Complexity Leadership Theory: Enabling People and Organizations for Adaptability
‘‘We’ve got 21st century technology and speed colliding head-on with 20th and 19th century institutions, rules and cultures.’’
In 2010, IBM’s CEO Study reported that the rising rate of complexity associated with increasing volatility, uncertainty and interconnectedness was the biggest challenge facing organizational leaders around the globe. In this environment, the world is operating in fundamentally different ways. As Sam Palmisano, head of IBM at the time described, incre- mental changes are no longer sufficient because ‘‘events, threats and opportunities aren’t just coming at us faster or with less predictability; they are converging and influencing each other to create entirely unique situations.’’ These contexts require adaptability and new ways of leading. Despite this, executives indicated that their organizations were not equipped to deal with complexity, and over half the CEOs doubted their ability to manage it.
Since that time complexity has only increased. If in 2010 we saw economies topple from complexity due to the Global Financial Crisis, in recent years it is as if the very foundations of what we know about management are being pulled out beneath us. Organizations and entire industries are being affected, with increased connectivity allowing everyday people to network and drive large-scale political, social and market disruption. For some, these are exciting times and the opportunities to lead change have never been greater. For others, the lack of clarity and speed at which complexity is increasing feels overwhelming and chaotic. For the latter, there is a growing sense of dismay about what the future holds and the inability to control it.
WHAT IS COMPLEXITY?
Although many are feeling and experiencing complexity in the workplace and in their lives, it is harder for them to describe exactly what it is. Despite the name, the concept of complexity itself is really quite simple: Complexity is about rich interconnectivity. Adding the word ‘‘rich’’ to interconnectivity means that when things interact, they change one another in unexpected and irreversible ways. Complexity scholars like to describe this as the distinction between ‘‘complexity’’ and ‘‘complicated.’’ Complicated systems may have many parts but when the parts interact they do not change each other. For example, a jumbo jet is complicated but mayonnaise is complex. When you add parts to a jumbo jet they make a bigger entity but the original components do not change–—a wheel is still a wheel, a window is a window, and steel always remains steel. When you mix the ingredients in mayonnaise (eggs, oil, lemon), however, the ingredients are fundamentally changed, and you can never get the original elements back. In complexity terms, the system is not decomposable back to its original parts.
Once we understand this, we can see complexity all around us. It occurs when networked interactions allow events to link up and create unexpected outcomes, or emergence. As mentioned earlier, the Global Financial Crisis (GFC) is a complexity emergence event in that a variety of factors linked up in an interconnected system and produced an outcome that was largely unpredictable, other than in the short term, and had far-reaching effects. After it happened there was no going back–—organizations and economies around the world had to operate in the new reality. Moreover, the impact can be long lasting. We are still feeling the effects of the GFC, and it influences decision-making and activities in our current contexts.
The ‘‘Order’’ Response
In this new reality, it is more essential than ever for organiza- tions to adapt–—to pivot in real time with the changing needs of the environment. They must fit the mantra of complexity theorists that it takes complexity to beat complexity. Despite this, what we see in our data over and over again is that when faced with complexity, the natural proclivity of people and organizations is to respond with order–—to turn to hierarch- ical approaches of leading and managing change top-down. Snapping back to previously successful, ordered solutions provides a sense of control that satisfies not only the needs of managers who have been trained in traditional leadership models, but also organizational members who look to leaders to take care of them and make things ‘‘right’’ again.
What we see in our research is that when confronted with complexity, organizations most often seek greater account- ability. They demand ‘‘more from less’’ and instill better risk mitigation strategies. When these fail, they turn to greater regulatory control. These ‘‘order’’ responses can actually do more harm than good. An example is the recording industry’s response to the emergence of Napster in the 1990s. From June 1999 to February 2001, the peer-to-peer music sharing entity grew from zero to over 26 million users. For the first time ever, individuals were able to gain access to their favorite songs without having to purchase entire CDs. But the Recording Industry Association of America (RIAA) responded by filing a suit for vicarious copyright infringement under the U.S. Digital Millennium Copyright Act. The result was that in July 2001, Napster was forced to shut down.
