there will be little perceived need to pay attention to the fundamental, systemic problem take into account (Braun, 2002). The Shifting the Burden structure also explains another common attitude in dealing with problems: escaping, not dealing with the problem, ignoring the symptoms, acquiescing at all costs; in other words, the attitude of someone with his head in the sand so as not to see and act, hoping that the problem is resolved on its own. The effect of this attitude is the worsening of the symptoms as well as the malfunctioning of the entire system; the problem deteriorates until it is irreversible and immune to every solution. (Mella, 2012, p.215). The behavior over time of this archetype of the management intervention works in a way that each time an intervention aims at problem symptoms, some temporary improvement in performance is experienced (this assumes a well-planned intervention). The underlying problem persists however and the reappearance of problem symptoms invariably happens. A classic example is the using corporate human resource staff to figure out local personnel problems, thereby keeping managers from developing their own interpersonal skills (Senge, 1990).

33

which by contrast requires less understanding, is short- term solution used to correct a problem, is easier to

formulate, is relatively less expense - in the short run - and produces instant gratification.

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In addition, we have to consider that the archetype provides a starting point for breaking congestion by identifying chains of problem symptoms and solutions that rise walls between functions, departments, or divisions. Shifting the Burden is an example of creative tension at work. The archetype give attention to the gap between the pressures to perform in the short-term with the insights and long-term supporting decisions to which systems managers try to respond. It also points to the critical importance of evolving patience as one of the skills that systems managers include in their Personal Mastery of competencies. It illustrates the challenge and difficulty in making evidence to a forward-thinking leadership in the face of mounting pressure to fix it and get on to the next problem (Braun, 2002). Without a clear and persuasive picture in the minds eye of the manager (Personal Vision) as well as in the collective minds eye of everyone (Shared Vision), the pressure to go for the quick fix may overcome the manager, denouncing her/him to a recurring pattern of interventions that aims to solve the same set of problem symptoms (Braun, 2002).

4.3 Eroding goals

Eroding Goals shares a basic similarity with Shifting the Burden - the dynamic tension between a symptomatic solution and a fundamental one. In the case of Eroding Goals, managers are faced with performance that fails to meet a stated goal, such as quality standards or employees morale standards, atrophy. They seek a rationale (the symptomatic solution) for seek a rational way to change the goal to one that appears to be more attainable rather than rigorously determining what prevents the organization from performing as originally expected (the fundamental solution) (Senge, 1990). Unlike other archetypes, Eroding Goals analyzes dynamic behavior in the present that is the result of forecasts of the future made in the past. The argument to adapt the goal is not without merit the future cannot be know with certainty, so if the forecast turned out to be wrong, what is the harm in making adjustments that reflect current knowledge about reality? (Braun, 2002, p.6). Without some objective metric to autonomously estimate performance, against some benchmark for example, the temptation to lower goals is difficult to challenge - no measurement, no data, no problem. A classic example is a company that responds to a problems shifting, by continually upping its quoted delivery times or the problem of a quality standards; if a gap takes place between what the 79

organization targeted and its actual performance, tension arises between pressure to live up to standards and the pressure to roll the standards back to something achievable (Braun, 2002). If the quality standard is anchored to an internal perception of customer expectations rather than an industry standard (what the competition is doing) there is the risk that the pressure to scale back the standard will prevail. This archetype helps to explain why an organization is not able to achieve its desired goals. Used as a diagnostic tool, it can target drifting performance areas and help organizations attain their visions. If a gap occurs between what the organization targeted and its actual performance, a tension develops between pressure to live up to standards and the pressure to roll the standards back to something achievable. Since there are potentially legitimate reasons to adjust goals downward, systems managers must take extreme caution when considering an adjustment to goals. The two most important considerations are an honest and rigorous examination of the organization itself and an equally candid look at competitors and their performance, and at customers and their expectations (Braun, 2002). Mella (2012) gives some examples to see how frequently this archetype is in act: this archetype is very frequent in any systemic decisional context, especially where the control system is not able to achieve the standards set for it, which turn out to be too high.(Mella, 2012, p. 240). We even see this archetype at play in families, when the behavior of the parents and children deteriorate to unbearably boorish level. Is incredible to see newpaper stories showing how this archetype is at play daily in various situation. Air pollution is above the safety threshold? We pass a law to raise the threshold. The amount of sodium in the water is too high? We raise the tolerance levels (Mella, 2012, p. 240).

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4.4 Escalation
The Escalation archetype take place when one partys actions are perceived by another party to be a threat, and the second party react in a similar manner, further increasing the threat. It hypothesizes that the two balancing loops will develop a reinforcing effect, resulting in threatening actions by both parties that grow exponentially over time (Braun, 2002). A commonly held belief of competition is bringing an appropriate response to the actions of competitors: to sustain ones own competitive advantage; to maintain momentum toward gaining competitive advantage; or because thats what managers are supposed to do.

The behavior of escalation is relatively simple and anticipatable. The actions (and reactions) of each party are similar in nature, though they turn into increasingly competitive as time goes by. One of the reasons we stay in escalation dynamics may arise from our view of competition. This archetype suggests that ruthless competition well supports no one well in the long run. The archetype provides a way to identify escalation structures at work and shows how to break out of them or avoid them altogether. In the health care industry, especially in a geographically defined market, it is not uncommon for competitors to engage in a campaign of erecting buildings as a tactic to secure market share. Each facility is seen as a threat by the competitor, who after some delay, will reply in kind. This can continue for some time until the cost of doing so develop into prohibitive and the escalation stops. This may result in one competitors eventual market dominance (if it had the resources to support the construction boom) or in one competitors collapse due to overextending itself financially (Braun, 2002).

4.5 Tragedy of the commons

As Braun (2002) write in his article, the commons in an organization is a resource (people, materials, space, tools, etc.) that is simultaneously made available to multiple people and/or teams. This Archetype is useful for recognizing cases where the individual choices regarding the use of a limited resource, though they may appear perfectly rational from the individuals point of view, are destined to produce a catastrophe at the collective level.(Mella, 2012, p.251) 81

According to Braun (2002), this behavior can provide several consequences in the organization: 1. Individual or team performance decreases as the erosion of the commons affects their ability to join up individual goals and objectives. 2. Aggregate organizational performance erodes as the interaction and interdependency of multiple individual and/or team performance starts to reflect the declining performance of the individuals or teams. 3. Organizational goals themselves begin to erode and to reflect the diminished ability of the commons to support the goals and objectives of the individuals and teams that depend on the commons. This can have far reaching consequences in terms of the firms competitive advantage in the markets in which it competes. 4. The commons itself deteriorates as a valued and valuable resource to the point where it is regarded as a cause of failure rather than success. When these perceptions become embedded in peoples collective assumptions, they can lead to deep beliefs about the organization and its ability (and willingness) to be successful in the long-term (Braun, 2002). According to Braun (2002), the archetype can be utilized to help connect the long-term effects of individual actions to the collective outcome, and create measures for managing the common resource more effectively. A classic example is the division in a firm that divide a common salesforce and compete for the use of sales reps by upping their sales targets, until the salesforce burns out from overextension. From many aspects, the Tragedy of the Commons is a classic example of reductionist thinking. By staying unaware of the effect of the parts on the whole, people carry on thinking and behaving as though there are no connections within the organization that affect their ability to converge goals and objectives. Focused on their own part, behaving as though it depended on no other, demands on the commons are published with only the present in mind. Sustainability is increasingly put forward as a leading principle for the planet we inhabit. Sustainability has applications within organizations, with respect to their structure and practices, with an eye on the long-term future. Structures that create commons and policies and practices that govern them (leading to depletion or replenishment) are critical success factors (Braun, 2002). Ultimately, firms may conclude that structures that include commons are ineffective ways of distributing and allocating resources. Alternatively, they may increase insight into how commons have to be governed, and recognize that structures and policies, other than the commons itself, all 82

interact and have a pronounced effect upon the utility the commons bring to organizations (Braun, 2002).

4.6 Growth and Underinvestment

When the development process approaches the limit to growth because of the existence of a critical resource that saturates the productive capacity, this limit can be eliminated, or put off to the future, through new investment to increase the productive capacity necessary for growth. However, it can happen that when the critical resource is nearing the depletion limit, the returns from growth diminish, and rather than providing incentives for new investment in order to restore the previous levels of return, the decision could be made not to increase the missing capacity. This would then trigger a balancing process that would reduce the need for such investment and produce a spiral of continual failure due to underinvestment.(Mella, 2012, p. 258). According to Braun (2012), eroding goals or standers cause too weak investment, or to slow, and customers get increasingly unhappy, slowing demand growth and thereby making the needed investment unnecessary or impossible. Unique to Growth and Underinvestment is the long-term requirement to continue to keep its capabilities and core competencies at a level that ensures its competitive advantage. If demand surpass capacity, performance can suffer and hurt demand. If this dynamic is not recognized, the decrease in demand can then be used as a reason not to invest in the needed capacity. This archetype can be used to ensure that investment decisions are viewed from a fresh perspective, rather than relying on past decisions (Braun, 2002). A classic example is the countless once-successful growth firms that allowed product or service quality to erode, and were unable to generate enough revenues to invest in remedies, otherwise, shareholders historically treat the business firm as a wealth generator for their families. Growth and Underinvestment is the archetype that give special attention to planning for limits. In this case, are the capabilities and core competencies that furnish firms their competitive advantage. This is part and parcel of strategic planning as well as internal policy formation. It also pay attention to the insidious nature of the failure to meet customer demands over long periods of time, the constant decline in the firms opinion of itself and in its commitment to, and ability to perform at, customer demands and expectations (Braun, 2002).

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4.7 Fixes that Fail

When managers find themselves saying, I thought we fixed this - why is it worse than it was before?, the Fixes that Fail archetype may be at work in the organization. (Braun, 2002). This archetype is also a good reflection of the dangers of reductionist thinking that managers find themselves dealing with the same problem symptoms, albeit in a variety of different colors and flavors, over and over again. When problem symptoms are taken as known to be a unique set of circumstances that exist in their own (relatively) small, isolated subsystem, unconnected to other problem symptoms or other parts of the larger whole system, it is plausible to assume that focusing ones attention on the problem symptom is a reasonable response and one that will be effective (Braun, 2002). According to Mella (2012), this archetype confirms that there are no one-off problems. Every problem, if not properly solved, will generate other problems, forming a chain that drags on even for long periods. The adoption of Systems Thinking would greatly reduce the risk of failure of the solutions. In effect, Systems Thinking obliges us to accurately consider the forecasts of future problems in order to avoid unforeseen consequences. (Mella, 2012, p. 207) Fixes that Fail conveys a strong resemblance with Shifting the Burden, in which the managerial response is primarily aimed at the problem symptom rather than spending time on the more difficult and time consuming task of identifying the underlying, systemic problem. The difference between Shifting the Burden and Fixes that Fail lies in the unintended consequence that emerges from the quick-fix that functions as a reinforcing loop, exacerbating the initial problem symptom. By contrast, the Shifting the Burden archetype suggests that while the fundamental problem will not have been addressed, the repeated intervention in response to the problem symptom(s) may still have some palliative effect for a limited time (Braun, 2002). The Fixes that Fail archetype represents a steadily worsening scenario, where the initial problem symptoms are aggravated by the fix that is applied to them. The reinforcing loop, which contains a delay, contributes to a steadily worsening problem symptom, not in spite of the fix (which is the case with Shifting the Burden) but because of it. The classic behavior over time for Fixes that Fail is the trend that proves that management intervention appears to have a beneficial effect, even as the long-term trend proceed to deteriorate. Likewise there is an accumulation of side effects that take on lives and energy of their own, each of 84

which consumes time and resources that could otherwise be devoted to fixing the original problems (Braun, 2002). Almost any decision carries long-term and short-term consequences, and the two are often diametrically opposed. This archetype can support the organization to get off the problem solving treadmill by identifying fixes that may be doing more harm than good. The key to appreciate the Fixes that Fail archetype is the delay in the balancing loop. The time that elapses between the fix and the worsening problem symptoms frequently makes the connection between the fix and the deteriorating problem symptoms hard to identify. Managers tend to impute the worsening problem symptom to something other than the prior decision(s) they made in their efforts to fix the problem symptom(s). Despite its apparent simplicity, Fixes that Fail can be very hard to solve. It requires an intense commitment to set aside mental models that may strongly control managers not to see, or even consider, that there may be a connection between the problem symptoms that are apparent and the fix(es) they are applying in an effort to mitigate the problem symptoms. A practical example is the tobacco industry, which for years steadfastly denied that there were any ill health effects from smoking, pouring vast amounts of money into advertising and a pattern of denials. The tactic served the industry well. However, each time it denied that smoking caused health problems, it stiffened the resolve of scientists, and research of the effects of smoking on health steadily grew. Ultimately, the amount of evidence grew extensively that no amount of PR or advertising could overcome the industrys claims (Braun, 2002).

4.8 Limits to growth

Life often seems full of such paradoxes. When we are busy earning lots of money, we have little time to enjoy it. When we do have time available, it seems we dont have much money to spend. A rapidly growing company finds itself so busy planning for more growth, it doesnt invest its profits in the development it might need if growth slowed down. When growth does slow down, and it becomes more obvious how some fundamental improvements could spur that growth again, the company no longer has the necessary money or people available. If only you could anticipate the worst of times while youre still in the best of times (Senge P., Kleiner A., Roberts C., Ross R., Smith B., The Fifth Discipline Fieldbook Strategies and Tools for Building a Learning Organization, 1994: 129). 85

Recognizing this paradox can sustain individuals and companies avoid the trap of Limits to Growth. The truth is that we never growth without limits. In every aspect of life, patterns of growth and limits come together in various combination. Sometimes growth dominates; sometimes limits dominate; and often the degree of influence shifts back and forth between them. In the template (Figure 15), the growth process is usually shown as a virtuous reinforcing loop on the left. The limiting process is usually shown as a balancing loop on the right, which reacts to imbalances imposed on it by the growth loop. The balancing loop is also driven to move toward its target a limit or constraint on the whole system, difficult to see because it is so far removed from the growth process.

