Wednesday, January 26, 2011

Helping Your Organization Succeed in a Complex Environment

I recently had the good fortune to attend a short presentation by Sally Blount, the new Dean of the Kellogg Graduate School of Management. She spoke of the changing environment, new trends and issues that business schools and all organizations are going to face in the coming decades.

She noted speaking to a number of the captains of the finance industry -- the men and women who can take business actions that move markets. They told her they used to be able to take these actions and pretty well predict the outcome a specific action would have on the market, but that this no longer is the case.

So what's changed? The actions are the same. But the markets, obviously, are not. Why?

I would argue that the external environment has become far more complex than ever before. This complexity has been driven by huge technological changes in every walk of life. These changes have in turn affected nations, organizations and individuals around the world. Transformations such as these, combined with constantly increasing population, cannot help but reshape cultures as well. And whether you agree with global warming or not, I would argue it is one of many perceived ecological environmental changes that are influencing world economies and politics. All this complexity has added innumerable variables to what were once fairly straightforward economic equations. The world in which we all operate has become extremely complicated. Man-made and natural processes that once had a manageable number of inputs and outputs now have so many as to be practically unmanageable.

When I attended Kellogg, I took a course entitled "Management and Its Environment" taught by Dr. Stanley Hallett. It was not only one of the high points of my Kellogg career but the wellspring for much of my professional career. The class was about the way our society changes across time and the interplay between business, government, non-governmental organizations, the judicial system and so forth. Dr. Hallett's view was that for organizations to succeed, their managers needed to understand and respond to changes in the environment. He broke the environment into:
  • The green, or ecological, environment
  • The technological environment
  • The social/cultural environment
  • The economic environment (which includes the organization's financial situation as well as the competitive and general economic environment)
  • The regulatory and legislative environment
As I was trying to say above, all these environments have experienced exponential change in the past few decades.

My take away is that understanding the environment, while more difficult than ever, is more important than ever to the success of organizations. This is because the morphing external environment can alter how stakeholder groups feel and what they believe, and this can cause a misalignment between these stakeholders and any given organization with which they might previously have been aligned. And this means the organizations for which you work.

Today, many organizations are more complex than they were ten or twenty years ago, and different parts of the organization are responsible for understanding and responding to the five parts of the environment I list above. For example, IT or R&D might be responsible for understanding and responding to technological change, and most large organizations have a governmental affairs group that is supposed to understand and respond to regulatory and legislative change.

However, this increasing complexity also is an opportunity for public relations or communications, because all these changes affect an organization's stakeholders and how they will react to actions the organization takes. PR and communications departments should seize responsibility for understanding and managing this. If they don't management will place the responsibility elsewhere and communications departments will be increasingly marginalized.

This is an opportunity for communications professionals to add real senior-management-level value to their organizations by identifying and understanding emerging trends and issues and how they will affect interactions between their organizations and key stakeholders.

In a future post, I will discuss a method I've developed to conceptualize and manage these complex issues.

Please comment or call if you'd like to discuss this. I'd love to hear from you.


Liz Guthridge said...

Hi, Forrest! I'm looking forward to the next installment, especially learning about your method for conceptualizing and managing these complex issues. You're tackling an important issue. Meanwhile, it's important for all of us to take time to look up and out, rather than down and in, to make sure we're aware of what's happening around us. And last but not least, I'm so excited that Dr. Sally Blount is Kellogg's Dean. Her intellect, energy, and collaborative nature will be good for the school and Northwestern I believe. Liz Guthridge

Forrest W. Anderson said...

Thanks for your comment, Liz. Your point is well taken. We spend so much time responding to our bosses, clients, etc., that we tend not to look at the world around us.

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