An Interview with David K. Hurst (2006)

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Interview by Alistair Craven


Welcome to ManagementFirstYour website (www.davidkhurst.com) states that you present highly innovative ideas through the application of systems thinking.  What is the significance of systems thinking and its application to business?

 

David K. Hurst:

The origins of modern business management lie in our efforts to control large-scale enterprises – typically those with more than 150 people in one location or those whose operations are spread out in space and time. For example, as soon as a 19th Century railroad grew to more than 50 miles in length, management through face-to-face relationships began to break down and more analytical and bureaucratic approaches became essential. Analysis and bureaucracy allow optimization of the parts of a system but only by “freezing” them: they cannot address the dynamic integration of those parts into a coherent, sustainable whole. This is where the systems approach comes in – it never lets us forget the reciprocal relationship between the parts and the whole, between text and context, between “push” and “pull”, between performance and learning and between management and leadership.

I think it also has to be acknowledged that the systems approach (like learning!) is gently but profoundly subversive of the status quo wherever it is found, including conventional wisdoms, hierarchies and establishments of all kinds. As such, of course, it is every change agent’s indispensable ally! For systems thinkers see change as the norm and stability as something to be explained. They are never comfortable attributing effects to single causes, let alone to lone actors with clear intentions, so the heroic, decisive leader profiled in the popular press (as well as some business schools) is a ludicrous notion.

Systems thinking can also make one skeptical about the extent to which individual organizations can reinvent themselves. We know from ecology that innovation in ecosystems takes place on the edges and in the open patches within systems, where there are few constraints on small-scale experimentation. Nature doesn’t require mature trees to renew themselves – it sweeps them away with wind and fire, flood and pestilence to create the contexts for renewal – hence the phrase “gales of creative destruction” that Joseph Schumpeter used to describe the central dynamic of capitalism.

In business, Darwinian selection processes seem to be more active at the population (market) level than they are within organizations themselves. Thus, in some ways, systems thinking can be seen as an evolutionary response to classical management’s theory of Intelligent Design, championing markets, Lamarckian learning processes, opportunism and improvisation over (but not to the exclusion of) organizations, rational actors, clear objectives and strategic decision-making! The central challenge for managers in every organization is to find their way through this maze of factors and variables. But for advisors to business this nuanced systems view can be difficult to espouse, because organizations hire consultants and spend money on people development programs while markets don’t!

You have spent more than a quarter of a century as a senior operating manager in a number of diversified companies.  Can you outline some of the greatest managerial challenges you have faced in your career so far?

David K. Hurst:

The evidence on leadership development is clear: for most managers, challenging assignments, significant bosses and hardships are the major catalysts for learning. I was fortunate to have early opportunities to run relatively small businesses in times of change. The watershed experience for me was when our medium-sized, public company was taken over in a hostile, wildly over-leveraged buyout on the eve of a severe economic recession.

We went insolvent almost immediately but owed the banks so much money that it was their problem as well as ours! The mayhem that ensued provided the finest learning experience that any manager could ask for.  We had to save the best parts of the business by retaining employees, customers and suppliers, fending off competitors, placating shareholders and their minions while repaying the bankers (more or less!). As managers we entered a topsy-turvy world, where everything was just the opposite of what one had been taught in business school! From an accounting perspective we were clinically dead, with a large equity deficit that could not be remedied and yet we lived! Almost overnight we switched from a tall hierarchy to a network of project teams. The pressure was intense but as all available information was shared and the teams were given real responsibilities, we bonded together. The camaraderie, cooperation and trust that developed among the members of the management team were incredible: even third parties – customers and suppliers – said they had never met people from an organization who were more together. Everyone was on the same page.

This was powerful development experience for everyone on the management team: but individually we didn’t change as much as we grew. We grew enormously, each of us realizing our potential, becoming in some sense what we always “were”. I had always been a “closet” academic and the experience helped me put my finger on what I had always felt had been wrong, or at least inadequate, about what was being taught in the business schools. Four years later, after the dust had settled, I turned to systems thinking – initially in the form of Chinese Taoist philosophy – to understand what had happened to us and to write about it. My first-ever article, Of Boxes, Bubbles and Effective Management, was published in the Harvard Business Review (May 1984) and became quite well-known. I found that I could write, had something to say and could bridge the gap between theory and practice: these were the seeds for a second career after I left the corporate world. Action comes first: the words come later.