Figure 15: Limits to Growth Template Source: D. Sandow and A.M. Allen, The Nature of Social Collaboration: How Work Really Gets Done,2005

This archetype states that a sustaining process of accelerating growth (or expansion) will find a balancing process as the limit of that system is approached. It hypothesizes that continuing efforts will develop diminishing returns as one approaches the limits (Braun, 2002). The model of this archetype exemplify all cases in which a growth process relying on a condition of growth available in a limited quantity develops in the short term a reinforcing loop. If, in a long term, the condition for growth becomes scarce, there grows a gap between the necessary condition and the available one, which creates a slowing down action on growth that balances the growth loop. 86

When the growth rates stabilizes, the most common response is to continue through the same lines of behavior, insisting on loop (R1); since loop (B1) intervenes, the obstacles to growth in fact do not diminish but instead intensify. In fact, the behavior that we will assist is an efforts to grow in the initial stages, perhaps exponentially. However, as the limits to growth are approached, the growth engine starts to lose its effectiveness and the rate of growth begins to decrease. In the end, despite continuous pressure from the growth engine, the rate of growth stops and then reverses (Braun, 2002). If we dont plan for limits, we are planning for failure. This archetype represents that being successful can be just as dangerous to long-term health as being unsuccessful. By mapping out the growth engines and potential danger points in advance, we can anticipate future problems and eliminate them before they become a threat(Braun, 2002). Another behavior that we can recognize in this archetype is that managers are sustained to be action oriented and proactive and constantly occupied in the process of pushing on people and situations to make them change or move. Typically, they bring into focus their attention on the sphere of activity in the organization that coincides with their title and job description. The Limits to Growth archetype evokes managers to take the time to analyze what might be pushing back against their efforts. The counter-force may come, and most likely will come, from either parts of the organization not under the direction of the manager from the external environment. Expansionistic thinking is a key competency for identify Limits to Growth (Braun, 2002). By focusing their attention on these limits, managers may discover opportunities to either continue the improvement curve they were on, or make out the elements in the system that represent the counter-force and devise new improvement initiatives that would diminish or remove the limits. As Braun (2002) write in is article The systems Archetypes, the actions that the organization have to consider to prevent this behavior and this archetype are: Focus on removing the limit (or weakening its effect) rather than continuing to drive the reinforcing process of growth. Use the archetype to identify potential balancing processes before they begin to affect growth. Identify links between the growth processes and limiting factors to determine ways to manage the balance between the two. While the seven action steps to identify the limits and to plan a new strategy are: Identify the growth engines. Determine the doubling time of those processes. 87

 Identify potential limits and balancing loops Determine change required to deal effectively with the limits identified. Assess the time needed to change. Is there a discrepancy between the doubling time and the changes required to support growth? Balance the growth. Identify strategies for achieving system balance. Reevaluate the growth strategy. Continuously challenge assumptions (Braun, 2002). In fact, the strategies that Senge (1994) suggests in his Fieldbook for a Limits to Growth situation are: Beware of doing more of what worked in the past. Resist the temptation to invest more heavily in the reinforcing process, rather than trying to understand the balancing process. For each reinforcing process, there are probably ten or more balancing processes waiting to happen, but they are nearly all invisible. We dont notice what keeps things stable; we notice only when things dramatically grow or decline. If the growth has stalled, look at both the reinforcing and balancing loops trying to find interrelationships between the successful strategies and the potential limits. The limits might be within the organization as exhausting the financial, human or technological resources; they might be within yourselves as youre held back by mental models, tradition or norms ; or they might be external like a saturated market or a commodity market which attracts new competitors). For every limit, there are effective strategies, but we usually dont see them. Our natural tendency is to look for what worked in the past and to keep redoubling our efforts, instead of paying attention to the constraints. The choice between stabilizing or peaking and crashing often depends on the length of balancing loop delay and our response to it. A long delay in the balancing loop means the growth cycle can push the system well beyond its capacity before it is heeded. The real leverage in a Limits to Growth scenario lies in its early phases, while you still have time and resources to maneuver. Anticipate upcoming limiting forces, which are small now, but which will increase as time goes on. Ask yourself: what measure can you take so that, as you continue to grow, your capacity to handle your limits also grows? Look for other potential engines of growth. can you strengthen the resources which are driving your own growth?

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The Limits to Growth archetypes is useful to discover the nature of the slowing down action and of the limiting condition in order to use the latter as a lever before the direction along the loop is inverted, and, in the end, to prevent the problem by planning the necessary measures. The archetypes in question helps us even to see how the balance between these elements shifts over time. It particularly helps us come to terms with the ways in which, by pushing hard to overcome the constraints on our lives, make the effects of those constraints even worse than they otherwise would be. An example that the author Braun (2002) write in his article The System Archetypes is the experience of the organization America-On-Line: the initial success on a fee-per-minute business model. Their competition offered a flat-rate to connect and access the internet. In an effort to both recapture their eroding market share and grow subscribers, AOL began an aggressive marketing campaign, flooding the market with CDs designed to make subscription and connection easy and attractive. The campaign was an enormous success, so much that the demand completely overwhelmed their technical capacity to deliver service. Not only were new subscribers alienated, as well were existing subscribers who left in significant numbers. This archetype can show the situation of the limiting action on sales represented as a given market size. Sales depend on demand. If sales increase, according to loop (R1), then revenues also increase, if prices do not decline; this presumably produces greater profit, which makes more resources available to intensify marketing activity in support demand (Mella, Systems Thinking Intelligence in action, 2012: 255). The leverage effect to improve the growth limit is obtained, in this example, by mediating on the limiting condition through an appropriate marketing strategy that only helps demand but also seeks to increase market size over the long term (loop (R2)). This increase counters the decrease in sales so that the market of reference does not shrink, thereby making further growth possible (Mella, 2012). The archetype can work in the process involving the production of the new products; the development of the product portfolio is fundamental for the survival of firms.

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Figure 16: BCG Growth-Share Matrix Source: www.quickmba.com According the Boston Consulting Group (1970) (Figure 16), with reference to the product life cycle, the product must be dynamic; long-standing products (dogs) must be linked to new products (question mark) in the hope that latter they are transformed into rapidly-developing products (stars), which in turn, evolve into products that finance themselves development of new products (Mella, 2010). As long as the cycle repeats itself, the firm will preserve its economic efficiency; when the cycle is stopped a crisis arises that must be overcome through an appropriate corporate strategy aimed at renovating the portfolio, if the firm wants to avoid the systems dissolution (Mella, 2010). The managerial capacity of the managers in facing increasingly more complex production and market situations produced by the growing number of products to be managed by the technical personnel, which is ever increasing but not always adequately skilled, limit the condition of the development of new products (Mella, 2010). (cash cows), to be used in the

4.9 A Global Limits to Growth

Considering the authors D. Meadows, J. Randers and D. Meadows that have written Limits to Growth: The 30 Year Update I want to analyze these archetypes taking into account the global environment. In fact, limits to growth include both the material and energy that are extracted from the Earth, and the capacity of the planet to absorb the pollutants that are generated as those materials and energy are used, not only how an organization can growth and make profits during his life. Streams of material and energy flow from the planetary sources through the economic system to the 90

planetary sinks where wastes and pollutants end up. There are limits, however, to the rates at which sources can produce these materials and energy without harm to people, the economy, or the earths processes of regeneration and regulation. Under the business as usual scenario, world society proceeds in a traditional manner without major deviation from the policies pursued during most of the 20th century. In this scenario, society proceeds as long as possible without major policy change. Population rises to more than seven billion by 2030. But a few decades into the 21st century, growth of the economy stops and reverses abruptly (D. Meadows, J. Randers and D. Meadows, 2004)34. As natural resources become harder to obtain, capital is diverted to extract more of them. This leaves less capital for investment in industrial output. The result is industrial decline, which forces declines in the service and agricultural sectors. Near the year 2030, population peaks and begins to decrease as the death rate is driven upward by lack of food and health services. After 2070 the costs of the various technologies, plus the rising costs of obtaining nonrenewable resources from increasingly depleted mines, demand more capital than the economy can provide. The result is rather abrupt decline. In 1987, the World Commission on Environment and Development put the idea of sustainability into these words: A sustainable society is one that meets the needs of the present without compromising the ability of future generations to meet their own needs. From a systems point of view, a sustainable society is one that has in place informational, social, and institutional mechanisms to keep in check the positive feedback loops that cause exponential population and capital growth. This means that birthrates roughly equal death rates, and investment rates roughly equal depreciation rates, unless or until technical change and social decisions justify a considered, limited change in the levels of population or capital (D. Meadows, J. Randers and D. Meadows, 2004). Such a society, the authors D. Meadows, J. Randers and D. Meadows ,with a sustainable ecological footprint, would be almost unimaginably different from the one in which most people now live. Before we can elaborate on what sustainability could be, we need to start with what it need not be: Sustainability does not mean zero growth. Rather, a sustainable society would be interested in qualitative development, not physical expansion. It would use material growth as a considered tool, not a perpetual mandate. Neither for nor against growth, it would start to discriminate among kinds of growth and purposes for growth. It would demand what the
34

Meadows D., Randers J. & Meadows D.,Limits to Growth: The 30-Year Update, 2004

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growth is for, and who would benefit, and what it would cost, and how long it would last, and whether the growth could be accommodated by the sources and sinks of the earth (D. Meadows, J. Randers and D. Meadows, 2004). A sustainable society would also not paralyze into permanence the current inequitable patterns of distribution. For both practical and moral reasons, a sustainable society must provide sufficiency and security for all. A sustainable society would not be a society of despondency and stagnation, unemployment and bankruptcy that current systems experience when their growth is interrupted. A deliberate transition of sustainability would take place slowly enough, and with enough forewarning, so that people and businesses could find their places in the new economy (D. Meadows, J. Randers and D. Meadows, 2004). A sustainable world would also not be a rigid one, with population or production or anything else held pathologically constant. One of the strangest assumptions of present-day mental models is the idea that a world of moderation must be one of strict, centralized government control. A sustainable world would need rules, laws, standards, boundaries, social agreements and social constraints, of course, but rules for sustainability would be put into place not to destroy freedoms, but to create freedoms or protect them (D. Meadows, J. Randers and D. Meadows, 2004). Some people think that a sustainable society would have to stop using nonrenewable resources. But that is an over-rigid interpretation of what it means to be sustainable. Certainly a sustainable society would use nonrenewable gifts from the earths crust more thoughtfully and efficiently (D. Meadows, J. Randers and D. Meadows, 2004).

4.10 Limits to Growth in Listen to Learn

In this paragraph, I want to consider an interesting loop writes to D. Sandow and A.M. Allen in The Nature of Social Collaboration: How Work Really Gets Done. This loop can be used in a learning organization to understand the importance of Listening and Collaboration: Collaboration begins with listening (Jewell-Larsen and Sandow 1999). Collaboration is the social coordination of action, and takes place in a social system of relations wherein everyone in the network is approved by everyone else in the network as a contributor toward a shared purpose. The flow of reflective relations resulting in collaboration permits any individual within the network to gain access to the knowledge of the whole. In a high-trust 92

environment, this is a continuous, generative process that is reproduced as those in the network continue to reflect on how they perform together and take action based on that evolving knowledge, as depicted in Figure 17 (D. Sandow and A.M. Allen, 2005).

Figure 17: Reinforcing trust Source: D. Sandow and M. Allen, The Nature of Social Collaboration: How Work Really Gets Done, 2005

Social capital is improved by collaboration. The converse is also true. Social capital diminishes as collaboration diminishes. We know this because in the absence of collaboration, there is social separation, which can result in redundant costs, misalignment, and often, mistrust and fear. This deterioration of relations reinforces internal competition and diminishes social capital. In short, without collaboration we are headed down the road of resource depletion (Figure18).

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Figure 18: Resource Depletion Source: D. Sandow and M. Allen, The Nature of Social Collaboration: How Work Really Gets Done, 2005

We have learned through years of doing this research that this reciprocal pattern is the most integrated social structure and the source of invention, continuous performance improvement, knowledge creation, and social well-being (D. Sandow and M. Allen, 2005).

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Collaboration begins with listening (Jewell-Larsen and Sandow 1999). This is simple, but not easy It is especially difficult if we tend to dominate others by believing that talking, teaching, describing, convincing, debating, and influencing them is the most effective approach to social collaboration. In a few words, The world would be better if everyone would just listen to me. What is often implied with these words is, I know the right answer. (D. Sandow and M. Allen, 2005,p.6). In real listening one learns from others. When we listen to a group describing a common experience, we learn from the group. If we wish to learn about the nature of social performance we simply listen to those who demonstrate exemplary group performance. We know when we are listening to learn. As we become curious and interested in learning more about collaboration we also learn to listen better to others (D. Sandow and M. Allen, 2005). This increases mutual trust and respect in the organization, resulting in an added and not insignificant benefit the expansion of social well-being. Because we all like not only to be heard but also to be recognized and accepted by others for our contribution. This social capital, described as the potential productivity of a social network or organization, is a valuable asset that adds a force factor to create organizational performance. Listening to others explain how they create value leads to the sharing of collective knowledge (D. Sandow and M. Allen, 2005). By viewing everyone as legitimate, they took the time to listen to them and thereby gather knowledge from the entire group to coordinate action. The knowledge inside the social system is shared with us as we begin to understand the nature of group performance. We become rapacious learners as we explore the wisdom of the group a requirement for any leader in the new knowledge economy. This approach is often described by employees as a reduction in informal meetings, and has become popularly referred to as management by walking around a management practice of Bill Hewlett and Dave Packard (D. Sandow and M. Allen, 2005). Performance improvement is commiserated to the collective knowledge that flows through social systems; listening is the key to introduce the flow of that knowledge. This is a bit difficult to discuss because most people intellectually know that listening is a critical personal skill for success. Still, many people may appear to be listening when actually their listening is superficial at best. It is helpful to understand when we are listening to learn and when we are not really listening at all (D. Sandow and M. Allen, 2005). A consequence of listening to learn from others is that the others come to understand that you understand them. This is not a trivial outcome, but one that conserves openness in social systems. 95