The Adaptive Response
In complex environments, instead of order we need an adaptive response. Adaptive responses resist the pull to order and capitalize on the collective intelligence of groups and networks. Organizations that enable an adaptive response do not turn to a top-down approach. Instead they engage net- works and emergence.
Emergence is the creation of new order that happens when agents (e.g., people, technology, information, resources) in a networked system combine together in an environment poised for change to generate the emergence of something that did not exist previously. In the emergence process, interacting parts of a system (i.e., agents) network around some kind of need and begin to link up. Adaptive responses are generated when these networked agents are able to resonate around a new approach, alternative way of thinking, or adaptive solution that meets the needs of a complex challenge. These innovations are generated in the ‘‘space between,’’ meaning that no one person can claim or take credit for them. Rather, they are the result of richly connected interactions that allow diverse people, ideas and pressures to collide and combine in ways that generate emergence of novelty.
ORGANIZING FOR ADAPTABILITY
A complex adaptive system is a dynamic system that is able to adapt in and evolve with a changing environment. At a macro level, it is a collection of dynamic networks of interactions, with each network comprised of a collection of many agents acting in parallel, creating rich interconnectivity. Colonies of social insects such as ants and bees that use simple rules and networked interactions to generate highly adaptive behavior are complex adaptive systems. So are neural networks that comprise the functioning of the human brain. In business, complex adaptive systems are seen in the emergence and dynamics of economies and markets.
In the physical and biological sciences, complex adaptive systems are described as having no centralized control and no fixed order. They are self-organizing, continually adapting and changing in relation to environmental conditions. But we know that is not true of organizational systems. Our struc- tures, no matter how flat or circular, do have hierarchy and hierarchical leaders. Their formal organization charts and management systems inhibit the ability of the system to self-organize. Moreover, because they are grounded in bureaucracy, they value rationality, efficiency and stability over adaptability. There is no getting around this. As long as organizations have hierarchy, and nearly all human organizing systems do, they have elements of bureaucracy, and the natural tendency of bureaucracy is to pull the system to order. The question for our research, then, was: How can we lead our organizations to be adaptive in the face of order imposed by hierarchical (bureaucratic) organizing structures? Given that by definition complex adaptive systems are self-organiz- ing, i.e., they do not have hierarchy and are not managed and planned, is it possible to enable organizations to act as complex adaptive systems even though they have hierarch-ical structures?
The Constraints of Bureaucracy
What our findings show is that organizations that are able to operate as complex adaptive systems do so by enabling adaptive space. Adaptive space is a network structure not previously recognized in the leadership literature. It plays in the pressures created by complexity challenges and allows agents to interact in ways that generate emergence and new adaptive order for a system. When enabled in organizations, adaptive space represents hierarchical organizations’ way of coping with the limits of bureaucratic organizing on adapt- ability. It helps leaders and organizations resist the pull to equilibrium by enabling self-organizing in the context of bureaucratic structures.
To see this, we need to think of organizations as comprised of two primary systems: an operational system and an entre- preneurial system. Operational systems are found in the formal, bureaucratic organizational structures that push for order, e.g., standardization, alignment, and control. They are responsible for productivity, efficiency, and results. Entrepreneurial systems occur in the informal structures and systems that push for change, e.g., new opportunities, different operating procedures, new products and services, or extension into different business areas. They are respon- sible for innovation, learning and growth.
The Need for Adaptive Space
In organizations that are adaptive, however, we see different dynamics at play. In adaptive organizations the operational system is not privileged, and conflict (i.e., adaptive tension) and the entrepreneurial system are not wiped out. Rather, leaders in these organizations recognize that adaptability lies in the rich interconnectivity (i.e., the complexity) of net- worked systems and their agents. Consistent with complex adaptive systems, they accept that everything cannot be structured, planned and controlled–—there is also a need for self-organizing and emergence. Therefore, leaders in adap- tive organizations capitalize on the tension created between the entrepreneurial system and the operational system to generate innovative new thinking and productive adaptabil- ity for the system. They do this by enabling adaptive space.
