Sunday, October 26, 2014

How has Russell Ackoff's Work influenced on Decision Making?

Ackoff provided concepts and tools of system learning to overcome blind spot in decision making.

Russell Ackoff wrote a book with Frederick Edmund Emery about purposeful systems which focused on the question of how systems thinking relates to human behavior. "Individual systems are purposive," they said, "Knowledge and understanding of their aims can only be gained by taking into account the mechanisms of social, cultural, and psychological systems". Any human-created systems can be characterized as "purposeful system" when its "members are also purposeful individuals who intentionally and collectively formulate objectives and are parts of larger purposeful systems. More specifically, how has Russell Ackoff’s work influenced decision making?

System learning: Russell Ackoff's work influences on management and decision-making through his work on systems learning. He saw effective decision making when people looked at an organization as a whole rather than single items. That means the effective decision making is based on understanding relationships between activities inside as well as outside an organization. For many business leaders, Russell Ackoff's work enhanced understanding of systems thinking, understood organizations as marketplaces: People in organizations tend to see each other as peers, superiors, or subordinates - while in a critical sense, they are customers and suppliers for each other. Understanding these dynamics enables much more effective analysis and design of organizations. 

The dynamics of design: Developed methods that engaged the right people early in any design activity, in ways that "captured" innovative thinking and managed decisions and conflicts throughout the design cycle. Understood organizations as Socio-Technical Systems: people readily perceive organizations and projects requiring the confluence of multiple perspectives ("Business, People, Process, Technology") to make great decisions. While managers will always encounter significant discipline-based blinders, Ackoff provided concepts and tools to overcome them.

How and Who makes the decision: The key decision factor is how you frame the issue (to be decided on), another factor needing more attention is WHO makes the decision, in particular, why is it that in business decisions are ultimately made by one person, the managers or heads of their respective units? Given the complexity of the digital business world and given the fallacies of individual decision-making, more often than not leading to poor decision-making, isn't it time businesses moved to groups, teams, circles making the decision and being accountable? The fundamental principle remains the same, more often,  that boards (Ackoff) or circles (Endenburg) make far better collective decisions in business.

Focus on the value proposition: Understanding that budgeting is not an accounting exercise but quantifying a planned set of activities bridged the gap. Suddenly the question was not what does that cost but "what are you doing and why? Money was a language through which you could equalize activities that otherwise would be hard to compare, always putting the activities in focus. In addition, people seeing others inside the organization as customers. And the employee’s role is enhanced when you understand the needs of others, particularly from the value proposition. 

The good decision making shall consider both effectiveness and efficiency: Science, technology, and economics focus on efficiency, but not effectiveness. The difference between efficiency and effectiveness is important to an understanding of transformative leadership. Efficiency is a measure of how well resources are used to achieve ends; it is value-free. Effectiveness is efficiency weighted by the values of the ends achieved; it is value-full.

Design thinking and socio-technical systems concept are important in digital transformation, and it should become the fundamental principles for businesses to understand digital dynamic and make the right decisions, the purposeful system, which implies both individual and organization as a whole, shall become more value-driven, Ackoff provided concepts and tools to overcome blind spot in decision making and helps businesses climbing business maturity from efficiency to effectiveness to agility.


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