Without openness, knowledge, innovation, and collaboration cannot occur as quickly and effectively as they naturally would. Response time to business demands plummets (D. Sandow and M. Allen, 2005). In todays turbulent corporate world we are constantly finding ourselves in newly forming teams whether due to reorganization, customer responsiveness, new opportunities, or new hiring. As you join a new group it sometimes feels as you are lost. You begin by asking exploratory questions, such as, Whats happening? or perhaps, What do you do? How does this work? Soon you are so absorbed in what is being explained to you that you forget about everything except what you are hearing. As your interest in what is being said becomes self-evident, the explanation broadens. Your trainer may say, Oh, if you are interested in this you should meet Maria. So off you go to listen to Marias explanation about what you just heard. Maybe Maria invites you to join her as she does what has been explained to you. Soon Maria passes you to another and by the end of the day you realize just how much you have learned, and have a growing appreciation that the group, individually and collectively, would be so willing to share their knowledge with you (D. Sandow and M. Allen, 2005). As the authors write, the consequence of listening to learn and learning to listen to others in a social network is that at some point in time the group understands that you understand them. There is an expansion in the knowledge shared as the group recognizes that this is not superficial knowledge for you, but meaningful understanding. Your listening has produced a space of collective reflection, fluency, and learning. Once youve accepted the invitation to listen, learn, and understand how people collaborate, you might do so routinely with more than one group. With multiple experiences of shared understanding we start to see the flow of knowledge and performance in social systems much like one begins to see the flow in a successful musical, theatrical, or sports performance (D. Sandow and M. Allen, 2005). Shared meaning is critical to collaboration and the flow of knowledge. It is easy to agree on words. However, the difficulty is in developing a shared meaning for our words. This shared meaning is a matter of understanding (i.e., listening, reflecting, and dialogue) and greatly improves our productivity. When meaning is shared among the work team members, no one is outside the social system. Everyone becomes an accepted or legitimate member. When high-performing teams describe the magic of their experience (flawless execution doing the impossible, reading each 96

others minds, etc.), they are reflecting on the power of their common understanding and flow of knowledge, which resulted in exceptional accomplishments (D. Sandow and M. Allen, 2005). Trust is the silent connector in social networks. We take it for granted but it is actually quite fascinating. Think about the person you trust most in your life. Trust is an emotional attitude that increases with the realization that someone comprehends you, because you come to see yourself, as in a reflective pool, through their observations and experiences in listening to you (D. Sandow and M. Allen, 2005). Carried to the social level, once the group realizes that you understand them, the relational ties between yourself and everyone else in the social system strengthen. You have become a legitimate member of the group and are now included in their network of conversations. Building trust in this way brings one from outside to inside the network. Conversations become deeper and reveal and generate more and more knowledge. Everyone in the group is accepted as a member of the social system and all are trusted to act in a manner that is aligned with their shared purpose. As trust grows, the focus shifts from me to we. I become more interested in learning from others than I am in their learning from me. Although I contribute whenever I can, I serve the purpose of the whole team or system (D. Sandow and M. Allen, 2005). Creating new knowledge is very different from creating products. This is one of the reasons organizations find themselves in a state of transformation today. We do not have license to learn from others one cannot force another to share knowledge. Learning from others is a privilege and trust conserves this privilege. When an organization loses trust it also loses the privilege to learn and the capacity to generate new knowledge in a productive manner (D. Sandow and M. Allen, 2005). Otto Scharmer (2010) describe four types of listening:

Downloading

Factual

Level of Listening
Empathic

Generative

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Downloading Listening: yeah, I know that already.. re-confirm and attend to what you already know; Listening from the assumption that you already know what is being said, therefore you listen only to confirm habitual judgments. Factual listening: recognize some new external facts and new information; Factual listening is when you pay attention to what is different, novel, or disquieting from what you already know. Empathic listening: see a situation through the eyes of another: I know exactly how you feel. Empathic listening is when the speaker pays attention to the feelings of the listener and vice versa. It opens the listener and allows an experience of standing in the others shoes to take place. Attention shifts from the listener to the speaker, allowing for deep connection on multiple levels. Generative listening: sense the highest future potential of another person or a situation. This deeper level of listening is difficult to express in linear language. It is a state of being in which everything slows down and inner wisdom is accessed. In group dynamics, it is called synergy. In interpersonal communication, it is described as oneness and flow (Scharmer, 2010). Each type of listening results in a different outcome and conversational pathway. In short: depending on the state of awareness that I operate from as a listener, the conversation will take a different course. I attend this way, therefore it emerges that way. (Scharmer, 2010, p.5).

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CHAPTER 5
Impediments and Facilitators

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5.1 Introduction
In the organizational learning system, several impediments might exist. To facilitate the change in organizational learning and improve the performance of organization, we will discuss about the impediments within and between task reorganizing processes that may exist in different stages of learning process (Showing, Yi-Ming, Ya-Tsai, 1999). Individuals have to figure out what the task and its environment are to determine what they should do and implement the decided organizing method to reach the perceived objectives. By doing so, role-constrained learning occurs when individuals attempt to modify the organizing way of tasks. Constraining role definitions and standard operating procedures check individuals from changing their behaviors in response to new knowledge. Then, individuals have to know what happens and whether their methods work (Showing, Yi-Ming, Ya-Tsai, 1999). Problems of learning and learning under ambiguity emerge because the causal relationships of tasks are too complex to understand, or the time lag between result and actions are too long or the task scope are too wide to observe. Individuals or groups cannot form appropriate relationships between their actions and results and they cannot design new action strategy for tasks (Showing, Yi-Ming, Ya-Tsai, 1999). Sometimes, the information feedback property of learning process does not even exist because of the long time lag and wide scope of tasks. Individuals and groups just respond to various events. These situations often happen in the dynamic complexity problems (Senge, 1990). Besides, because of the divided decision making and action taking responsibilities, individuals cannot form an opinion whether their decisions are right or not. It also influences individuals learning. In forming the mental models, learners mental models may also be too rigid to change. It may occur both in individuals mental models and groups shared mental models, such as group thinking. Problems of fragmented learning occur in the tasks carried out by groups of people. It means that even if some members learn some knowledge from the process, they cannot share the gained knowledge with other collaborators (Showing, Yi-Ming, Ya-Tsai, 1999). Among impediments of organizational learning, bad design of objective system is the most serious problem. Objectives guide and direct each learning process. Individuals and groups proceed their own regulating and learning process with the objectives of tasks. When the objectives are clearly and properly defined, each regulating process runs smoothly and contributes to the performance of organization as a whole. If it is too difficult to reach the objectives, individuals may revise or erode 100

their perceived goals to decrease the pressure they feel. With objectives unclear and equivocal, individuals cannot even have any learning actions because they do not know where to go (Senge, 1990). Objective system does not only guide each learning process, it also connect tasks to tasks. A bad design of objective system may lead to individuals and groups impinge others task carrying because of conflicting goals and harm the organizations performance (Showing, Yi-Ming, Ya-Tsai, 1999).35. Other impediments that the author Mella (2012) take into account for the System Thinking, are divided into two typologies: the fundamental impediments and the situational impediments, to find after all three area to facilitate the adoption of the system thinking; whereas a most important stickiness in the knowledge transfer is internal, as Szulanski (1996) writes in his article.

5.2 Challenge to Change

Most change initiatives fail. Eventually they run into constraints embedded in the culture of the organization or the prevailing system of management and fail to reach their potential. When they should bloom and prosper, they droop; managers must understand the run of change, the inevitable interplay between growth processes and limiting processes. Managers must identify natures way, and work with it (Senge, 2001)36. The process starts with understanding how to produce change. Initially, most of the action takes place in pilot groups. These groups can vary in size from a handful to an entire business unit of 1,000 people. They tend to be led by open-minded pragmatists who have innate curiosity and want to play with an innovative notion (Senge, 2001). The first basic choice facing the organization is whether the change will be authority-driven or learning-driven. Change driven by authority is more efficient to manage. Its also often more effective in the short run and more immediately comfortable for people in many organizations. Great results may be, with productivity and profitability soaring. Morale may soar too, as employees recognize that things are getting better; but eventually the initiative loses momentum because it depends on being pushed. Interest flutters to other projects or leaders leave and the process stalls (Senge, 2001).
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Showing Y, Yi-Ming T., Ya-Tsai T., Organizational Learning as a Feedback systems: a Conceptual Framework, Senge P., The Dance of Change The Challenges to Sustaining Momentum in Learning Organization, 2001

1999
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Learning initiatives, if properly constructed, are driven by widespread commitment. They depend for success on repeated opportunities for small actions that individuals can design, initiate and implement themselves. First on a small scale, then with increasingly large numbers of people and activities, participants articulate goals, experiment with new initiatives, learn from their successes and mistakes, and talk candidly about the results. That builds commitment and action. It also draws in new people who share similar values and aspirations. And since the change initiative does not depend on one person, it can be self-perpetuating. According to Senge (2001), important change initiatives often have the following qualities: They are connected with real work goals and processes. They are connected with improving performance. They include people who have the power to take action to achieve those goals. They try to balance action and reflection, connecting inquiry and experimentation. They give people an increased amount of white space, such an opportunities to think and reflect without pressure to make decisions. They are intended to increase peoples capacity, individually and collectively. They focus on learning, in settings that matter. All change initiatives must understand and work hard to overcome these ten challenges. The first four arise in the opening phase of initiating change: 1. Not enough time. The core group will have difficulty finding and allocating enough discretionary time for the project. In particular, as the change effort picks up steam, the time required to participate will increase. If the teams time flexibility is low, time can become a major constraint to progress. To counter this problem, it can help to mix several change initiatives that have a common goal, so time can be used more efficiently, and also to schedule large chunks of time for focus and concentration on the project. The organization must learn to trust people to control their own use of time rather than expecting them to conform to the speed of the boss. Indeed, the organization must go as far as to value unstructured time, by allowing people to have time to daydream. As well, the busywork that people have accumulated in an era of downsizing and greater technology must be removed and the group must learn to say no to political gamesmanship (Senge, 2001). 2. No help. In many organizations the notion that prevails is that asking for help is a sign of incompetence. The innovators, isolated from help because of that philosophy and their own pilot102

project status, often dont understand what they dont know until its too late. To counter that, group change leaders must invest early in getting help in the same way as they would seek opinion when undertaking any other complex task, such as buying a computer or initiating a home renovation project. The organization must produce capacity for coaching from people who have been there and know how to listen, ask questions and offer assistance. CEOs in change efforts and other leaders must find a partner in whom they can safely confide and express emotional tension, including misgivings about the effort. This safety valve will permit them to move from anxiety and fear to a creative, strategic sense of purpose. And the organization must change prevailing attitudes about seeking help attitudes like those of the CEO who said, Im too old for a mentor, or maybe too young. (Senge, 2001). 3. Not relevant. The innovators may fail to develop a compelling business case for change, and that prevents significant momentum from developing. Someone with managerial accountability must make the case, in practical terms, so the project can improve the workplace. If this does not happen, people will correctly consider the initiative as just adding more work to their already overfull plates. As well, strategic awareness should be built among key leaders, questions should be explicitly raised within the pilot group about project relevancy, more information should be made available to pilot group members, and efforts should be tightly linked to business results (Senge, 2001). 4. Walking the talk. Mismatches between behaviour and espoused values can destroy trust, leaving little safety for the reflection that conducts to authentic change. Its important, therefore, to develop espoused aims and goals that are credible. As well, leaders must realize that they can only build the credibility of their organizational values and aims by demonstration, not by articulation. They must also improve patience under pressure, not losing their temper or returning to authoritarian habits of old, and think carefully about their beliefs about people. From the opposite way, subordinates must improve patience towards their bosses, since they cant always change problems immediately, and know when to approach those bosses and tell them to back off (Senge, 2001). Three challenges arise in the next stage of sustaining transformation: 5. Fear and anxiety. Although fear and anxiety are natural and even healthy responses to change, they can undercut the effort. Participants may worry about whether they are equal to the tasks ahead and whether they can trust the others involved. To help, the organization should start small, building momentum before confronting difficult issues, and avoiding frontal assaults on major barriers. It should also do everything possible to ensure that participation in the pilot group is a 103

matter of choice, not oppression. Bosses must set an example of openness and ensure that in meetings diverse views are acknowledged. Breakdowns should be used as opportunities for learning (Senge, 2001). 6. Assessment and measurement. The traditional methods of measuring results in the organization may be inadequate for judging the success of the changed project, particularly in its early days. People must therefore appreciate the time delays that are involved in major change and not judge its efficacy prematurely. Change proponents must produce partnerships with executive leaders on assessing the assessment process, to ensure its fair, and they must make a priority of assessment and the development of new abilities to assess. The pioneers must also identify that not all assessment will be pleasant or indicative of progress. Innovation involves mistakes. There will be many failures among innovative change efforts (Senge, 2001). 7. True believers and non-believers. A siege mentality can grow in the organization between those involved in the changes and those on the outside. The pilot group can feel unappreciated and misunderstood as their enthusiasm grows for the project, yet they may find themselves adrift from others or even pitted against close colleagues who have become organizational enemies. In response, change leaders must become bicultural able to live in the world of their innovative subculture as well as the mainstream culture of the larger organization. Mentors can be useful, helping leaders of change to distinguish legitimate questions from irrational opposition. Care must be taken from the start to build the pilot groups ability to engage the larger organization. And openness must be cultivated in the pilot group members must be willing to challenge their own thinking and orthodoxies (Senge, 2001). Finally, three limits to growth inevitably arise in the final stage of rethinking the organization to accommodate widespread change: 8. Governance. As pilot groups expand their reach, governance of the organization may have to be modified to allow those groups to continue to flourish. Its important that the pilot groups pay attention to boundaries and be strategic when crossing them. They must articulate the case for broader change in terms of business results and learn to internalize the pressures facing organizational leaders. Its also valuable to experiment with cross-functional, cross boundary teams, if the change leaders can get them sponsored by the hierarchy (Senge, 2001). 9. Diffusion. Roadblocks will be met in the attempt to spread the change to the entire organization and its partners. The change team must value network leaders who can carry the new ideas to other parts of the organization. They must study the web of interaction within the company and identify 104

groups that can help to disseminate the change. Information about the new innovations should be widely released and attention should be paid to designing effective media for internal information exchange (Senge, 2001). 10. Strategy and purpose. The new ideas about strategy and purpose emerging from the pioneers must find a way to help the organization reinvent itself in a changing world. Its helpful to use scenario thinking to investigate blind spots and signal unexpected events that could derail change. The assumptions behind the current strategy must be exposed and tested. Leaders must engage others continually in discussions around organizational change and purpose. Thirty years ago Gregory Bateson a biologist, anthropologist, psychologist and pioneering systems thinker said the source of most of our problems is the difference between the way man thinks and the way nature works. By understanding the forces surrounding change projects what propels them and what hinders them managers are more likely to be successful (Senge, 2001).

5.3 Obstacle to Systems Thinking

Concerning the Systems Thinking, the discipline that P. Senge (1994) describe like the ability to see the big picture, we can found, thanks the book of the Mella (2012) in Systems thinking Intelligence in action, seven obstacles to the rapid and wide-scale assimilation of Systems Thinking. These seven impediments have been resented by Barry Richmond who divided them into two classes, the first are fundamental impediments, the second are situational. I believe that there are seven major impediments to the rapid and wide-scale assimilation of Systems Thinking. I have divided the seven into two classes, the first are fundamental impediments, the sec-ond are situational, although the compartments are far from hermetically separated. Fundamental impediments arise out of the way things are; i.e., the nature of objective reality, and the legacy of our biological heritage. To the extent that things really are the way you perceive them to be, and that intentionality can exert some influence over biology, we have some power to lessen these fundamental impediments. Situational impediments, on the other hand, are those that we, ourselves, largely create. This implies that we can directly do something about them. By altering our behavior, the form of our institutions, the way we do business, we can do much to eliminate the impediments in this class. Personally, I

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am optimistic. I feel there is much that we can do to remove the barriers to wide-scale adoption of Systems Thinking (Richmond, 1991. p. 3). Here, the Fundamental impediments: 1. First Impediment: we are all prisoners of our own frame of reference. We consume most of our time right up against reality and interact locally in certain parts of the web. 2. Second Impediments: almost all our daily experience look, as they unfold, as an open loop; that is, they do not seem to derive from ongoing continuous process. This, in turn, help us to view ourselves as respondents to rather than as creators of. 3. Third Impediment: the true essence of Systems Thinking is the ability to understand relationships and not the objects. For this, a considerable effort is needed, more than that required to simply open our eyes and allow the appropriate chemical receptors to be stimulated. This additional requirement, in particular during the start-up phase, symbolizes the third impediment to the adoption of a Systems Thinking. 4. Forth Impediment: in the last quarter of a critical year, when there are only two weeks left to put the balance sheet in order, there will not be a large enrolment in Systems Thinking seminar. The problem is that for too many people in too many organizations it is always the last quarter of critical years and there are always only two weeks left. Systems Thinking remains merely curiosity: something to investigate sometime soon (Mella, 2012). These one, on the other hand, are the Situational Impediments 5. Fifth Impediment: the first situational impediment to the assimilation of Systems Thinking is the lack of technical expertise. Until we liberate ourselves of our math anxiety and technological phobias, Systems Thinking will largely remain on the shelf. 6. Sixth Impediment: people oppose Systems Thinking because it can be threatening, and in various ways. People who rely on a monopoly of information, specific technical expertise, or well-defined turf boundaries to defend their sense of personal power will, as a result, find Systems Thinking threatening. 7. Seventh Impediment: before a person accept a systems perspective he must feel he is up to the task. It takes courage and strength to believe you can influence the way a systems functions. Systems Thinking scare individuals who have no true conviction of being capable of influencing a system (Mella, 2012).