Leaders help enable adaptive space by facilitating the gen- eration and movement of ideas and information across a system, creating conditions for emergence. They do this by capitalizing on two network structures associated with idea generation and flow: brokerage and group cohesion (see Fig. 1). Brokerage connects or bridges from one group to another. Brokerage creates conditions to facilitate discovery and introduction of novel ideas and help amplify them for scale across a system. Group cohesion is how connected an agent is with others in a group. Group cohesion provides a safe environment for pressure testing and iterating ideas to make them more impactful and amenable for scaling.
Research shows that because brokerage provides agents with early access to new and diverse information regarding things that are happening in other areas, it helps spark creative solutions and allows opportunities to influence how this information is distributed. Brokerage enables agents to think more boldly about what is possible by creating a richer set of possibilities. For example, in one large pharma- ceutical company the drug-development process could be traced back to a few key scientists who had brokerage relationships with outside academics. When two of the most richly connected brokers departed, these relationships were also lost and the innovation rate for the company dropped significantly, making the company less adaptive. This is con- sistent with research showing that brokerage creates greater access to novel insights and enhances diffusion of these insights.
Complexity dynamics explain how the network structures of brokerage and cohesion create the conditions for adaptive space. Leaders who enable adaptive space understand two key dynamics that make complex systems adaptive: conflict- ing and linking up. Conflicting is the tension created when agents bring diverse needs, worldviews, preferences or values to interactions. It motivates and pressures a system or agent to elaborate and change. Linking up occurs when agents find commonality that allows them to bond in relation- ships and networks. Linkages are the connections that hold bonded agents and aggregates together.
The Role of Pressures
While tags and attractors can help leaders energize emer- gence, they are often not enough. Hierarchical organizations can be resistant to change, and proficient at spitting out those who attempt to initiate it. Pressures may therefore be needed to loosen the system up for change. In organizations, complex- ity is often experienced as pressures. Complexity pressures disrupt current patterns of organizing, naturally opening up adaptive space. Complexity pressures typically involve: 1) a need for a novel solution (i.e., existing ways of operating will not work), 2) new partnerships (i.e., people have to work together who have not worked together before), 3) conflicting perspectives (i.e., individuals bring different needs and diverse experiences), and 4) interdependence (i.e., no choice but to work together–—adapt or ‘‘die’’).
LEADING FOR ADAPTABILITY
Complexity leadership draws attention to three types of leadership needed for adaptability: operational leadership, entrepreneurial leadership and enabling leadership (see Fig. 3). Operational leadership is the formal design and alignment of systems and processes for efficiently executing on ideas and converting them into productive outcomes (e.g., exploitation). Entrepreneurial leadership is the source of new ideas, innovation, learning and growth for the orga- nization (e.g., exploration). Enabling leadership is the enabling of conditions that effectively support and sustain adaptive space. Enabling leadership is a unique form of leadership introduced by complexity thinking. When appro- priately engaged with operational and entrepreneurial lea- dership, enabling leadership helps organizations be agile in the face of complexity (i.e., operate as complex adaptive systems).
In complexity, leaders still need to embrace the power of the operational system to generate efficiency and produce ongoing results. But they engage the formal functions dif- ferently. They recognize that innovation and adaptability are as core to organizational survival as operating results; there- fore, they work to protect against the destructive effects of the pull to order that privileges operational decision making at the expense of entrepreneurial thinking.