After the crisis was over, the greatest challenge we faced in the business was how to sustain the focus and commitment of the organization without the sense of urgency and pressure provided by external events. It took our team about six months to switch from a reactive “fire-fighting” mode to a more disciplined, internally generated agenda. But we ended up with a great appreciation of the valuable role of crisis as a catalyst for change and, after a while, we learned how to create our own senses of urgency to mobilize people. But we couldn’t sustain the high level of excitement of that earlier time, when we were fighting for our survival. As I look back on it I think that that kind of change has to be episodic – it’s just not sustainable for very long.

Rather interestingly, your book Learning from the Links aims to clarify muddled thinking in both management and golf by dealing squarely with the challenge of implementing a game plan and seeing it through.  Can you tell us more about the themes of this book and why managers should read it?

David K. Hurst:

In this book I applied systems thinking to management more formally while using an analogy familiar to many managers – that of golf. Analogies are essential to our understanding of unfamiliar, complex problems, but they need to be “disciplined” in their application. In this case I used complexity theory to discipline the analogy between golf and management.

In golf, as in management, almost everyone knows what they should be doing but very few know how to do it in the situations in which they find themselves. The challenge is to convert high-level, generic instructions into low-level, specific feedback so that one can build a sustainable system founded on parts that function reliably and are capable of improvement i.e. it is both a top-down and a bottom-up process. There are no “secrets”, no short cuts, only effective, continuous learning.

Learning from the Links covers a lot of ground: I took examples from talent development in many apparently disparate areas that have a lot in common with each other – provided one looks at them systemically.

Some takeaways: It is essential to build commitment before imposing discipline through feedback; otherwise people just won’t stay in learning mode. Effective learning demands timely, specific, visceral feedback – the kind one gets when one touches a hot stove! This kind of feedback is usually absent in both golf and management and it requires a lot of work to create it, especially at fine levels of operation. But the ability to form tight connections between actions and results at all levels of a system is essential to learning and, once present, progress can be rapid. The best exponents of it in management are Toyota with their Toyota Production System (TPS), which is all about creating the conditions for continuous learning on the production floor. On the shop floor they prefer simple, visual and tactile controls over approaches requiring data processing. This is in sharp contrast with the data-intensive systems employed in many companies on their shop floors, which too often obstruct learning.

Another takeaway from the book is that mastery takes time – there is something called the “Ten Year Rule” – it seems to take about ten years of practice with effective feedback to create an expert in fields as diverse as music, chess and gymnastics, not to mention golf and management!  So when it comes to developing managers the question is “How do we give them the particular experiences they need to realize their potential?” The coaching model, which comes from the Center for Creative Leadership, is assessment, challenge and support – assessment to understand the current situation; challenge (which includes honest feedback) to push people out of their comfort zones, followed by support to help them cope and learn from the situation. Classroom experiences are valuable only as adjuncts to experiences where managers find themselves needing the particular tools and frameworks that formal management education teaches so well. It has to be a “pull” rather than a “push” dynamic – just like a good golf swing and a Toyota production line!

In tackling change management, your book Crisis & Renewal: Meeting the Challenge of Organizational Change takes a look at a crucially important aspect of business.  What would you cite as the biggest demands facing change managers today?

David K. Hurst:

I think that the biggest challenge for any change manager is to understand the context in which they are operating; the dynamics of the system. This is where the rubber of change theory meets the road of change practice. Formal management education tries to work with universal concepts that are, by definition, context free: it is assumed that situations are analyzable and managers are free to act. Change managers, on the other hand, have to deal with specific situations – situations that may be impervious to analysis and contexts where they are not free to act. In Crisis & Renewal I developed a theory of how contexts change over the lives of organizations and what managers can do to work with the contexts in which they find themselves. Often, it seemed to me, especially in mature organizations, that change required crisis and if a crisis wasn’t manifest, then managers had to “create” one by amplifying weak signals and focusing the organization’s attention on aspects of the environment that may have been ignored. Many managers understand the role of crisis in galvanizing organizations into action but are quite inept – manipulative – in their use of them. I deal with the ethical challenge that the need for crisis poses for managers: unless managers embody in their behaviour the ideals of the organization they are trying to change, it is inevitable that their change efforts will be seen as self-serving and manipulative. To quote Gandhi, “We must be the change we wish to see in the world.”