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Then, Richmond, develops three areas to facilitate the adoption of Systems Thinking (Mella, 2012): First area: as personal computers become more powerful and more widely available, there will be an increase in the capacity to produce the simulated experiences that allow us to stand far enough back to see the trees and the forest. Second area: the formal education; there is a need for courses, at all levels, that deal with the similarity among the various disciplines rather than courses that bring out the differences. Not enough time is dedicated to exercising the intuition of people for the whole. Third area: organizations that operate under the assumption that power flows from the top down will remain adoption of Systems Thinking. At the same time, those working inside these organizations will feel little need for Systems Thinking and lack a sense of sufficient expertise to adopt this framework. Only in organizations where people really do, and are aware that they do, have an influence will Systems Thinking take root. We must search out these organizations. It is there where our efforts to implement Systems Thinking must be concentrated (Mella, 2012).

5.4 New Knowledge stickiness

Prior work highlights subtle processes by which institutionalized knowledge impedes the assimilation of new knowledge. Systems of resource allocation, information and communication constrain the free flow of intuition and interpretation, such that opportunities for learning may not be recognized (Crossan et al., 1999 cit. in Zietsma, Winn, Branzei and Vertinsky, 2002). In most organization, executives chose to stay entrenched in past practices in the face of direct pressure and arguments for alternatives, even when that decision proved costly. Executives separated themselves from environmentalists pressure by discouraging discussion of such pressures (Zietsma, Winn, Branzei and Vertinsky, 2002)37. The ability to transfer best practices internally is critical to a firm's ability to build competitive advantage through the appropriation of rents from scarce internal knowledge. Just as a firm's distinctive competencies might be difficult for other firms to reproduce, its best practices could be difficult to imitate internally. Yet, little systematic attention has been paid to such internal stickiness. Szulanski (1996) in the article Exploring Internal Stickiness: Impediments to the Transfer of Best
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Zietsma, Winn, Branzei and Vertinsky, The War of the Woods: Facilitators and Impediments of Organizational

Learning Process, Journal of Management, Vol. 13 ,2002

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Practice Within the Firm38 examines internal stickiness of knowledge transfer and tests the resulting model using canonical correlation analysis of a data set consisting of 271 observations of 122 best-practice transfers in eight companies. Contrary to conventional wisdom that condemns primarily motivational factors, the study findings show the major barriers to internal knowledge transfer to be knowledge-related factors such as the recipient's lack of absorptive capacity, causal ambiguity, and an arduous relationship between the source and the recipient. Internal transfers are typically slowed by confidentiality and legal obstacles than external transfers, they could be faster and initially less complicated, all other things being equal. For those reasons, in an era when continuous organizational learning and relentless performance improvement are needed to remain competitive, companies must increasingly resort to the internal transfer of capabilities (Szulanski, 1996). The notion of internal stickiness connotes the difficulty of transferring knowledge within the organization. The ease or difficulty of transferring technical knowledge is reflected in the cost of a transfer. Von Hippel (1994) introduced the notion of 'sticky information' to describe information that is difficult to transfer, stickiness being reflected in the incremental cost of transferring the information (Szulanski, 1996) Cost, eventfulness and internal stickiness Cost could be a poor descriptor of difficulty according to Szulandski (1996): 1. First, determining exactly which portion of the cost of a transfer actually reflects difficulty the incrementis a matter of conjecture without a base casethe cost of the same transfer without such difficulty. Systematically constructed base cases are rare, and past experience in transferring knowledge might be inadequate as a base case if prior transfers are not equal to the one under scrutiny. Moreover, experience is likely to be distorted by faulty memory, ex post embellishment of past events, and non-comparable transfer cost accounting. 2. Second, cost might fail to discriminate between problems that are equally costly but qualitatively very different. Some problems are resolved routinely or by pre-specified contingency plans with relatively little effort from all but the most directly involved participants. Other problems involve participants whose attention is not normally required,

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Szulanski G., Exploring Internal Stickiness: Impediments to Transfer of Best Practice Within the Firm, Strategic

Management Journal, Vol. 17,pp. 27-43, 1996

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such as senior managers, to expedite the identification of possible solutions and explicitly coordinate their implementation. This second type of problem is likely to engage, and thus be noticed by, a broader range of participants. This second type of problem is also likely to be remembered as being relatively more difficult to resolve, at least by those who could not cope with them without assistance. Hence, problems that participants cannot manage on a routine basis are likely to evoke the greatest overall perception of difficulty. Whether or not problems are objectively difficult to resolve matters little because perceptual processes, not objective properties, influence organizational behavior. The perceived difficulty of a problem for the individual is what determines his or her reaction to it (Szulanski, 1996). Therefore, transfers that concern the most non routine problems will be understood as the most difficult, other things being equal. This implies that the notion of eventfulness, the extent to which problematic situations experienced during a transfer are worthy of remark, is conceptually connected to the notion of difficulty. Eventfulness has a universal base case: a transfer that is not at all difficult is unremarkable, is uneventful. The implication is that an organization equipped with effective routines to handle all aspects of a transfer is unlikely to consider that transfer sticky (Szulanski, 1996). Eventfulness could be explained into an outcome- based descriptor of stickiness. If an organization has effective routines to handle all aspects of a knowledge transfer, it should be able to describe milestones, budgets, and expectations for the transfer process rather accurately. To the extent that the transfer tums out to be sticky, requiring ad hoc solutions, some of those milestones are likely to be missed, budgeted cost will be exceeded, and some of the participants' expectations about the transfer will not be fully met. As in the case of cost, the outcome-based descriptor necessitates the specification of a transfer specific base case in the form of ex ante expectations (Szulanski, 1996). A transfer-specific base case is not necessary, however, if the descriptor of stickiness is based on the process rather than the outcome of the process. Unifying the notion of eventfulness with the stages model presented in the preceding section provides four different descriptors of stickiness, one for each stage of the transfer. The process model that the author suggests, encountered the problems as the transfer unfolds will show changes according to the stage of the transfer. During the initiation stage, problems will originate from efforts to identify needs, identify knowledge that meets those needs, and assess the feasibility of the transfer. During the implementation stage, problems will indicate efforts to bridge 109

the communication gap between the source and the recipient or to adapt the practice to the recipient's needs. During the ramp-up stage, problems will indicate the struggle to achieve satisfactory performance. Finally, during the integration stage, problems will indicate efforts to achieve and preserve routine use of the new knowledge in the recipient. The more these problems require participants to develop ad hoc solutionsthat is, the more remarkable the problems arethe higher will be the perceived eventfulness of the transfer (Szulanski, 1996). The characteristics of the knowledge transferred written by Szulanski (1996), are: Causal ambiguity Modeling a capability as a production function; difficulty in the replication of a capability is most likely to emanate from ambiguity about what the factors of production are and how they associate during production. When the precise reasons for success or failure in replicating a capability in a new setting cannot be determined even ex post, causal ambiguity is present and it is impossible to produce an unambiguous list of the factors of production, much less measure their marginal contribution. Key to their argument is the notion of irreducible uncertainty; the undefinable portion of knowledge is incorporated in highly tacit human skills. Tacitness could also be a property of collectively held knowledge and it is often singled out as a central attribute of knowledge with respect to its transferability. Causal ambiguity could also result from imperfectly understood of the new context in which knowledge is put to use (Szulanski, 1996). Unprovenness Knowledge with a proven record of past usefulness is less difficult to transfer. Such a record hints of robustness and helps in the process of selecting knowledge for transfer. Without such a record, it is more difficult to convince potential recipients to engage in the transfer and to legitimize controversial integration efforts (Szulanski, 1996). The characteristics of the source of knowledge according to Szulanski (1996), are: Lack of motivation A knowledge source may be reluctant to share crucial knowledge for fear of losing ownership, a position of privilege, superiority; it may resent not being adequately rewarded for sharing hard-won success; or it may be unwilling to dedicate time and resources to support the transfer (Szulanski, 1996). Not perceived as reliable 110

An expert and trustworthy source is more likely than others to affect the behavior of a recipient. When the source unit is not understood as reliable, is not seen as trustworthy or knowledgeable, initiating a transfer from that source will be more difficult and its advice and example are likely to be challenged and resisted (Szulanski, 1996). The characteristics of the recipient of knowledge designed by Szulanski (1996), are: Lack of motivation The reluctance of some recipients to receive knowledge from the outside is well documented. Lack of motivation may result in foot dragging, passivity, feigned acceptance, hidden sabotage, or outright rejection in the implementation and use of new knowledge. Lack of absorptive capacity Recipients might be unable to utilize outside sources of knowledge; that is, they may lack absorptive capacity. Such capacity is largely a function of their preexisting stock of knowledge and it becomes manifest in their ability to value, assimilate and apply new knowledge successfully to commercial ends. Lack of retentive capacity A transfer of knowledge is effective only when the knowledge transferred is retained. Evidence from studies of innovation and planned organizational change suggests that persistence cannot be taken for granted. The ability of a recipient to institutionalize the utilization of new knowledge reflects its 'retentive' capacity. In the absence of such ability, initial difficulties during the integration of received knowledge may become an excuse for discontinuing its use and, when feasible, reverting to the previous status quo (Szulanski, 1996). And finally, the characteristics of the context that Szuanski (1996) consider the most important, are: Barren organizational context Intra-firm exchanges of knowledge are embedded in an organizational context, the characteristics of which may affect their gestation and evolution. Like a plant, a transfer that disclose fully in one context may grow poorly in another or stagnate in a third. An organizational context that facilitates the development of transfers is said to be fertile. Conversely, a context that hinders the gestation and evolution of transfers is said to be barren. Prior research reveal that formal structure and systems, sources of coordination and expertise, and behavior-framing attributes of the organizational context influence the number of attempts to transfer knowledge and the outcome of those attempts (Szulanski, 1996). 111

Arduous relationship A transfer of knowledge, especially when the knowledge carried has tacit components, may require numerous individual exchanges (Nonaka, 1994). The success of such exchanges depends to some extent on the ease of communication and on the 'intimacy' of the overall relationship between the source unit and the recipient unit. An arduous (i.e., laborious and distant) relationship might produce additional hardship in the transfer (Szulanski, 1996).

Recently, more and more attention has been paid to organizational learning issues. However, the gap between academic research and reality is still large at present. To meliorate organizations performances, one has to facilitate organizational learning as a whole. That is, the focus should be the whole organizational learning system, not merely the individual organizational processes. An organizational learning system consists of more than static relationships between organizations and individuals. The interlocked relationships among various organizational learning processes are more important than the learning processes themselves (Showing, Yi-Ming, Ya-Tsai, 1999).

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CHAPTER 6
Case Study Analysis

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6.1 Hanover Insurance Company

W. OBrien, as Chief Executive Officer of the Hanover Insurance Company, passed twenty years refining his companys vision, value, and sense of common purpose. Since retiring in 1991, he has passed much of his time helping other organizations do the same, in fact, he is now a member of the board of governors of the Center for Organizational Learning at MIT (Senge, 1994). Most people with which OBrien talk about business today, agree that extraordinary changes are taking place in the business universe. These changes go beyond an imbalance between supply and demand, or the advance of new technology. They represent an adjustment to far-reaching forces, including an evolution of the global work force that is unprecedented in history. In the period which we might call the modern industrial technology age
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there were several driving forces behind the

success of every winning company. The most important was efficiency of manufacturing; the ability to mass-produce, specialize work, and cut every cost down to the smallest tenth of a percent. Second, the winning companies learned to be effective mass marketers. A third attribute was rapid adoption of technology, and fourth was financial acumen, the ability to study activity in detail, determine how to get the best rates of return, and keep capital moving. The fifth driving force was a set of elementary people skills, which companies improved through sincere efforts to move from Douglas McGregors Theory X to Theory Y. All these forces gave momentum to the wave o f modern industrial technology (Senge, 1994). Now, a new wave is forming: the beginning of a twenty-first-century era which is yet unnamed. It is difficult to see the potential of that era if you are CEO of a major corporation (or of any organization), because right now, we are at the bottom of the trough. No one knows what their industry is going to look like at the top of the next wave, in the next century. If you are in assurance, my own business, you dont know how the legal and regulatory situation will modify: if you are in manufacturing, every aspect of global competitiveness, trade, and technology is uncertain. For any group of people charged with corporate governance, it would be like playing Russian Roulette to base your business on any picture of what is going to happen during the next curve. If you think you can figure it out, then I suggest you are in dire need of humility (Senge, 1994).

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the time from 1920 to 1990, when Ford, General Motors, Du Pont, and many other large corporations were growing

up.

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Instead, the only prudent thing one can do in this position is to ask oneself, what are the preconditions to manage this change?. Personally, I bet that four abilities will be necessary. I dont say there are only four; nor I am sure they are the right four. But they are the four I bet on: The first is learning how to disperse power on an orderly, no chaotic basis. Right now the word empowerment is a very powerful buzzword. Its also very dangerous. Just granting power, without some method of discipline and order that come out of a command-andcontrol bureaucracy, produces chaos. We have to learn how to separate power so that selfdiscipline can largely replace imposed discipline. That involves us in the area of culture: replacing the bureaucracy with aspirations, values, and vision (Senge, 1994). The second attribute of winning companies will be systematic understanding. In the insurance industry, we have extensive information, large computers, and smart actuaries spreading risk; but when we put them all together, nobodys gratified with the way the automobile insurance system is working. Were good at the type of problem which gives itself to a scientific solution and reductionistic thinking. We are absolutely uneducated in subjects that require us to understand systems and interrelationships (Senge, 1994). The third attribute that twenty-first-century companies will need is conversation. This is the single greatest learning tool in your organization- more important than computers or sophisticated research. As a society, we know the art of small talk; we can talk about how the Red Sox are doing or where we went on vacation. But when we meet contentious issueswhen there are feeling about rights, or when two worth-while principles come in conflict with one another- we have so many defense mechanisms that prevent communications that we are absolutely terrible. To pilot this enormous change we are going through, a corporation must become good at conversation that isnt polite (Senge, 1994). Finally, under our old system of governance one could lead by mandate. If you had the ability to rise the ladder, gain power, and then control that power, you could enforce these changes in attributes. But the forthcoming kind of company is going to require voluntary followership. Most of our leaders dont think in term of getting voluntary followers; they think in terms of control.

