Iceland economy goes into deep freeze

Just as there are ‘wheels within wheels’ (according to the book of Ezekiel in the Old Testament) there are systems within systems. Little systems nest and overlap within larger systems. The banking collapse revealed a system operating (or failing catastrophically) at a very high level. The sudden and unexpected collapse of the Icelandic economy was one of the most dramatic consequences. The report into how three Icelandic banks failed and brought ruin to their country reveals systemic leadership failure on an astonishing level. Repeated below is a key section of Eirikur Bergmann’s chilling account (‘How Iceland lost its soul’, the Guardian, 13 April, 2010).

‘Newly privatised, each of the three main banks came into ownership of three nouveau-rich families in Iceland. The report graphically explains how the three business blocks then, in a kind of a testosterone-driven pissing contest, used the savings of generations of hard-working Icelanders to storm the global financial market, including the City of London.
'The report also shows that the crash was mainly caused by a systemic error within Iceland. By vigorously enforcing its deregulation policy the lassez-faire government created a monster it couldn't control: the Icelandic Viking-capitalist was born. Any voice of caution and classical wisdom was dismissed as old-fashioned. In an opinion-oppressed political environment the regulation industry was made laughable by the politicians and business elite alike.
'Then the Icelandic business Vikings headed for the high streets around Europe with their pockets full of borrowed money. Fresh out of business school Icelandic CEOs took over established companies in fields they couldn't even pronounce. The fast decision-making and risk-seeking behaviour of this new breed was hailed in the business media around the world, boosting the already overblown egos of these young alpha-males.
'Within one short decade we turned a traditional Nordic welfare state economy into one of deregulated bonanza capitalism. We somehow lost sight of our roots and values, as is evident in the part of the report that deals with ethics. The president of Iceland, Ólafur Ragnar Grímsson – who recently vetoed the Icesave agreement – is portrayed as the main cheerleader of the new business elite.
'When the clouds started to gather on the horizon in early 2006, all criticism against what we had grown accustomed to calling the Icelandic economic miracle, was dismissed as ill-intentioned whining by envious foreigners. Throwing nationalism into the mix of inexperience, the Icelandic government responded by launching a defensive PR campaign in London, New York and Copenhagen.'

One can speculate how this disaster might have been avoided. Most leaders lack a suitable mental framework to help them to see and understand the dynamics of what is happening around, between and even within themselves. Such a framework might have enabled Iceland’s leaders to fit the emerging pieces into a systemic picture as the awful risk unfurled. Without this facility to capture, process and make sense of the unfolding of events, valuable data appears like so much random and unwelcome noise.

Lessons must be learned

The NSPCC (National Society for the Prevention of Cruelty to Children) plays a key role in child protection in the UK. The Society is rightly exasperated with the seeming inability of the many parties involved to learn from past mistakes (‘NSPCC calls for reform of child abuse inquiries’ – BBC News, 8 April 2010) . ‘Lessons are not being learned’, claims the NSPCC. Too many recommendations from reports into past failures are not acted upon, it says. The same mistakes are repeated time and again. But is the problem with the way inquires are conducted and reported, or with how they are followed up?

The failings in child protection – including their repetitive nature – are, of course, systemic in nature. Children are protected by organisations working effectively (or ineffectively) as systems. Individuals play their part, of course, but within a wider and constraining system. If organisations fail to deliver, this whole system has failed. Attempts to blame individuals as though they are free and powerful agents are both misplaced and unfair.

The NSPCC expresses two interests: The first is to improve serious case reviews. These reviews follow individual child deaths, such as those of Baby Peter and Victoria Climbie, and recommend improvements. On this aspect my colleague Professor Eileen Munro of the LSE has undertaken pioneering research into alternative systemic methods of inquiry. Intriguingly, the NSPCC’s other interest is focused on post-inquiry implementation of recommendations for improvement. I discuss that next.

It may not be sufficiently recognised, by the NSPCC and other parties, that implementation of recommendations is also a systemic matter. If you examine the current post-inquiry implementation process that is undertaken following these reports, you can’t help but notice the absence of a systemic approach. But ‘lessons will be learned’ only if a systemic perspective is adopted after failure as well as before it. Improvement will not happen if implementation is simply left to players to pick things up according to how they see their particular roles and responsibilities in a typically run, hierarchical, silo-driven functional structure. Otherwise, the warts-and-all system will continue to thwart their aspirations to learn lessons just as it thwarts their good intention to provide faultless child protection in the first place.

