9 Organizational aspects of wisdom

Brad C. Anderson

If you thought that managing a team’s dynamics was difficult, it gets even more challenging when you look at the whole organization. Organizations involve the coordinated activity between many teams, thus magnifying the challenges. Not only do you have a multiplicity of groups that need to manage themselves, but now you also have to manage the dynamics between groups.

This added complexity makes for a chaotic and high-pressure life for members of an organization.[1] Peter Vaill described the chaos of organizational life as “… the nonstop cascade of surprising, novel, obtrusive events that pepper (and sometimes bombard) all managers, events that often cannot be foreseen or planned away.”[2]

The immense time pressures that exist in organizations compound this problem. These time pressures prevent managers from reflecting on unfolding events and learning from experience. Consequently, managers think and act on the fly. This is hardly a recipe for wise action.

These challenges can cause many problems for organizations, which the table below summarizes:[3][4][5]

Dysfunctions of values Dysfunctions of rationality Dysfunctions of power
Unwise companies

  • Impose their values on employees
  • Lack appropriate checks and balances, leading to abuse of staff, small stakeholders, consumers, suppliers, and the environment
Unwise companies

  • Focus on addressing the symptom rather than the cause of problems
  • Ignore data and theory
  • Fail to connect the changes they implement to business issues they face
Unwise companies

  • Tolerate the arbitrary use of power
  • Ignore the impact of power and politics on decision-making
  • Pursue change to create the illusion of managerial action, which in turn leads to promotions and stock market returns
  • Pursue change not because it is needed but because other firms in the industry are doing it, and managers want to follow the pack.

Exercises

Reflect on the challenges members of an organization face as described above: chaos and time pressure. Then, review the dysfunctions caused by unwise action listed in the previous table.

  1. How might those challenges of chaos and time pressure lead to those dysfunctional actions? How might those pressures lead people to make dysfunctional choices?
  2. Perhaps you have your own experience working in this type of environment. Are any of the organizations you have worked for guilty of partaking in these dysfunctional actions? What are the pressures that led you and your co-workers to take those actions?

For inspiration, the example directly below describes a situation where managers mimicked what other companies did, even though they believed those actions were detrimental in the long-term.

An Example of Why Managers Follow The Pack

In his book, A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation, the author described the forces that led bankers to make investments in high-risk assets before the 2008 financial crisis. Despite short-term gains, most bankers knew these assets would ultimately result in losses, yet they still invested. Why?

Initially, when one bank makes a high-risk investment, they earn significant profits for a while. Their superior performance makes other banks look bad. Clients begin saying, “Bank A is earning a 15% return on investment; you are only earning 10%. Why should I invest my money with you?”

Bankers can try to explain to their clients that Bank A’s investment strategy is highly risky and will eventually result in losses. These losses, however, may take a long time to occur, and investors want to earn profits now.

When another bank, say, Bank B, makes the same investment, they, too, get a 15% return. Then Bank C joins the game. Ultimately, if you and your bank do not make the same high-risk investment, then you end up looking like you are a worse-than-average bank. Customers leave, and bankers get fired.

If you want to stay in the game, you need to follow the pack and make similar high-risk investments.

Then, when the high-risk investment ultimately goes bust, it goes bust for every bank at the same time. When clients say, “You’re losing my money!” the bank can reply, “Everyone is losing money. The economy is in a downturn, and everyone is suffering.”

Thus, if you fail to take the high-risk investment, you end up looking like you are performing worse than average when the investment is doing well. Then, when the high-risk investment ultimately fails, it fails for everyone, so you can claim that this calamity is beyond your control.

This dynamic creates immense pressure on bankers to follow other banks’ lead, even if they believe the strategy is ultimately doomed to failure.

The challenges described above make wise action difficult. Organizational wisdom, however, is possible. The following table summarizes companies’ attributes that foster wisdom:[6][7][8]

 

Strength in Values Strength in Rationality Strength in Use of Power
Wise companies foster employees who

  • Maintain fundamental values and priorities
  • Live a value system, rather than paying lip service to one.
  • Do not sacrifice values for the sake of processes, but rather design processes that achieve their values.
  • Continually reflect on the meaning and importance of key values.
  • Recognize that multiple values are always at play rather than a single, overriding value
  • Weave values and organizational priorities together to create insights about what actions to take
Wise companies foster systems and employees who

  • Identify and frame problems in a productive way.
  • Facilitate effective communication between groups within the organization
  • Identify and develop multiple possibilities for action.
  • Find time to reflect on fostering an awareness of the paradigm through which they are viewing problems.
  • Help their co-workers to see problems in a new way.
  • Continually learn
  • Honour the past by understanding how the organization historically addressed problems that it can then apply to current and future challenges
Wise companies foster

  • Employees who understand no one has absolute control and so bad things may happen that no one can prevent.
  • Employees who understand how they may accidentally use power to disempower others in their organization
  • Continuity of leadership. Developing organizational competency takes years of consistent effort, which requires continuity of management.