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1920 1990 Efficient manufacturing Effective mass marketing Rapid adoption of technology Financial acumen Theory Y

1990 the Future Distributing power while increasing self-discipline Systemic thinking skills as well

developed as reductionistic skills Improved conversation Voluntary followership

The abilities on the left of the chart will continue to be important. The bureaucratic way of life, after all, has done a great job in raising our material standard of living and alleviating us from the oppression of hard, physical labor (Senge, 1994). But I dont think the new attributes will be a fad. Their essence, when you cut through all the propaganda, is marrying together individual growth and economic performance. You can never divide them. If you try to walk down road without the other, you will not build a great organization. for me, personally, one of the turning points was the day I had to say to myself: What do I want to do with the rest of my life? Do I want to spend it coping with politics and other organizational diseases- or do I want to spend it working on building a great organization? (Senge, 1994, p.15).

6.1.1 Story of a Learning Organization

This story of a business turnaround is also a story of organizational and personal transformation.1 New leaders encouraged a moribund business, Hanover Insurance, by emphasizing ideas, purpose, and values in order to engage and energize employees. Significant improvements in business results were seen after only one year and continued to accelerate for more than 20 years. During these years, Hanovers top leaders continued to promote change processes, based on their conviction that fuller u se of their employees human potential was the key to their business success. They had an equal conviction that the typical work environment of bureaucratic mediocrity, office politics, and lack of work satisfaction was anathema and ethically unacceptable. This case is about change management, human resources as a strategic key, leadership, transformation, and ethics (Sugarman, 2001)40.
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Sugarman B., Twenty Years of Organizational Learning and Ethics at Hanover Insurance: Interviews with Bill

OBrien,2001

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In 1969, Hanover Insurance was one of lowest performers in its field, a company resting comfortably at the bottom of the industry. But by 1984, it had risen to the top quartile. President Jack Adam, appointed in 1969, and his new vice president of marketing, Bill OBrien, had spent 10 years developing what they later called a values-based culture and reviving business performance dramatically. OBrien says, We redesigned the culture from one that was command and control to one that was vision -driven and values-based.(Sugarman, 2001, p.1). By 1979, when OBrien took over the role of president, Hanover had been consistently outperforming the industry average during the previous decade. The bad news was that the whole industry was entering a very difficult period due to the tort explosion, with courts making large, escalating damage awards against insurers. However, the good news was that Hanovers continued creative efforts to make still deeper changes during the next decade conduct to an increased lead over its competitors (Sugarman, 2001). Facing this additional challenge, in its second decade of change, Hanover began making serious use of systems thinking instead of just traditional problem-solving by linear cause-and-effect thinking. In 1982, OBrien met Peter Senge; the two learned much from each other. Senge taught Hanover to apply systems thinking to managing its tough business problems, and OBrien and Hanover showed Senge what a real learning organization looked and felt likeand what was required to cultivate one (Senge, 1990). OBrien commented, The advent of Peter brought us on a journey to more learning, systems thinking, advanced work on conversation, and an introduction to scenario planning (B. Sugarman, 2001, p.1-2). In the article of Sugarman (2001), the story of this business turnaround is remarkable in several ways: First, as early pioneers, its leaders really did, in the old clich, make it up as they went along. There were no publications on organizational change management to help them. Through this pioneering work, OBrien gained a role as a founder of the learning organization. Second, the two principle leaders, Adam and OBrien, supported a sustained effort over two decades to explore and experiment with methods based on certain deeply held values and beliefs. Third, these change leaders were deeply dedicated to both profit and ethical values. They considered profit and values essential to each other. They did not start out with any such notions, however; they were pragmatists, not ideologues with a point to prove; businessmen with a company to save; and decent individuals with some firm ideas about good and evil. Says OBrien: 117

We didnt start out to create a culture or to be a learning organization. Our starting point was a high level of frustration at the waste of human talent. We thought that the politics, the bureaucracy, and all the bullshit was a bad environment for our people and that they were working at 30% of their mental and imaginative capabilities, quality of thinking, and spirit (Sugarman, 2001, p.2).

6.1.2 Intent of the Change Initiative

According to OBrien, the intent of their change initiative was to improve the financial performance of the company, to move from the bottom of the industry to become recognized for excellence. We didnt set out to build a culture that helped people to grow. We started out to make the company operate better, but we always believed that it would operate better if we had a culture that helped people to grow and that also served the customer. At that time, there was little business literature on the customer, and there wasnt the deep commitment to quality for the customer that there is today. OBriens thinking developed, fueled by his talks with Adam and endless conversations as he spoke to groups of employees about the importance of values and vision in the business. Later, in the interviews for this case study, OBrien clarified his thinking (Sugarman, 2001). While learning was important to him for building a stronger company, the quest for more virtue was his most important goal: I had a deep frustration with the way large organizations hired people out of school, full of ideals and energy to make a contribution, and, because of bureaucracy and organizational politics, the vast majority of them became empty shells, counting the days and years to retirement. I didnt think it was a learning issue; it was more a virtue issue. I thought it was too much politics, too much kissing ass, too much lying, too much putting spin on everything. Really enormous doses of selfishness and not just at the top, but my department versus your department. I saw the infections in the corporation as inferior virtue. So I looked for the eternal truths or values that would elevate behavior above those lower things. If we had a profile of the Fortune 500 companies, I think they would have both a virtue deficiency and a learning deficiency, but that the first would be much bigger than the second. My roots come from Christian beliefs and the street. My bias is that companies have a big need for values and virtue, because that can turn on the entire workforce (Sugarman, 2001, p.2).

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Goals of the Hanover Effort

At the start of the first decade, Adam and OBriens goal for Hanover was to be in the upper fourth of stock insurance companies, as measured by combined ratio, and to grow at 1.25 to 1.5 times the industry growth rate. At the start of the second decade, OBrien produced the goal to the upper quarter of all insurance companies (not just stock companies, but including the mutual insurance companies as well). Both Adam and OBrien were also dedicated to making Hanover a profitable business by making it a better companybetter in the sense of Aristotles virtuea company that people could feel good about working for. Success, for them, was defined as achieving both goals. In 1985, Adam stated, More than anything else, I wanted to lead in the creation of the kind of company I had always wanted to work for and never could find. I wanted to help build a corporate family where we let people use all their abilities, where we let people help build an outstanding organization. I felt if we could build this kind of an organization, we could attract able people who not only would grow and achieve their own abilities and desires, but would help others to grow and achieve (J. Adam, 1986 cit in Sugarman, 2001, p.3).

6.1.3 Methods for Enabling Learning and Change

The primary change agents at the beginning of the turnaround were Adam and OBrien. Their method at the beginning was to talk to employees about the purpose of the company, about values, and about visionthe leaders vision and what that meant to employees. At first, it was mainly teaching and preaching, but as they achieved more experience in engaging employees in these discussions, there was more give and take. The values and the company philosophy were inserted in classes and all kinds of meetings. In monthly bulletins to employees and annual reports, Adam and OBrien would also write frequently about values and how they applied (Sugarman, 2001). There was a good deal of trial and error. OBrien commented: In 1970, we didnt have a philosophy. The first thing we did was lay out a purpose. We had some people on a task force to talk about what the purpose should be. We would write about the purpose. Then for a period of time, we talked about a lot of principles, most about fighting the diseases of politics and bureaucracy. We said, for example, that Human judgment should always transcend procedures. If the procedure guide says do X, and youve thought about it and you think A is better, then do A. We had about 25 slogans like this. Another was, Substance will always transcend 119

appearance. People were asking themselves, whats the slogan this month? These things werent coherent or connected. So in 1978, I took a couple of days off, sat down with a big accounting pad, and put things across the top and the bottom. I reduced these things to the seven values that we stand for. Jack liked them but was afraid we might be getting too far ahead of the troops. He said, Why dont you take them to the next direct-report meeting and try them on the group? I got a long, respectful silence, but not approval. I let it drop. I didnt know what to do. In subsequent meetings, whenever wed get to knotty issues, people would say, That comes back to what you talked about a couple of months ago, Bill. Its those values. So we scheduled another damn presentation, and they coalesced around the idea. Thats how we got those values: merit, openness, localness, leanness, what we believe about people, responsibility to the insurance agents, and responsibility to the customers. (Sugarman, 2001, p.3). Later, other change agents were transported on board. Chris Argyris was the first outside consultant and the only process consultant. His work was about conducting more effective conversations. Peter Senge, the second consultant, was an expert on systems thinking. Later, Lee Bolman (an expert in organizational culture) and others managed extensive training sessions, especially a three-day course called Merit, Openness, Localness. Living with a value of Merit meant making every decision in the company on the basis of what would get the best results, not on the political clout of the advocates of any position. Anybody can intellectually grasp merit and agree on its value. The trick is internalizing it in the way the organization behaves. Senior managers had to show we really meant it, even when our own positions were at stake, and practice it through an extensive period of cynicism, which lasted for years (Sugarman, 2001). Our value of openness came in three dimension. The first referred to our relationship with outsiders. OBrien had worked in four companies before Hanover, and had seen firsthand how frequently the reports to shareholders were not forthright interpretations of actual performance. A growth rate might be 3 percent, but it was characterized as record-breaking, because sales were higher than the previous year. Not only did the shareholders tend to see through this, but is also made it impossible for employees to trust us. At Hanover, starting in the 1970s, we sent the same report to front-line managers as we sent the board of directors, with no spin on the news (Sugarman, 2001). At Hanover, in the 1980s, we began using the company magazine to describe the rules of the insurance industry. We placed a bulletin board in the lobby, and posted the most relevant financial statistics for the forty largest insurance companies. But we also need a sense of openness in our conversation. We 120

were first showed to the skills of balancing inquiry and advocacy in the late 1970s when Chris Argyris visited. Jack Adam set up a meeting with twelve of his direct reports, and within ten minutes, Chris had described how different our espoused values were from the value which governed our behavior. Ultimately, Hanover determined a permanent course which we called merit, openness, and localness, in which more than 1500 managers were trained in skills to enhance open conversation. The third key value, localness, did not represent a geographic concept. It was based on the principle of subsidiarity: that a higher level should not make decision for a lower level, if the lower level is capable of making the decision itself. This is a very smart principle. It suggests that the role of people at the top is to make the people who do the work self-reliant, not dependent. If you intervene from the top, the burden of proof is on you to show why the intervention is necessary. All professional and managerial employees were eventually included. OBrien commented: We did a lot of education, not just on technical insurance. It included the skills of effective conversation and critical thinking (along the lines taught by Argyris). I have found very few executives who can get up and talk about ideas. We developed a group of executives (particularly Jack and myself) who were constantly explaining the ideas behind the company. And we wrote a lot about our philosophy and how it applied to current issues. (Sugarman, 2001, p.3). Behind these methods lies OBriens belief in the power of ideas and his frustration that too many companies are governed by mediocre ideas. (Sugarman, 2001, p.4). In the first decade, there was no philosophy department. But, in 1981, Hanover hired a vice president of philosophy (Tom Grimes). He taught systems thinking and thinking about thinking (drawing from a course on Eastern and Western thought by Professor John Becket at the University of New Hampshires Whittemore School of Business). Later, the philosophy department included three people. OBrien commented: We were constantly running people through one-, two-, or three-day workshops in their offices all over the country. By the mid-eighties, it was right down to the toenails of the company. We came back to the values and vision in every major meeting. And we walked the talk. For example, leanness meant that I traveled coach; openness meant that when we had bad news, we told it to the employees. There was no spin put on messages to our customers or our agents; we talked straight. The process was informal, but it came down to preaching and practicing. Whenever there was a meeting, we always came back to What is our vision? What are our values? How does our purpose tell us what 121

to do? At first, people thought the philosophy was separate from the business; we had to struggle to integrate it. One of the jobs of the CEO is to make sure the music has got all its parts and instruments, including the cultural ones, the values. Otherwise, the drumbeat of budgets and so on will dominate the music of the company. If all the meetings are about financials, all the music about culture and uplifting people will disappear. Bringing in a consultant to do an offsite wont do it. The CEO has got to maintain the meld of the ennobling corporate principles in the corporate diet. He can believe it and want it, but if he doesnt build in that subject, melded with the sales, finances, and engineering, it wont happen. (Sugarman, 2001, p.4). What anchored these efforts for OBrien was his strong sense of what was wrong with the situation: Back in 1971, everyone took a warped version of Adam Smith and imagined that maximum greed would work out the best for the common good. The only stakeholders were the stockholders. We were one of the first companies to challenge that [Adam, 1973]. I remember that we got some negative stockholder reaction. But we thought that if we had an ennobling purpose, something of interest to the employees, it would make our company more purposeful. Our expectations were exaggerated. People initially had a favorable reaction but it didnt really change behaviors. When I became president in 1979, I was frustrated because purpose was not tapping in as much as it should, even though the company had improved quite dramatically since 1971. I talked to every single employee in the company in groups, and I laid out my vision for Hanover where our roots had been, the current reality, how we stacked up against competitors. Then I talked about my dream. When I was done, I said, Its not my dream thats important. It gets me out of bed each morning to go to work to build what I want to build, but it doesnt do anything for you. I encouraged them to work on their vision. It was the first time we extended our purpose to vision, as an important ingredient to get people to become purposeful. At the same time, we had identified the diseases and adopted the values, which in effect were antibiotics to the infections. Those two things, vision and values, gave us a culture that brought people to a point where they could implement what we already knew, better than our competitors. At that point [1982], when we were getting to be a mature, vision-driven, values-based company, I met Peter Senge. The industry was running into problems that no one had figured out, and the old, linear cause-andeffect mentality was producing painful, unintended consequences. (Sugarman, 2001, p.4).