A key role of operational leaders in the complexity leader- ship framework is converting emergent ideas into organiza- tional systems and structures that produce innovation and ongoing results. Operational leaders do this by sponsoring, aligning and executing (see Fig. 4). Sponsoring involves pull- ing ideas from adaptive space and positioning them for support from the formal system. Sponsoring helps overcome the problem of the ‘‘brick wall’’–—the seemingly automatic reflex of the operational system and its leaders to say no when approached with innovative ideas or suggestions for new ways of doing things. Aligning and executing involve finding ways to resource and implement the idea or new approach to enhance organizational performance and fitness.
Entrepreneurial leadership is the creation and development of novelty (e.g., ideas, innovative solutions, new products or services) in ways that help an organization adapt to pressures or capitalize on opportunities. It operates in local contexts (a local is the network of relationships and contexts actors engage in to get work done), and is often motivated by complexity pressures that challenge individuals and groups to come up with new ways of working, or new products and services.
Entrepreneurial leadership is consistent with research showing that creativity is often a collective process. An example is the creation by a company called Design Con- tinuum of the Reebok Pump shoe, which in its first year accounted for over $1 billion in revenue. As described by Andrew Hargadon and Beth Bechky, a few individuals with knowledge about client demands interacted in a brainstorm- ing session with another person who had knowledge of infla- table splints. This group then linked their idea up with another person who had knowledge of IV bags that could be adapted to provide air bladders. These individuals subse- quently connected with individuals with expertise in pumps. It was only through these unfolding interactions that they came to recognize how their disparate knowledge could be relevant to building a better basketball shoe. The linking up of diverse agents (e.g., individuals, information, technolo- gies) resulted in an emergent outcome that none of them could have imagined or predicted.
While operational and entrepreneurial leadership exist in our current leadership lexicon, enabling leadership is a new way of thinking arising in response to complexity. Our research shows that although many people are practicing enabling leadership, it often goes unrecognized because we don’t have a leadership language to describe it. Worse, because it does not fit our traditional conceptualizations of what leaders do, the actions of those who engage in it can be misunderstood or misconstrued. A key implication of our research is that understanding, developing and rewarding enabling leadership practice is critical for organizational success and survival in today’s complex world.
Enabling Leadership Skills
Enabling leadership brings with it a unique set of skills. Enabling leaders must be personally adaptive to adjust their style and approach based on unfolding dynamics and their read of the situation. Understanding the nature of complex- ity and emergence, they must initiate the emergence process by mobilizing and energizing others to act and then, when the shift begins, be disciplined enough to step into the back- ground so the movement can emerge. Enabling leaders know that the only way to build an adaptive organization that is sustainable over time is unleashing the capacity of many local agents to regularly see and enact adaptive responses. Enabling emergence and adaptive space is an active process of learning. It involves an ongoing balance of knowing when to be highly visible to catalyze others and when to be invisible to enable others. Therefore, at times they need to act as the catalyst, standing up and challenging the organization to be bolder, and at other times they need to step away so that others can rise up.
In light of escalating challenges facing political and business leaders in today’s complex environments, it is imperative that we as leadership scholars and practitioners begin to take on the hard work of pioneering new models for researching and developing leadership. A new world requires a new way of thinking. Reflecting on events like Brexit and the U.S. political election in 2016, German Chancellor Angela Merkel recently said: ‘‘I think we live in a period of profound transformation, very similar to when we had a transition from agricultural societies to industrial societies.’’ This per- iod calls for us to understand the rich interconnectivity that underlies the forces of change in our societies and organiza- tions, and learn to interact and engage with it. We must learn to enable adaptive, rather than ordered, responses to com- plexity.
The IBM CEO study to which we refer is titled ‘‘Capitalizing on Complexity: Insights on the Global Chief Executive Officer Study.’’ You can find it on IBM’s website at: http://www-935. ibm.com/services/c-suite/series-download.html.