It’s the system wot done it!

In November 2009 I wrote an article for the Guardian newspaper entitled ‘Sometimes it’s the workplace that’s stupid, not the staff’. My purpose was to support child-care social workers who were being singled out for criticism – by the media and politicians – in high-profile cases of child deaths or abuse.

Instead of a personal focus, the article showed how the behaviour of social workers was shaped by what was going on around them and between work colleagues and partners in their local structure. This ‘system’, I argued, was probably more influential than individuals’ own level of skill, capability, motivation and training. In other words, if not victims as such, workers are nonetheless vulnerable to the vicissitudes of their system. They are in a sense pawns, with a limited number of moves available to them under the rules, and they are themselves easily predated upon by those looking for a scapegoat – both from within their hierarchy and from outside their system.

My article showed that workers are often thought to be ‘stupid’. Indeed, the article triggered a handful of readers who have a pathological hatred of social workers, to vent their spleen on me as author of a sympathetic stance. They couldn’t stand the thought of ‘guilty’ social workers being able to escape their due by being able to claim “It’s the system wot done it.”

Yet we have all experienced a stupid system; for example, almost every encounter with a call centre. When something fails, ask if more than one person is involved in this failure. Ask whether there is something systemic about the performance failure, something that could apply similarly to other individuals that might go wrong. Might the failure recur if the design of the system remains unchanged? Indeed, is it the system that is stupid and needs spotlighting and improving?

A systems perspective is concerned with such questions as: who is allowed to talk to whom; how is accountability managed; how does leadership work; how does the organisation learn; how does the hierarchy operate, and how is power used?

In the fishtank analogy of a workplace, it is the quality of the water in the fishtank that determines the lustre of the fish. It is what people are surrounded by that shapes their work behaviour. Yet most onlookers see only the fish, and then criticise them. Seeing and challenging the system takes imagination, patience, and a thick skin.

Invitations to tender can suppress leadership

I am sometimes invited to submit a competitive tender for work, for example to run workshops. I nearly always decline – for three reasons. Firstly because of the costly inefficiency of a bureaucratic process that can waste considerable time for both parties. Secondly, the assumption that it is acceptable for multiple bidders to apply their creative effort in the knowledge that all but one will fail. Thirdly because of the poor quality of inter-personal connection, the game playing and second-guessing.

The challenge of obtaining value for money for the buying organisation, in an efficient and respectful way, which acknowledges the needs of the suppliers as well as the buyers, raises several issues about leadership.

Eastern cultures tend to prefer to develop reliable relationships with a small number of suppliers over time and stick with them. But this can work against novelty and new entrants. A case can be made for competitive tendering when it applies to purchasing commodities such as stationery. But it works badly when buying intellectual and creative contributions. Centrally organised purchasing departments can fail to make this distinction and be excessively driven by cost and uniformity of process.

There is something fundamentally wrong with a model that separates people into two groups: those who identify, understand and specify a need, and those who are then told what this need is and are asked to deliver against it. The approach is reminiscent of the division between head-office managers whose job is to think up strategies for front-line workers to implement. Or between systems analysts and computer programmers, which finds the latter often rejecting the former’s specification.

The same is true when it comes to human systems in organisations. Commercial imperatives may dictate that suppliers need to bite their tongue and comply with the buyer’s requests, but privately they may have misgivings about the buyer’s analysis. They may resent being kept at arm’s length from the organisation’s problems. They may want to challenge the buyer’s basic premise. They may have unrecognised expertise beyond that being sought. Once suppliers have landed the contract they may seek to reshape their offering, having kept this intention hidden initially.

How can this situation be improved? The aim of both parties should be to strive for authenticity, the minimalising of power differentials, the maximisation of trust between the parties, and a sense of partnership in matching problems and emergent solutions. There is only one way to do that: it means sitting down and spending time together, before specifications are hardened up, paperwork completed, and sums applied. If this kind of dialogue doesn’t take place at the outset, the strain, game playing and inauthenticity may remain during the period of delivering the contract.