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What OBrien had founded was that other learning methods would be needed to continue Hanovers growth toward fulfilling his aspirations and becoming more of a learning organization. He continued: I saw the potential of systems thinking helping us to arrive at a deeper understanding of complexity and hence to making better decisions. What I remember clearly is a series of people I met, Peter Senge, Jay Forrester, and John Beckett. Peter brought in this guy from Digital, a former academic who understood systems thinking. And he took us through an issue that his division was handling up in New Hampshire using systems thinking. And I said to myself, My god, its so much clearer. If I took it to the second step and asked, Now, how do I use systems thinking to make better decisions so I can make money? I probably couldnt answer it. But I valued that more complete understanding of complexity and I had faith that if I understood more about the complexity that my competitors and I were facing, I would eventually have a competitive advantage. I think that was the difference between me and some other people who were exposed to systems thinking. Its like learning to diagram a sentence in the fifth grade and mastering the English language. Thats half the battle of lifelearning the language. I had that faith that if I could see the problem clearer than my competitors, I would come up with better answers. Half of what we learned [in systems thinking] wasnt how to solve a problem; it was how to avoid making it worse. (Sugarman, 2001, p.4-5). The role that systems thinking had in the success of Hanover is deep and subtle, according to OBrien. At one level, that role may be understood through the way it was utilized in the claims learning laboratorya computer- based simulator in which learners could prove with making decisions such as how much to spend on training claims adjusters, while they watched the effect of their decisions on other measures, such as quality of work and employee turnover (Hanover, 1986). This illustrates one way in which systems thinking helped Hanover people to understand better the systematic nature of their businessthrough concrete causal links between one element and another. At another level, however, the influence of systems thinking at Hanover goes deeper and is harder to define (Sugarman, 2001). When the insurance industry faced the 1980s, with tort liability explosion, escalating litigation and losses, conflict, and profound imbalance, a significant number of Hanover people were able to see it as a system in upheaval, without demonizing other players. They were also able to see fresh business opportunities in the turmoil; for example, Hanover became the administrator (contracted to the state) of the newly swollen assigned risk pools of high-risk (undesirable) insured in Maine and New Jersey. 123

The Hanover managers at the state level (not head-office hot shots) were successful in two ways: along with conceiving entirely new lines of business, they succeeded in winning the trust of top state officials and were awarded (and re-awarded) very large (and profitable) contracts. OBrien thinks there was something special about the systems thinking mind-set the Hanover managers had cultivated. Beyond the greater clarity it gave them to see the systemic links, it seems that the bigpicture, no parochial systems view can position people differently in relation to their world. It can take a person beyond the narrow assumption that my position is myself and out of the prejudiced view that everyone whose behavior is not favorable to my interests wishes me harm. The systems thinker perceives that many consequences are not planned or even expected by those who cause them, so he or she is less inclined to blame or demonize other players. OBrien does not care to call this a modified way of being, but he would call it an aura that can make people more attractive partners in a high risk venture where trust is essential. He thought that the contribution of systems thinking can go beyond improved cognitive insights; He is identifying a force moving in the realm of ethics (a less selfcentered view of the world) and in the realm of ontology the being word again (Sugarman, 2001). Returning to his historical overview of the Hanover transformation, OBrien explicated how systems thinking arrived at the company: Our vision and values approach had enabled us to execute effectively what we already knew, but it did not help us to figure out the divergent issues. That required the application of systems thinking. When I met Senge and learned about systems thinking from him, we each saw that the other had the missing piece (the truth) that he had been seeking. I needed what he had, and Senge admired greatly the workplace culture at Hanover. We got very excited about the idea of learning and the idea of augmenting linear thinking. Senge gave us scaffolding on which we could formalize systems thinking. He, in turn, became intrigued with our culture. He came into our company and found that it had a learning atmosphere. He told me that in most companies, he would spend two-thirds of the day cutting through the games and all the crap, but here we open a conversation and people are right into it. That was the beginning of the second decade. We were both ready. (Sugarman, 2001).

6.1.4 Transformation
Asking to OBrien what specific shifts in work processes and practices, such as changes in meetings, goal-setting, or performance assessment, had happened. He replied: 124

When a company transforms itself, 90% of that transformation takes place inside the people and 10% is process change and reorganization (Im pulling these numbers out of the air). In defining the inn er change in people, we could use Argyriss ground rules for conversation: dont engage in a conversation to win; engage in it to genuinely learn; dont forget to inquire into what other people think; dont just advocate your views, as managers tend to do; decision making should be free of political paint, that is, self-interest. The natural, innate being of people is generally good, but if you take a culture that reinforces being good, its even better. Part of that is recognition and part is social stigma. We didnt intentionally put it in there but if somebody was in a session and they are obviously negotiating for their self-interest or their turf, they worry about what their peers are thinking about them. We had established certain standards that disapproved of that kind of politics and bureaucracy. There was an expectation of a certain level of behavior, and managers felt it.(Sugarman, 2001, p.6). The creation of this company culture that OBrien illustrates, reinforcing social norms and expectation s that support the behavior and thinking patterns of a (virtuous) learning organization, represents an enormous accomplishment. The new culture that supports learning acquires a forward momentum of its own, as he describes in the next section (Sugarman, 2001).

Changes in Processes or Practices

OBrien had more to say about process change: When we started adopting Argyriss principles, emphasizing inquiry as well as advocacy, thinking in terms of learning rather than winning, the change in process or practice happened. When we adopted localness and took out some of the management levels and reallocated authority, that was a change in process. And, in personal growth. It was all evolving. The intellectual current in the company was so much higher by 1980 than it was in 1970. The conversation in the seventies was about what the rule books said to do. The conversation in the eighties was: What are the unintended consequences? What are the implications? After being educated in conversation and critical thinking, people started thinking, This company really cares about me. Im having richer conversations with my wife, my kids. I read the paper and I see issues more clearly than I did before. But for some employees, the re was an unfortunate side to this culture change. When the intellectual currents got faster, a fair number of people didnt want to take the risk. Over time, they decided to leave, or they were asked to leave. When you had a company in the seventies that 125

was a political, bureaucratic environment, it was a pick-and-shovel, one-by-one job of getting people turned on. Then in the middle eighties, we were hiring people who just picked it up from the person sitting next to them. There was an osmosis effect. I couldnt understand why it had been so hard to get people on board ten years before. They thought it was terrific; they really had the words and the music. That was the difference between the seventies and the eighties. (Sugarman, 2001, p.7).

Diffusion of Culture
OBrien discussed the change in culture: In the early seventies, the philosophy got kind of bottled up in the home office, and the further you were from the home office, the less people understood it. In the late seventies, the general managers, especially those in the home office, had an intellectual grasp of the subject, and theyd go out to the branches. Theyd be the only people in the branches who knew the philosophy, but not deeply enough to be good missionaries. Later, our philosophy department would send in supervisors. The name philosophy department began as a joke or nickname but soon it became standard usage around the company. Pretty soon we were getting a critical mass in Chicago, in Oklahoma, in Texas. If I were doing this again and had the capital, I would have done it earlier. Back then, this was all experimental. Top managers take almost a year to get comfortable with the extent of change from command and control. By 1981, we were confident that we had a mature, values-based, vision-driven organization. (Sugarman, 2001, p.8).

Changes in Business Results

While the implications of this case apply to many industries and arenas, OBriens success depended on a significant extent on his understanding of the fundamentals of the insurance business. He explained: Combined ratio is the key business measure in insurance, a combination of what the company pays out in losses and overheadin other words, profit and loss on the underwriting. The insurance company also gets a free float of a lot of money to invest. So underwriting plus investment gives net profit or loss. During the years 1978 to 1993, McKinsey & Co. tracked the property and casualty business on combined ratio. It considered us as one of the nine great underwriting companies, in the upper quarter of the 36 companies measured. Of that nine, six had already been in that group at the start. We were

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one of three that entered that select group, and we did it coming from the bottom of the industry. (Sugarman, 2001, p.8). Hanover annual reports give additional data that documented significant improvements in performancenot merely relative to the companys own baseline, but relative the industry as a whole. Hanover consistently meliorated its performance ranking relative to its competitors over this 20-year period. Starting at the back of the pack, it moved up to average, then moved well ahead of average, up into the top quartile. In the five years before 1969, Hanover was, on average, 5.5 points worse than the industry average. By the early 1970s, Hanover began to outperform the industry by consistently widening margins. From 1983 to 1986, Hanovers consolidated ratio was 6.6 points better than the industry average. In 1970, the stock was about $4 per share; when OBrien became president, it was $5.76; when he left it was $39. By contrast, The Travelers stock price stayed flat. The market capitalization of Hanover extended from1969 to 1986 by 1,783%, while the average rate for all property-casualty companies during the same years was 779% (Hanover, 1986).

Causes of Success
The Hanover data are convincing evidence of its success. The company had meliorated its business performance dramatically. From 1978, its growth rate outpaced the industry average. Not only did it make more profit and build up its capital worth year by year, but it meliorated its standing relative to other firms in the property and casualty insurance business (Hanover, 1986). This rules out the possibility that the meliorated results could be due more to the rising tide of an easier business environment than to internal improvements. Generally, performance standards in a competitive market drift upward. Just to maintain a relative standing, a company must improve at least as much as its peers. Hanover clearly did better at what it dideven more so than its peers. What gets the credit for causing that improvement? (Sugarman, 2001). In the first year after Adam took over, Hanovers results relative to the industry average meliorated noticeably. What causal processes could have worked so quickly? The refreshing effect of new leadership, with many visible changes in behavior and style after many years under a tired old regime?

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The energy, attention to employees, and optimism of new management? Or fear of the new broom and higher standards? In the property and casualty insurance business, there is considerable delay between a change in the key success factors and a visible result, perhaps ten years. There is a long pipeline between meliorating the quality of underwriting and the resulting profitability of those policies; similarly, there is a long pipeline between improving the quality of customer service by loss adjusters and agents and meliorated customer retention and attraction of new customers because of the long delays between when policies are written (sold), when the stream of premiums is received, and when payouts are made. So should we attribute the acceleration in Hanovers improvement rate in the second decade to the power of improvements made during the second decade or to the delayed effect of first-decade changes? Or to some combination of these two and other factors, interacting in dynamic ways over time? (Sugarman, 2001).

6.1.5 Context
Some aspects of history and context may have helped to become the Hanover story. Adam and OBrien started the work of transforming Hanover. We were kindred spirits, says OBrien. He had no rivals among his peers for the role of change agent-in-chief and chief designer of a new philosophy to revitalize the company. Adam and OBrien were both business junkies (OBriens phrase), avid students of other businesses. Religion has had a strong role in OBriens life. He considers himself a Christian first; a capitalist second. He has directed to integrate his religious faith with his business lifea key to his considerable success. He achieved his business success, not in spite of his religion, but because of it. His 12 years of Catholic school education were the source of his values and his passion for virtue in the workplace and a major source of his whole approach to changing fundamentally the way Hanover was run (Sugarman, 2001). Asking to OBrien what is inside a person that causes him to conduct that kind of change, he explained: There are stages of growth. Theres a stage where you want to get established family, career. Then you get established and youve got to cross a line if you want to go to the highest stages, which are heavily centered around legacy, leaving a better world, becoming more other-centered and less selfcentered. I had achieved a lot more than I ever expected, and I felt that my mission was to set a model for how work, life, and profitability could be married in a better setting. I never felt I was a

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troublemaker. I felt I was always playing within the boundaries, and I could prove that I could meet the business objectives by following values and my beliefs about the basic worth of the working person. I was fairly articulate about explaining it. I found bosses here and there who would back me. I found others I couldnt stand and I changed jobs. This is why Im a little bit passionate when I talk about virtue. Our problems in business and government are not because were not smart enough to cope with them. Its a virtue issue. The old, eternal capital sinspower, greed, lustthey get us in trouble over and over again. Business has an awful lot of power to make a difference. (Sugarman, 2001, p.9). OBrien is not pious about expressing his religious beliefs. He is mostly plainspoken and, once in a while, profane. Questioning him about the sources of his ideas about leadership, What kind of a fellow were you back when this was all beginning? Im trying to understand how someone comes to take on the challenge of making change. He responded: I graduated from high school in 1950, and I dont think I ever met a person in my social life who wore a shirt and tie, except the family doctor making house calls. All my friends fathers worked for the electric company or the bus company, and they were all people I respected. They were responsible people. So I always had respect for the person on the front line. I was only one generation removed from it myself. I knew they werent dumbos. The other life-shaping experience I had was the army. I went in as a private and came out as a corporal specialist. In those days, the army was very hierarchical, and I got a look at leadership from the followers side. We had military leaders who were just outstanding, and other guys who were terrible. I realized what happened to the terrible leaders; the troops screwed em. We had 24 hours a day to think about how to screw that guy, and he ended up with so many problems. He could only put a couple of minutes on each one. We outwitted him every time. The guys who came in and treated us with respect, who told us the truth, we put out for them. And you could see it in the army because they change around all the time. Shipped in, shipped out. A company can go from being a top performer to a disaster in 90 days. So I got a view of leadership that made a lasting impression. (Sugarman, 2001, p.9-10). OBrien had these firm views about leadership and ethics from early on. That he ended up in the insurance industry, rather than another one, was fortuitous. I tried to get a job at IBM, at Mobil Oil, at the telephone company, but I ended up at SafeCo, an insurance company in the financial district of New York City, he commented. Not because I loved insurance, but because I got down to the bottom 129

of the food chain. I started as an accounting clerk, then I got into billing systems, then underwriting, then marketing. The company did business through independent agents, and I wound up having a field of about 40 agents. (Sugarman, 2001).

6.1.6 Results and Reactions

The 20-year period of sustained, renewed improvement at Hanover was reached by unlocking the human potential of Hanovers employees. At the beginning, it was the personal vision of just a few people, but became the shared vision of many, supported by social norms and expectations (company culture). This transformation of a business, as investors or industry analysts would view it, could not have happened without the corresponding transformation of the people involved, both the rank-and-file employees and the leaders who instigated it. Later, observers called this culture change, and Hanover was featured in The Fifth Discipline as one of the pioneer learning organizations (Senge, 1990). But the leaders of this organizational change just wanted to make a successful business from a rundown insurance company rife with the usual pathologies of bureaucracy, company politics, bad attitudes, and despair. The leaders condemned the waste of human talent they saw; it violated their values and ethics, and they believed they saw how to fix both problems at the same time. It was harder than they thought and they found no guides or models to light the way. But they , to a remarkable degree (Sugarman, 2001). Hanovers parent company was State Mutual, a mutual insurance company; its chairmen during the 1970s and most of the 1980s had been strong, consistent supporters of OBriens philosophy of business. When the last one died in 1989, his replacement wanted greater control over Hanover and its assets. Hanover, a public stock company, was making 70% of the group profits. So the parent company chairman added five members to the Hanover board in order to secure his control. OBrien opposed this and resigned. In my heart, he says, I could not convince myself that the new regime was committed to continuing support for the values-based culture we had built up over 20 years. (Sugarman, 2001, p.10). This story is about installing more virtue in the business world, while giving better service to more customers, a more satisfying work experience to employees, and better returns to stockholders. The story is also about teaching the fundamentals of organizational learning by example (Sugarman, 2001).