The pace of change compared with previous eras is also an issue: people talk about the pace of change speeding up and I think that’s true but at the same time you have to look at the scale on which change is taking place. In the 19th Century the introduction of steam-powered ships reduced the transit time across the Atlantic from eight weeks to six days and made mass immigration to America possible. Over time this led to huge changes in the distribution of people around the world. Today change is faster but the scale is much smaller – Moore’s Law applies to switches on computer chips, not trans-Atlantic travel.  The implication for change managers is that the capacity to lead – to manage change – has to be distributed much more broadly and thus at finer scales throughout the organization than it has been in the past.

What is the significance of a crisis in the realm of change management?

David K. Hurst:

Crisis can be a valuable catalyst for change, especially in contexts that constrain effective action. Current business examples would be the integrated steel mills, the Big Three auto manufacturers and the so-called “legacy” airlines. Managers know exactly what has to be done in these situations, but they are severely constrained in their ability to do anything really effective. Here crisis (often in the form of Chapter 11 bankruptcy in the US) is an essential prerequisite to break the constraints on action and focus the organization and its stakeholders on the priorities. It is well known that the Chinese written character for “crisis” is composed of two symbols, one for “danger” and another that represents “opportunity”: Taoist (systems) thinking allows one to understand why this is the case. Of course crisis can be dysfunctional in a change effort if the leadership is either not forthcoming or if it turns out to have the wrong values; the history of Germany in the 1920s and 1930s is illustrative on a large scale of just how dysfunctional crisis can be.

One of your articles from Strategy + Business looks at the intriguing topic of “managing up.”  You state that this area has been neglected for a long time in business literature, but it seems to have always been an essential component of good management.  Can you explain your reasons for this?

David K. Hurst:

Historically, business literature has had a strong top-down bias – there were managers and the managed. In the formal managerial world of the 1950s this seemed so obvious that few questioned it. From a systems perspective, however, this makes no sense at all: every element of a system is, a “holon”, to uses a word coined by Arthur Koestler, that is, it can be seen both as an independent entity in its own right as well as a dependency of a larger system.

Everyone, even the CEO, is the “meat” in a systems “sandwich”. Actually it’s a spherical sandwich: one has to manage “up” and “down” as well as “left” and “right”, “forward” and “back”. But management upward is particularly important – it’s the fundamental recognition that managers are humans too and not logic machines – they are just as needy for recognition, praise and feedback as everybody else. As one climbs the ladder of seniority in an organization one gets less and less feedback and the feedback one does get is rarely timely, specific or visceral. One of the reasons for this is the scaling effect – as the scope of one’s responsibilities increases, the grain of the detail that one can pay attention to coarsens. Another reason is the all too human reluctance to bring bad news to one’s boss, let alone one’s boss’ boss. Thus, without feedback, decisions are often made and persisted in for all the wrong reasons: managing up highlights and addresses this ubiquitous problem.

In his interview with ManagementFirst, Peter Senge stated that when an organization changes only when it has to, that is “testimony to the fact that the people in it don’t have a picture of the future that’s compelling enough to cause them to automatically bring about the changes needed.”  How would you react to this view?

David K. Hurst:

I agree completely with it – it follows naturally from a systems view and is repeatedly confirmed by experience. It does beg the question, however, of how to build and sustain a compelling, shared vision of the future with people and contexts that are changing continually.

Classical management thinking seems to imply that facts and logic should rule and that if disputes can be settled rationally everyone will sign off and follow. But the facts of any situation rarely speak for themselves and people will usually interpret them in ways that demand the least effort on their part i.e. no change. As Herbert Simon pointed out, all living systems must perforce be conservative creatures of habit – it’s the only way complexity can be handled with finite mental resources. So inertia is adaptive – until you have to change. So for me a compelling vision is not the opposite of a crisis, it’s the other side of the same coin. The key dynamic is the relationship between the two. If you don’t have a compelling, shared vision that allows you to adapt, then you will experience a crisis that (provided it’s not fatal) will help you build a compelling, shared vision of how you need to change. This is particularly difficult where the feedback is equivocal and the time scale is large – global warming comes to mind as an example of such a problem. The key role of leadership follows from this – to amplify, dramatize, and focus in a compelling way on the need for change, when the immediate spurs to action are not obvious.