To read more about the theoretical basis of complexity leadership see Mary Uhl-Bien, Russ Marion and Bill McKelvey’s paper in The Leadership Quarterly titled ‘‘Complexity Leader- ship Theory: Shifting Leadership from the Industrial Age to the Knowledge Era’’ (2007, Vol. 18, pp. 298—318). Further infor- mation on the complexity dynamics underlying adaptive space can be found in ‘‘Complexity Leadership in Bureaucratic Forms of Organizing: A Meso Model’’ (Uhl-Bien & Marion, 2009, The Leadership Quarterly, Vol. 20, pp. 631—650) and ‘‘Leadership in Complex Organizations’’ (Marion & Uhl-Bien, 2001, The Leadership Quarterly, Vol. 12, pp. 389—418).
A practical view of complexity leadership is offered by Michael Arena and Mary Uhl-Bien in ‘‘Complexity Leadership Theory: Shifting from Human Capital to Social Capital’’ (People & Strategy, Vol. 39, Issue 2, pp. 22—27).
You can learn more about emergence in Benyamin Lich- tenstein’s book Generative Emergence (Oxford University Press, 2014). For articles in which you can apply your own emergence lens to see how emergence works in social move- ments you can check out ‘‘Fractured Lands: How the Arab World Came Apart’’ by Scott Anderson (New York Times, August 10, 2016) and ‘‘The Great Unraveling: Republicans Rode Waves of Populism Until They Crashed the Party’’ by Gerald F. Seib and Patrick O’Connor (Wall Street Journal, Oct. 26, 2016).
Andrew Hargadon and Beth Bechky’s discussion of collec- tive creativity can be found in ‘‘When Collections of Creatives Become Creative Collectives: A Field Study of Problem Sol- ving at Work’’ in Organization Science (July-August, Vol. 17, No. 4, pp. 484—500). You can read more about the relation- ship between creativity and group cohesion in Jasjit Singh and Lee Fleming’s 2010 article ‘‘Lone Inventors as Sources of Breakthroughs: Myth or Reality?’’ in Management Science (Vol. 56, No. 1, pp. 41—56).
Numerous articles address network dynamics. Lee Fleming and colleagues describe the relationship between network structures and creativity in ‘‘Creativity in Small Worlds’’ in California Management Review (Fleming & Marx, 2006, Cali- fornia Management Review, Vol. 48, No. 4, pp. 6—27) and ‘‘Collaborative Brokerage, Generative Creativity, and Crea- tive Success’’ in Administrative Science Quarterly (Fleming, Mingo & Chen, 2007, Vol. 52, pp. 443—475).
You can read further on brokerage and network closure in Ron Burt’s ‘‘Brokerage and Closure: An Introduction to Social Capital’’ in Administrative Science Quarterly (2005, Vol. 52, No. 3, pp. 482—485) and ‘‘Structural Holes and Good Ideas’’ in American Journal of Sociology (2004, Vol. 110, No. 2, pp. 349—399). Ray Reagans and Bill McEvily describe ‘‘Network Structure and Knowledge Transfer: The Effects of Closure and Range’’ in Administrative Science Quarterly (2003, Vol. 48, pp. 240—267).
You can also check out Rob Cross’s work on network structures in ‘‘Tie and Network Correlates of Performance in Knowledge Intensive Work’’ in Academy of Management Journal (Cross & Cummings, 2004, Vol. 47, No. 6, pp. 928— 937) and ‘‘Leading in a Connected World: How Effective Leaders Drive Results Through Networks’’ (Cross, Cowen, Vertucci & Thomas, 2009, Organizational Dynamics, Vol. 38, No. 2, pp. 93—105).
For more on invisible leadership see ‘‘Invisible Leader- ship’’ by Gill Robinson Kickman in Encyclopedia of Leadership (edited by George Goethals, Georgia Sorenson and James MacGregor, Sage, 2004, pp. 750—754) and ‘‘The Power of Invisible Leadership: How a Compelling Common Purpose Inspires Exceptional Leadership’’ by Gill Robinson Hickman and Georgia Sorenson (Sage Publishing, 2014).