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6.2 The SHELL case study

Shell has leveraged the concept of Learning Organization in its credo planning as learning (de Geus 1988). Faced with dramatic changes and unpredictability in the world oil markets, Shell's planners realized a shift of their basic task: We no longer saw our task as producing a documented view of the future business environment five or ten years ahead. Our real target was the microcosm (the 'mental model') of our decision makers (Henry)41. The evidence of Mental Models are the success that Royal Dutch/Shell (RDS). The company says that their success came from sharing mental about the company, the competitors and their markets, which resulted in the more common concept of scenario modeling. Other applications of mental models is to be able to anticipate a change in business activity and thus also change the mental model of the company among all employees. They re-conceptualized their basic task as fostering learning rather than devising plans and engaged the managers in seeking out the implications of possible scenarios. This conditioned the managers to be mentally prepared for the uncertainties in the task environment. Thus, they institutionalized the learning process at Shell (Herny). From the 1970s to the 1990s, significant environmental changes impacted all segments of the world of Shell. These changes called for internal changes in both the parent and its U.S. subsidiary. Throughout this critical period, Royal Dutch/Shell (RDS) remained profitable despite a downturn in industry profits. Its superior performance was its use of strategic organizational learning tools such as scenario forecasting. Through use of such technologies, Royal Dutch Shell has become known as a premier learning organization in its pursuit of understanding of trends in the global business/economic environment (Wood, Cortada, 2012)42.

6.2.1 Royal Dutch/Shell: Transformation to a Living Company

Arie de Geus, former coordinator of group planning for RDS, and leader in the development of scenario forecasting, has delineated the process as one in which management teams change their shared mental models of their company, their markets, and their competitors. Graham Galer of group planning

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at RDS and colleague Kees Heijden say, "Sophisticated decision making and forecasting alone fail to comprehend unexpected influences that come at a project 'sideways' - the unforeseen variables that do not arise in a standard mental model. Scenarios constantly rehearse possible pathways into the future and build sets of mental models through which managers can enrich the corporate one-track mind." Through the use of scenario forecasting and planning, organizations have started to view planning as learning and learning as planning (Brenneman, Keys, Fulmer, 1998)43. De Geus quotes a study by Ellen de Rooij of the Stratix Group in Amsterdam that indicates that the average life expectancy of all firms in Japan and Europe is only about 12.5 years. Yet the Stora Company of Sweden had its starting as a copper mine more than 700 years ago. And many other companies have lasted more than 100 years, including Shell itself. De Geus's conclusion is provocative: "Companies die because their managers' focus on economic activity of producing goods and services and forget that an organization's true nature is that of a community of humans" (Brenneman, Keys, Fulmer, 1998).

Royal Dutch/Shell dates back to the 1890s when its British founders started trading for the Far East Company. (Shell's name was derived from the fact that sea shells were used as money in the Far East). De Geus's book The Living Company emphasizes that only living entities learn, and like all living systems, companies too must continue to learn in order to continue to live. Shell planners, through examination of long-lived companies, discovered four common key factors: sensitivity to their environment; possession of a strong sense of identity; tolerance for new or different ways of thinking or acting (often associated with decentralization); conservative approach to financing (Brenneman, Keys, Fulmer, 1998).

Perhaps influenced by the thinking of de Geus, many planners today understand the work of business as shifting from one ruled by capital to one ruled by learning. The living company is critically dependent upon its institutional memory and its ability to anticipate the future. Longstanding companies excel at learning, at anticipating the future, and accommodating it through change.

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Systemic plans, based on forecasts from history, can be correct when times are stable. But since the world business environment is often turbulent and volatile, Royal Dutch/Shell evolved "scenario planning," an alternative tool for looking at the future. Anticipatory planners, such as those at RDS, write imaginary stories about the future concluding with multiple scenarios. Guided by such scenarios and aided by other organizational strengths, RDS comfortably endured the petroleum crisis of the 1970s (Brenneman, Keys, Fulmer, 1998). In 1968, Shell undertook a study of the year 2000, analyzing the question, "Is there life after oil?" One scenario improved was the possibility of $15 for a barrel of oil, a seemingly disastrous scenario in a world of $28-$30 for a barrel of oil (now is $96). When oil actually dropped to the $15-level Shell weathered the storm better than their competitors because they had prevented the possibility and made tentative plans for the downturn. Through scenario forecasting, Shell improved a team of highly diverse experts that brought varying knowledge to planning efforts (Brenneman, Keys, Fulmer, 1998).

6.2.2 A different kind of Learning at U.S. Shell

The dominant culture in an organization is difficult to change because an organization tends to perpetuate its thinking by self-selecting new members in its own image. While RDS in the 1990s had begun to select "systems thinkers," people who see current reality in an organization as only one of many possibilities for the long term, SOC (Shell Oil Company, a subsidiary) was heavily populated with "event thinkers." Galer and van der Heijden contrast these approaches by defining the event thinkers as "people who interpret current developments as inevitable and view corporate life as a series of unrelated events rather than as connected systems." While the changing environment of the petroleum industry cried out for a reexamination of mental models, little re-examination occurred at SOC. Instead U.S. Shell (another subsidiary) was characterized by a parochial, short-term orientation, typical of American corporations of the time (Brenneman, Keys, Fulmer, 1998). U.S. Shell clung tenaciously to its mental models that included confidence in $30 for a barrel of oil and a success model based on cash generation through financial performance improvement built on shortterm cost reduction. Shell Oil Company in the 1980s was not a model of organizational learning (The Knowledge Management Yearbook 2000-2001). Little changed at SOC until the early 1990s when a new CEO, Phil Carroll, arrived on the heels of the worst business results in years. Carroll wasted no time in seeking alternate paths for SOC. He openly stated his vision for the company and started to bring in consultants and deputies who could help him 133

transform the company. At a recent retirement speech at Amherst College, for The Society for Organizational Learning, Carroll recalled several of the events that expedited a transformation of learning and leadership at U.S. Shell, including visits by Noel Tichy of the University of Michigan and Peter Senge of MIT. Tichy brought ideas about Transformational Leadership that ignited a personal change in Carroll's leadership philosophy and that of many of his managers. Peter Senge of the Center for Organizational Learning at MIT (now SoL) conducted consulting and seminars that are still being used to enhance organizational learning at U.S. Shell today. These events led to the proliferation of learning at U.S. Shell, as throughout European Shell, and eventually to the development of the concept of "servant leadership." (The Knowledge Management Yearbook 2000-2001). Aided by these resources, Phil Carroll has led Shell Oil Company toward a significant transformation of its corporate culture. It is contained of a new vision, a new business model, a new system of governance, a new concept of leadership, and the use of learning as both the foundation of Shell's transformation and a permanent part of its culture (Fulmer, Gibbs and Goldsmith, 2000)44. The transformation, initially known as the learning and development initiative, started with a process designed to create a mission, with vision and values powerful enough to engage the minds and hearts of SOC's people. The emerging dialogue from this process also invited people to look within themselves and discover their personal visions. The new business model allows the company's leaders to build winning strategies by recognizing where they can exert the greatest leverage and add the most value. When fully implemented, it will give every employee a better understanding of his or her contribution to the company (The Knowledge Management Yearbook 2000-2001). In order to unleash the potential of Shell's people, the company is going to systems of governance that disperse authority and responsibility throughout the organization and aim to create a greater sense of ownership and enlarged opportunities for personal growth. SOC believes that leadership skills can be broadened and deepened in everyone. Through leadership development workshops, the company is helping managers understand their personal potential and discover new ways of thinking and doing (The Knowledge Management Yearbook 2000-2001). These SOC transformational activities are taking place under the Learning and Performance (LEAP) program. After the program showed measurable returns in the United States and elsewhere, Shell made it corporatewide. This corporate initiative gives the framework within which both individual and
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Fulmer, Gibbs and Goldsmith, Developing Leaders: How Winning Companies Keep On Winning, SLOAN Management

Review,2000

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collective learning takes place. Shell believes that the most powerful learning experiences, the ones that produce the fastest and most lasting results, are those in which real people are engaged in finding real solutions to real problems - an action learning process (Fulmer, Gibbs and Goldsmith, 2000). Edgar Schein explains that culture is an attribute of societies and communities that needs shared learning but that is often obscured by natural filters and defenses. Top executives at SOC are now openly discussing the current realities of culture, a strategic learning that cannot be accomplished in the most interactive classroom or experiential training event. Cross-functional groups of senior managers at SOC are examining causes of unsatisfactory decision implementation and low morale. Teams included of engineers and social scientists have contracted with managers to assist in creating strategies incorporating learning (Fulmer, Gibbs and Goldsmith, 2000).

Centers of Excellence
Following the establishment of these initiatives, the U.S. Shell Learning Center was determined. It is comprised of seven Centers of Excellence which include Systems Thinking, Leadership, Mental Models, Personal Mastery, Business Strategy, People Strategy, and Business Models. Under the leadership of Jerome Adames, general manager of learning and transformation, approximately 30 consultants work with all components of Shell Oil Company - Shell Exploration & Productions, Shell Chemical, Equilon Enterprises, and Shell Services. The objective of the Shell Learning Center is to promote continuous learning and business excellence and to engage new leaders and new employees in its culture. This commitment of resources is a clear signal that managers are expected to take action and to accept a picture of reality that calls for change (Fulmer, Gibbs and Goldsmith, 2000). Brenneman, Keys and Fulmer (1998) offer Jaques' concept of "Requisite Organization" as a way to comprehend why such an explicit expectation is crucial to lasting organization learning and performance. In this framework, based on Jaques' 50 years of research, only individuals can be effectively held accountable. Managers may not abdicate accountability by declaring subordinate teams accountable. Willingly fulfilling one's accountability to meet mutual obligations is what constitutes teamwork. Accordingly Brennemam, Keys and Fulmer (1998), suggests the following propositions from his experiences at U.S. Shell in regard to learning:

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1. Learning is virtually automatic in organizations characterized by workplace attributes created by top management like clarity of goals, roles and expectations, openness, curiosity about alternatives, respect and attentive listening. 2. Conditions for learning, when they are not already present, must be produced by new or transformed power-holders who articulate, model and reinforce the learning attributes. Training or experiential workshops cannot replace these conditions. 3. Only the truth about cultural current reality can set an organization free of the invisible decisions that constrain learning and performance. To find that truth needs the power of managerial accountability modeling and insisting on rigorous fact-based, systemic reasoning to break out of event thinking. As Senge (1994) states in The Fifth Discipline, commitment to current reality is "commitment to the truth." While clear accountability and responsible exercise of authority are crucial, there is an apparent paradox of leadership clarified well by Senge in excerpts from a discussion with Phil Carroll and other CEOs. "When I first came in as CEO," says Phil Carroll..." everyone thought, 'Phil will tell us what he wants us to do.' But I didn't have a clue, and if I had, it would have been a disaster." "Anyone who thinks the CEO can drive this kind of change (learning transformation) is wrong," added HarleyDavidson CEO Rich Teerlink. Reflecting on these executive insights, Senge outlined three reasons why leaders come to a more humble view of the power of top management. First, cynicism exists in most organizations following years of management fads. Senge says, "When the CEO preaches about 'becoming a learning organization,' people roll back their eyes and think to themselves, 'Here we go again. I wonder what seminar he went to last weekend.' Most corporations," Senge continues, "have had so many 'flavor-of-the-month' initiatives that people immediately discount any new pronouncement as executive cheerleading, or as they say at Harley-Davidson, 'another fine program.'" A second reason demanding CEO humility is the difficulty in obtaining genuine commitment, even when strong authority and compliance are present. Finally, top-management initiatives often backfire and end up moving organizations backward, not forward. Senge notes that this is not only true in obvious cases like downsizing and reorganizations that have the side effect of increasing fear and distrust, but also in programs designed to create learning, such as 360 degree feedback programs with which managers must comply. Communication programs must not inhibit learning and communication and must not

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reinforce the mindset that only top management has the power to fix problems (The Knowledge Management Yearbook 2000-2001).

Finding Balance
Senge's learning center companies often confront the dilemmas pretended by the two contrasting views presented above - executive leadership is needed to bring about real change, but strong authoritarian leadership can also slow down or undermine other types of change. Senge concludes, "What is needed are leaders who 'walk ahead,' who are genuinely committed to deep change in themselves and in their organizations." Shell, under the leadership of Phil Carroll, has been moving toward a resolution of the dilemma - a strong leader who can empower a transformation in learning and change but one who does not try to micromanage it. One of the greatest challenges in a workable balance is setting conditions to produce lower level leaders who are genuinely committed and accountable. Wishing and visioning alone don't do it. Commanding backfires. A resolution has come in the idea of "servant leadership," described in a recent speech by Phil Carroll, and obviously inspired by Senge and Robert Greenleaf. This concept is explained as "people who lead because they choose to serve one another and to serve a higher purpose." It is an ideal that appeals to deeply held beliefs in the dignity and self-worth of all people. From an organization perspective, servant leadership can be seen as committed modeling of stewardship for people and resources with accountability for outcomes (Fulmer, Gibbs and Goldsmith, 2000). Early in his administration, Carroll, reflecting on his leadership metamorphosis, said, "Gradually, I have come to see a whole new model for my role as a CEO. Perhaps my real job is to be the ecologist for the organization." At the end of his administration, in an SoL speech, Carroll described, with great emotion and feeling, his own personal transformation into a servant leader (Brenneman, Keys, Fulmer, 1998).

6.2.3 Learning and Leadership of Shell Worldwide

The group that connects Shell's operating companies together around the world is the committee of managing directors, on which leaders from both parent organizations (in London and the Hague) sit. The operating units at Shell tend toward autonomy on key topics such as leadership and these units may have differing views from the corporate perspective. With these issues in mind, the Committee of Managing Directors formed LEAP (Leadership and Performance) in 1996, directed by C. V. (Mac) 137

McDonald, to accelerate transformation and leadership development at Shell (Fulmer, Gibbs and Goldsmith, 2000). To ensure that its Leadership and Performance program does not simply react to the immediate needs of the business, Shells LEAP team has an ongoing conversation with the committee of managing directors, representing all of Shells geographic and functional areas, about corporate transformation. LEAP staff members negotiate an agreement with the executive of the business unit and the critical players who will go through the program. Together they create budgets for team project and time expectations and goals (Fulmer, Gibbs and Goldsmith, 2000). Best-practice organizations use the goals of their leadership-development program as guide to putting the right people in the right programs. The goal of Shells LEAP program is to create leaders at all levels, so the programs are open to anyone within the organization (Fulmer, Gibbs and Goldsmith, 2000). To Shells LEAP staff, a program adds value only if the team project generates revenues at least 2 5 times greater than the projects cost (a 25:1 ROI). During the initial contracting process, a LEAP staff member and the leader of the business unit determine the desired project outcomes, including financial targets. The business leader expresses his or her objective in sending the candidate to the program; in many cases that defines the program and problem the team or individual will address (Fulmer, Gibbs and Goldsmith, 2000). Since learning and leadership development at Shell are closely linked, responsibility for both is shared by corporate and unit levels and both groups report to the board chairman at Shell. Leadership development is comprised of executives/senior management, middle management/supervisors, and leaders at all levels of the organization. With 45 people (35 of whom are labeled "change agents"), LEAP works closely with operating units to promote and meliorate their leadership practices. Early on, the primary criticism leveled at LEAP was only the disappointment that LEAP was requiring so long to reach a critical mass of leaders and the slow pace that leadership development was requiring. Thus in late 1996, RDS senior leadership authorized the rapid increase in LEAP's ability to support transformation, and as a result, LEAP increased from a staff of 8 to 45 by the end of 1997 (Brenneman, Keys, Fulmer, 1998).