In The Search for Leadership I discuss two possible mindsets behind inviting competitive tenders; one exhibits a managerialist approach and the other a leadership approach. In the case of the latter, the manager asks him/herself questions about the current tendering practice, including: ‘Why am I continuing to do what I am continuing to do the way I am continuing to do it?. What values and assumptions are driving the approach? What is being done merely out of habit?’.

Keep it clean, but only when I say so

Simple but flawed human nature offers the best explanation for the problems identified in the two most recent posts. The following real story makes the point well.

A manager was responsible for a machine shop. The shop was always dirty and presented a safety risk. He couldn’t get the workmen to keep it clean and tidy. So he hired a consultant to help. The consultant took photographs of the mess and pinned them up on an office wall. He then invited the workers to rate them. The workers were shocked when they saw the photos, seeing the mess with a fresh pair of eyes. They gave the photos very high (bad) scores for presenting safety hazards. They returned to the workshop and started cleaning up the mess. Job done? No.

The manager was most put out and immediately instructed them to stop. He explained that he had not given them the order to begin cleaning up the place. This was an affront to his authority. What he needed more than a clean and safe workshop was recognition that he, as manager, was needed and that his authority was to be respected. If there was going to be something closer to self-government in his workshop, it would come only on his terms.

Managers are sometimes the problem as well as the solution. But there is a solution to the problem of what to do with managers, and that is to see the manager’s role and how it adds value in a very different way – switching its focus from managing the people to managing the system.

Them and us

Yesterday I wrote about two different types of dialogue – both in politics and in organisations. In the first of these, people accept their position and are grateful for what is provided to them, sometimes being allowed to offer their feedback to their betters. In the second, the people expect more involvement and seek to influence change more directly. While leaders may claim to believe that the latter is good for others, and indeed for themselves, in practice they are tempted to seek shelter behind the certainty and protective shield offered by the former’s hierarchy.

By a strange coincidence, as I was sorting through some papers yesterday evening, I came across a Guardian article by Madeline Bunting dated 19 January 2004. In it she quotes David Marquand (in his Decline of the Public) referring to ‘‘Alexis de Tocqueville’s description of the parent state which aims to keep its citizens in ‘perpetual childhood’: power is absolute, minute, regular, provident and mild … it is well content that the people should rejoice, provided that they think of nothing but rejoicing.”.

Bunting recognises that ‘The 19th century Frenchman has provided a chillingly accurate assessment of Blairism. In a reworking of the bread and circus formula, New Labour will tirelessly seek to deliver the electorate better schools, hospitals and a rising standard of living (for the majority), but has no appetite for the debates on how that should be done. To a significant section of public opinion, that’s enough – just don’t make the mistake of thinking it’s called democracy’. In other words, don’t confuse the content with the process.

All large organisations reflect that dilemma. Employee climate surveys, for example, reinforce simple upward feedback in a version of Transactional Analysis’s parent-child model. Negative feedback can be easily shrugged off with a “Well they would say that at this time wouldn’t they”. But what does this say about trade union relationships with, say, signalmen and cabin crew. What about striking workers expressing a concern for safety? Is that management’s responsibility? Or is it everyone’s?

Focus groups don’t go far enough

After being the butt of jokes, focus groups are again receiving a favourable mention. It’s election time, after all: let’s find out what people think.

If the question that is the subject of the focus group is clear and accepted, then asking a group of people to discuss and express their viewpoint is valuable. This kind of conversational process embodies what is known as single-loop learning; that is, the broad premise is assumed to be valid. But a different form of discussion is needed where double-loop learning is required – that is, when the question being asked is itself open to question.

In organisations, single-loop learning helps with alignment and compliance. Double-loop learning opens up the possibility of change; it is a more challenging process. For those engaged in discussions aimed at achieving change, we need to replace the focus group with what Lesley Kuhn (Adventures in Complexity, Triarchy Press) calls ‘coherent conversations’.

The point about coherent conversations is that they permit ‘emergence’. This refers to the capacity of complex entities to exhibit unexpected and novel properties or behaviours not previously observed …’. Thomas Hunt Morgan captured the idea as long ago as 1927 when he said: ‘The emphasis is not on the unfolding of something already in being, but on the outspringing of something that has hitherto not been in being’.

Politicians and their favoured focus groups should take note. Single-loop questions such as ‘which of our policies do you prefer?’ have their place, but a sceptical and apathetic public has its own questions to ask about the name of the game being played.