An Example of How Employees Use Their Power to Disempower Others

One of the elements in the above table was wise companies foster employers who understand how they may accidentally use power to disempower others in their organization.

What does it mean to use your power to disempower others? Let’s look at an example.

A university department consisted of several faculty members. A few of these members had founded the department decades ago. Other members were recent hires and had only worked for several months to a couple of years.

Though the older, founding members of the department had no formal authority, they held these individuals in high esteem. As a result of the respect and seniority these senior members had, they possessed informal power within the department.

In itself, there was nothing wrong with this. These founding members had significant experience and a deep interest in the department’s success. Their authority, even though it was informal, did manage to “disempower” others, though.

During meetings, faculty would often debate different solutions to the problems they had. When one of these founding members spoke, however, the department considered the issue closed.

If a newer faculty member was dissatisfied with the resolution and sought to re-open the debate, they were met with resistance from the department. The debate was tolerated only so long as the founding members tolerated it.

As newer faculty chafed under this dynamic, morale dropped, and several people felt bullied.  The department risked sliding into dysfunction until the university intervened and moderated a negotiation over how department members treated one another.

If you have power, whether formal or informal, the key takeaway is you may inadvertently silence those with less power. Not only can this erode morale and create a toxic work environment, but it can also close avenues of good ideas and needed change.

To counter this, organizations that aspire to act wisely will foster awareness among its employees of how people might use power to disempower others. They further create systems that allow all voices to be heard.

Key Takeaways

  • At the level of the organization, acting wisely requires individuals who:
    • Emphasize and honour fundamental values
    • Inspire others to solve problems creatively.
    • Use power constructively.

  1. Vaill, P. B. (1998). The Unspeakable Texture of Process Wisdom. In S. Srivastva & D. L. Cooperrider (Eds.), Organizational Wisdom and Executive Courage (pp. 25–39). San Francisco: The New Lexington Press.
  2. Vaill, P. B. (1998). The Unspeakable Texture of Process Wisdom. In S. Srivastva & D. L. Cooperrider (Eds.), Organizational Wisdom and Executive Courage (pp. 25–39). San Francisco: The New Lexington Press.
  3. Burke, W. W. (2007). Organizational Aesthetics--Aesthetics and Wisdom in the Practice of Organization Development. In E. H. Kessler & J. R. Bailey (Eds.), Handbook of Organizational and Managerial Wisdom (pp. 243–259). Thousand Oaks, CA: Sage Publications Inc.
  4. Lawrence, P. R. (2007). Organizational Logic--Institutionalizing Wisdom in Organizations. In E. H. Kessler & J. R. Bailey (Eds.), Handbook of Organizational and Managerial Wisdom (pp. 43–60). Thousand Oaks, CA: Sage Publications Inc.
  5. Beyer, J. M., & Nino, D. (1998). Facing the Future: Backing Courage with Wisdom. In S. Srivastva & D. L. Cooperrider (Eds.), Organizational Wisdom and Executive Courage (pp. 65–97). San Francisco: The New Lexington Press.
  6. Beyer, J. M., & Nino, D. (1998). Facing the Future: Backing Courage with Wisdom. In S. Srivastva & D. L. Cooperrider (Eds.), Organizational Wisdom and Executive Courage (pp. 65–97). San Francisco: The New Lexington Press.
  7. Vaill, P. B. (1998). The Unspeakable Texture of Process Wisdom. In S. Srivastva & D. L. Cooperrider (Eds.), Organizational Wisdom and Executive Courage (pp. 25–39). San Francisco: The New Lexington Press.
  8. Vaill, P. B. (2007). Organizational Epistemology--Interpersonal Relations in Organizations and the Emergence of Wisdom. In E. H. Kessler & J. R. Bailey (Eds.), Handbook of Organizational and Managerial Wisdom (pp. 327–355). Thousand Oaks, CA: Sage Publications Inc.

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Organizational aspects of wisdom by Brad C. Anderson is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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