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Learning to Act
The primary instrument of learning and change at LEAP is action learning, and as a result, only one of its current programs includes "sitting in a classroom." Its four major programs touched 2,500 people last year, and by the end of 1998 it aspires to accelerate the number of persons reached to over 14,000. The internal change agents have been successful enough and demand for their services has been so high that, in the future, LEAP will be funded by the operating units on a pay-back system, rather than by corporate funds (Brenneman, Keys, Fulmer, 1998). The strength of Shell's learning organization comes from the fact that action learning focuses on business results, the engagement of senior leadership, and the involvement of personnel at all levels. The work being done by these leadership champions is not only unique, but also extremely effective. There is also a felt need to include Shell contractors and suppliers (Brenneman, Keys, Fulmer, 1998). LEAP wants to create the superior leaders at all levels of the organization - leaders who possess a core set of values which span the entire company and an in depth knowledge of the business, both lacking in many past Shell managers. Shell has embraced the philosophy that everyone has the capacity to be a leader and believes in the concept of "servant leadership," or the creation of conditions that enable others to realize and develop their potential in the work place. LEAP defines the servant leader as one who: Recognizes that, as an individual, one does not have all the answers; Is able to demonstrate a sense of humility and vulnerability; Advances his or her own transformation, and the personal transformation of others, and the transformation of the company; Builds the capability of the company and the people in it (Brenneman, Keys, Fulmer, 1998).

Far from being a weakness or character flaw, these qualities help fashion trust in a leader. Supportive, empowering leaders who merge such leadership skills with action learning create unexpected learning opportunities. Far from being a weakness or a character flaw, these qualities help foster trust in a leader. And that is critical to any leader's success (The Knowledge Management Yearbook 2000-2001). Successful organizational learning competencies for leaders, defined by Shell, involve the ability to build a shared vision, an in-depth knowledge of the business, the skill to think systematically, and the ability to communicate through open and honest dialogue. Although these competencies are determined at the corporate level, they are not viewed as "edicts from on high." LEAP actually works with the 139

operating units to "sell them" on the expediency of these competencies and on the need for each leader to build their own teachable point of view on leadership (Brenneman, Keys, Fulmer, 1998).

6.2.4 Fundamentals Leadership at Royal Dutch Shell

Steve Miller, group managing director of the Royal Dutch/Shell group of companies, joined Shell's committee of managing directors in 1996. The committee is made up of the senior leaders who guide the day-to-day activities of the Shell Group. Although, in 1994, the company had initiated a program designed to transform the organization, little progress was demonstrated in spite of much reorganizing, downsizing, and instruction. Richard Pascale, an associate fellow at Oxford University, spent six months observing Steve Miller in action. Pascale discovered that initially Miller's people - "at the coal face" - the term Shell applies to its frontline activities - showed little improvement based on experience during the '80s as a sponsor of quality efforts in U.S. Shell, Miller confided that efforts were hopeless to transform Shell's complex and resistant bureaucracy one level at a time (Brenneman, Keys, Fulmer, 1998). Consequently, working with the LEAP project leaders, he implemented a business model that included front-line leadership transformation, action learning within teams, and leader-teaching. Miller's rationale to his approach is simple: "Change how you define leadership and you change how you run the company. Once the people at the grassroots find they own the problem, they find they also own the answer - and they improve things very quickly, very aggressively, and very creatively, with a lot more ideas than the old-style leader could ever hand down from headquarters. (Brenneman, Keys, Fulmer, 1998, p. 7). During his interviews with Pascale, reported in Fast Track, Miller recalled how the company brought six- to eight-person teams from about six operating companies to a "retailing boot camp." For instance, for Malaysia, to meliorate service-station revenues along major highways, the firm brought together a cross-functional team that was made up of a dealer, union trucker, and four or five marketing executives. "A new business model and leadership skills were developed to prepare participants to apply new tools to their local market." As one group of teams left, another group came in. For 60 days, the first set of teams worked to improve business plans to address their problems. They then returned to the "boot camp" for a peer-review meeting (Brenneman, Keys, Fulmer, 1998).

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At the end of the third workshop each team sat with Miller's team and him in a "fishbowl" environment to review its business plan as other teams looked on. "Both peer pressure and learning were intense," he told Pascale. At the end of the sessions, the teams returned home for another 60 days during which they worked to put their ideas into action. At the end of the 60 days, they returned to discuss not only their breakthroughs but their breakdowns. "Ultimately," said Miller, "these grassroots people go back home and say, 'I have just cut a deal with the managing director to do these things....'"(Brenneman, Keys, Fulmer, 1998, p.7). Miller credits three major elements of the learning/leadership program with its success: 1. First, ordinarily executives make presentations about things the company is doing - speaking in the third person - a safe way to talk and interact. Grassroots leadership calls for talking in the first person. For example, "I'm talking about my transformation," says Miller. "This creates a personal connection and it changes how we talk and how we work with each other." 2. Second, the leader in the grassroots model must be a personal teacher and coach. "The scariest part," according to Miller, "is letting go. You don't retain the kind of control that traditional leaders are accustomed to, although you may, in fact, have more control in the form of more feedback and learning." 3. Third, grassroots leaders rely on the "fishbowl" concept. Teams "on a hot seat" lay out business plans for Miller and peer teams. Miller says "they think the pressure is on them, but the truth is, the pressure is on me." He explains that the fish bowl exercise makes him to be consistent - to call peer plans "a bunch of crap" if indeed they are - and reserve praise for truly worthy plans. This kind of straight talk is a major culture change for Shell - persons at a lower organizational level speaking directly to a managing director, a candid interchange from a director, and the use of personal "I" type conversations (Brenneman, Keys, Fulmer, 1998). Over the years Royal Dutch/Shell and its operating companies have determined differently and at different speeds, but most of the Shell companies are today active in many aspects of organization learning and cultural change. This is likely to continue indefinitely with additional opportunity to benefit from the cultural diversity in the organization. Modeling the path forward and creating conditions for maximum learning advantage will be a key accountability of today's and tomorrow's managers in Shell (Brenneman, Keys, Fulmer, 1998).

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In 1998 when the American Productivity and Quality Council (APQC) teamed with the American Society of Training and Development to conduct a Global "Best Practice Study of Leadership Development," it is not surprising that Shell was chosen as a model for its commitment to learning and its emphasis on applying learning tools to actual corporate challenges. Royal Dutch-Shell, the parent company, appears to be a model of the living company, partially because it has endured for over 100 years, but more especially because it seems to be exemplifying some of the criteria that de Geus found present in similar long-lived companies. It is navigating the turbulent white water of environmental changes by remaining sensitive to the environment through scenario forecasting. Throughout the world Shell encourages decentralization and increased collaboration with operating companies, with global clients and others with whom Shell can share technology. All Shell business lines with suppliers, clients and/or significant shared technologies are in transition toward more active "inter-affiliate" collaboration. That means increased intercultural and transnational interaction with increasingly shared (or understood and respected, if different) learning from culturally diverse experiences (Brenneman, Keys, Fulmer, 1998). Throughout the units reviewed there is strong emphasis on action learning, a systematic process that requires that project teams and other units not only solve problems and complete projects, but reflect on learning from each episode, and bank this learning in institutional memory. This will provide increased adaptability and the ability to learn and adjust required of the living company (Schwandt and Marquardt, 2000)45. Throughout key units of Shell, leadership is being transformed into what the company calls "servant leadership." The concept calls for leadership humility in order to support others in learning and leading and acknowledges that everyone has the capacity to be a leader and a servant. The servant leadership philosophy can best be defined as an attempt to put a "human face" on the "coal face" which has so long driven thinking at Shell. More than any other discovery, this movement appears to coincide with the thinking of Arie de Geus's living company - "Companies (that do not) die because their managers (have not exclusively) focused on economic activity of producing goods and services and forgotten that an organization's true nature is that of a community of humans."(The Knowledge Management Yearbook 2000-2001).

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Conclusion

We live in a world of change whereby organizations are called to produce greater value through unique combinations of innovation, quality, efficiency, and customization. These sources of value cannot be reached by doing more of the same or playing with the familiar. Rather, worn operating models and patterns of thinking must be replaced with fresh, novel ones (Scott, 2011). In 1988, the Harvard Business Review carried an article called Planning as Learning, by Arie de Geus, coordinator of group planning at Royal Dutch/Shell. The author was not well known outside of Shell and his article resonated with a great many peopleparticularly this line: We understand that the only competitive advantage the company of the future will have is its managers ability to learn faster than their competitors. Eight years later, the American CEO most admired by his peers, Jack Welch of General Electric, had come to the same conclusion. Welch made this statement in a GE annual report: Our behavior is driven by a fundamental core belief: The desire and the ability of an organization to continuously learn from any sourceand to rapidly convert this learning into actionis its ultimate competitive advantage. Several other large companies including Chevron, Coca-Cola, First National Bancorp, Mead Industries, Shell Oil, and Tenneco, have also featured the learning organization concept in recent annual reports. Senge has introduced thousands of managers at Ford, Procter & Gamble, AT&T, Royal Dutch/Shell, and at other major corporations to the disciplines of the learning organization through the seminars offered by Innovation Associates. These and other corporate statements echo the theme that learning is the only infinitely renewable resource. Competitors can gain access to other resources: capital, labor, raw materials, and even technology and knowledge (for example, they can hire away your people). But no one can purchase, duplicate, or reverse-engineer an organizations ability to learn. According to a research study sponsored by Training and Development, a publication of the American Society for Training and Development, all organizations learn, but not always for the better. A learning organization is an organization that has an enhanced capacity to learn, adapt, and change. It's an organization in which learning processes are analyzed, monitored, developed, managed, and aligned with improvement and innovation goals. Its vision, strategy, leaders, values, structures, systems, 143

processes, and practices all work to foster people's learning and development and to accelerate systemslevel learning. The development of learning organization depends on the development of every individuals creativity and the thinking process within the organization. In order to become competitive, the organization must needs to capture the organizational knowledge. The change in developed economy focuses towards the knowledge work with the continuous sophisticated workforce, the capacity for learning from the work experience, independent thinking along with the awareness of interconnected nature of business for learning. Many of these factors point to acknowledge the changes in the business practices. A learning organization can be defined as the organization where the people at every level continuously increasing their ability and capacity for producing the better results which they really care about (Baker and George 2007). This action is taken collectively by the whole workforce of the company. In my thesis I take into consideration Learning Organizations and organizational learning disciplines, to understand if this kind of disciplines, tools and skills can do the difference in an organization. In fact, first of all I explained the various definitions of the most important authors: Organizational learning means the process of improving actions through better knowledge and understanding(Lyles, 1985, p. 803); Organizations are seen as learning by encoding inferences from history into routines that gui de behavior (Levitt and March,1988, p. 320); Characterized knowledge-creating companies as places where inventing new knowledge is not a specialized activity; it is a way of behaving, indeed, a way of being, in which everyone is a knowledge worker(Nonaka, 1991, p. 97). Then, I continued my thesis studying how an organization can develop as an Organizational Learning to compete and to possess the right skill, strategies and tools to improve his performance: In an Organizational Learning we will found skills as problem solving, ability to look inward and the capacity to learn from an unsuccessful (Argyris, 1993). Three critical issues must be addressed before a company can truly become a learning organization; first is the question of meaning: a well-grounded, easy-to-apply definition of a learning organization; second comes management: clearer operational guidelines for practice; and finally, better tools for measurement can assess an organization's rate and level of learning (Garvin, 1993, p.1). Leaders are designers, teachers, and stewards. These roles require new skills: the ability to build shared vision, to bring to the surface and challenge prevailing mental models, and to foster more systemic 144

patterns of thinking. Leaders in learning organizations are responsible for building organization where people are continually expanding their capabilities to shape their future: leaders are responsible for learning (Senge, 1990, p.2-3). In the third chapter I discussed of Leadership and Innovation, two important skills that organization must develop and must have to be productive in mostly unknown, future states. I considered a framework to encourage innovation through the generative leadership. This leadership approach develops the context for stimulating innovation in complex systems. This approach contends that generative leadership is a process for controlling complexity and institutionalizing innovation that balances connectivity and interaction between individuals and groups. Generative leaders do not pay attention on developing individual traits or creativity amongst those they work with, but rather develop the conditions that nurture innovation. (Surie and Hazy, 2006). A value that create advantage is know-how-in-action, which Swart (2011) define as a routine in practice which consists of specific actions, by specific people, in specific places and times. Theory U, a framework process that helps leader to innovate, built on 15 years of action research by Scharmer (2010) is a tested instrument for learning and leading change in individuals, groups, organizations, and larger systems. The basic premise of Theory U is r = f(a). The reality (r), that a system of players enacts, is a function of the awareness (a) that these players operate from (Scharmer, 2010). In the fourth part of my study I provided a synthetic description of various archetypes, which are tools that leaders can use to construct credible and consistent hypotheses about governing forces of their organizations, dwelling upon the Limits to Growth archetypes; it is useful for discovering the nature of the slowing down action and of the limiting condition in order to use the latter as a lever before the direction along the loop is inverted, and, in the end, to prevent the problem by planning the necessary measures. The fifth chapter deals with Impediments and Facilitators; in these pages I argued the difficulties that an organization can go against when builds a Learning Organization: Not enough time, No Help, Not Relevant, Walking the talk, Fear and anxiety, Assessment and measurement, True believers and non-believers, Governance, Diffusion and Strategy and purpose (Senge, 2001). I have also considered a certain number of Facilitators: first of all, personal computers which represent a powerful and available tool that there will give an increase in the capacity to produce the simulated experiences that allow us to stand far enough back to see the trees and the forest; the formal 145

education: courses, at all levels, that deal with the similarity among the various disciplines rather than courses that bring out the differences. In chapter 6, two concrete example of Learning Organization are presented: Hanover Insurance Company and Royal Dutch/Shell, two important business cases which give the example that create a better organization is possible, that develop a transformation of our organization is possible. The story of these two case studies is about installing more virtue in the business world, while giving better service to more customers, a more satisfying work experience to employees, and better returns to stockholders. The story is also about teaching the fundamentals of organizational learning by example (Sugarman, 2001).

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