In this effort, as everyone knows, actions speak much louder than words: for the same reasons, in learning situations, simulations that supply powerful experiences are usually much more effective than lectures.

There have been several famous cases in recent years of malpractice and fraud at the highest level of company leadership.  As a noted commentator on business leadership, what are your general reflections on this dark period for the CEO?

David K. Hurst:

Every economic cycle of boom and bust sees corporate abuses near the top of the market when shareholders are least likely to question how apparently excellent results are achieved. There does seem to be a secular change, however, in the balance of power between managers and shareholders.

All one has to do is look at executive pay. Peter Drucker’s suggestion that CEOs should earn a multiple of no more than twenty times the pay of blue collar workers now looks quite antique (the current ratio in the US is in the region of 500!). There seems to be an emerging consensus that the ability of CEOs to “manage up” i.e. control their Boards of Directors and hence their own pay, has increased vastly.

Executive pay is not going to be controlled either by markets or institutions self-regulating themselves; it has been depressing to see how many ostensibly reputable professionals and organizations have connived in the efforts of managers to gull their stakeholders. Executive pay is going to have to be regulated by the community with government as its proxy: complete transparency is the first step and we are still a long way from that. If this does not happen the risk is that over time managers will lose their social legitimacy. Of course managers aren’t elected (although perhaps they should be), so we are unlikely to see any of the cold fury that can be visited on politicians. It’s going to be a slow process discovering governance methods that work and staying ahead of the curve as managers and their advisors find ways to “game” them. Once again, systems thinking suggests that it is an evolutionary process, with no silver bullets.

On the subject of creativity, you have said that some organizations lack “creative tension” and have lost their ability to learn.  How can a company recover from this situation?

David K. Hurst:

Successful firms have to perform two broad sets of activities that are often antagonistic toward each other. On the one hand, they have to offer reliable products and services at reasonable prices; on the other hand, they have to innovate continually to develop new customer offerings. Management theorists call these two dynamics “exploitation” and “exploration,” and the debate about their true nature and the relationship between them is a hot topic in the academic world.

For individual organizations, it’s essential for managers to understand the contexts in which they are operating.  I like Harvard Business School’s Clayton Christensen’s work in this area when he talks about disruptive innovation and what it takes for an organization to disrupt itself by forming separate organizations with different values and processes to exploit such opportunities. More generally I favour “ethical anarchy” and “prescribed fire” at many levels in the organization, always destabilizing it a bit, so that it improves its balancing skills! Such activities can range from open communication and honest feedback through the protection of mavericks within the organization against the establishment’s relentless tendency to crush them. An important initiative, that is almost a litmus test of a firm’s ability to be creative, is the effective separation of the two antagonist roles of budgeting – financial forecasting and performance management. The compression of these two functions into a monolithic budgeting process, which is standard for most organizations, restricts the ability of resources to flow through the system in anything other than the formal channels.  There are few “edges” and “open patches” where small-scale, trial-and-error experimentation can take place.

To end on a completely different note, if you had the opportunity to have lunch with any famous leader from the past of present, who would it be and why?

David K. Hurst:

The great Taoist sage, Lao Tse, wrote that “He who knows does not speak; he that speaks does not know.” It is a well recognized phenomenon that often the best practitioners make the worst teachers because they cannot articulate exactly what it is that they do. Their art is tacit and beyond language; indeed trying to put the art into words may interfere with its practice – in golf we call it “choking”, in management we call it “unauthentic” or “manipulative”. Of course, if asked, many successful leaders will tell you why they think they are successful, but often their explanations are not very helpful because they are a tangle of conventional wisdom and personal biases.

So one really has to spend time with leaders and see them practice their art. I am drawn to military situations for the same reason that evolutionary biologists study fruit flies rather than elephants – a lot happens in a short time. This gives one a choice of many leaders to study but, in the spirit of the 2005 Bicentenary of the Battle of Trafalgar and the heroic death of Horatio Nelson, I would like to spend a few weeks at sea with England’s famous fighting admiral. His career and the clear superiority of the Royal Navy in that era is a testament to the developmental powers of tough assignments, significant bosses and hardships.

If you insist that it must be a lunch then I’ll choose a leading chef – the great 19th Century French chef, Adolphe Dugléré, perhaps – and eat in the kitchen!

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