Management -The handling of complexity

Complexity has been one of the most frequently used words for some years now. People talk about complex systems, complex interrelationships, complex problems etc. There is hardly a presentation or discussion among executives without some reference to complexity - for instance, the complexity of markets, products and processes.

Most people have more of an intuitive understanding of complexity. They associate it with something difficult, incomprehensible and inscrutable; in everyday life this intuitive understanding may be adequate. Yet in relation to management it is useful and, for senior management tasks, necessary to have more precise knowledge of complexity.

In a certain sense, management can almost be defined as the art of dealing successfully with complex systems, for example steering them in a desired direction and influencing their behaviour in order to achieve particular objectives. It can also be said that management means bringing a system under control and keeping it under control.

Simple systems pose no great problems in terms of their governance, regulation and handling - in short, their control. Serious problems occur - and relentlessly at that - when a system is complex.

What really needs to be brought under control is in truth not the system, as it is known for short; strictly speaking it is the complexity of the system. So the crucial questions of cybernetics are of the following kind: how can the complexity of a system be brought under control? How can a system be controlled and regulated if it is complex? How must the structure or architecture of a system be configured so that its complexity can be brought under control in the first place?

Yet that is only half of what makes cybernetics interesting and complexity important. The other half is associated with the realisation that simple systems cannot have certain very desirable abilities in the first place. As the biologist and geneticist, Karsten, aptly said: "greater abilities grow only from increased complexity."

This factor is frequently overlooked. In numerous relevant books one can find passages, the gist of which is that one would need to reduce the complexity of a system in order to bring it under control. That is only half of the truth. What is seldom mentioned is that, by doing so, one risks destroying the system itself, as well as its main features and abilities. For example, if an organism is to be able to learn in a more exacting and demanding sense, it must exhibit a minimal amount of complexity. Below a certain threshold, learning is not possible. The same applies to perception, communication and, for example, the capacities for thought and consciousness.

Reductionism dominates

The greatest flaw in management literature, management training and the understanding of management is the reductionism to be found almost everywhere. However - the more complex a system is, the broader its behavioural spectrum becomes, while it can also react in a fundamentally more varied way to environmental changes in the market, at client companies and suppliers, those affecting competitors and in the political field etc. At the same time, though, it becomes that much more difficult and demanding to keep the system under control and to ensure that, of the large number of actions (or conditions) possible in principle, a correct one or even the best one is put into practice.

The game of chess is a good illustration of this; at the beginning and the end of a game, the number of moves is clearly limited. While the game is in full swing, however, each of the two players has a very large number of options for responding to their opponent's moves. This makes the game interesting one the one hand; no two games of chess go the same way, as we know. Yet it also makes the game difficult and demanding.

The game of chess nonetheless has the great advantage that the player can see his opponent?s moves. The game as a whole is completely transparent to both players; each can observe everything that occurs on the board. The pieces are well-known and their behavioural options - i.e. their specific variety of moves - are defined by unequivocal and unalterable rules. Although this means that the variety of moves for each piece is quite small - the pawns have the smallest, the queen the greatest -, the game of chess as a whole and as a system is hugely varied. The number of possible moves in the game of chess is 10^155. By way of comparison; the number of stars in our milky way is estimated at 10^11.

Management - control of high-variety systems

The economy and business are comparable with chess only under certain conditions, however. There is much talk today of "players" and the "rules of the game", but the analogy does not stretch far enough. There are substantial differences between chess and management. In the economy, neither the pieces nor the rules are defined. Both can change at any time and they do so - though generally one is not sufficiently aware of it.

The current state of the "game", which player has made which move and what significance and effect the move has etc., tends to be impossible to establish beyond doubt, even with the best market research. One must almost always operate with probabilities and presumptions. Often it is not even clear what "game" is being played. Much the same is true of the company itself, where - with the exception of the very simplest cases - it is also quite difficult to determine its state with sufficient precision and adequate speed.

One cannot often be sure what next state it will move towards when exposed to all the factors; most information is about probabilities, much is uncertain, everything is in constant flux and the variety of behaviour for each individual "piece" is not only much broader than in chess but utterly impossible to define precisely.

It is therefore no exaggeration to say that even small companies have systems that include astronomical amounts of variety - high-variety systems, as they are known in technical terminology. So the crucial question of management is: how can a high-variety system be brought under control? This is precisely what makes Stafford Beer's statement so important: "If cybernetics is the science of control, management is the profession of control - in a certain type of system." Viewed in terms of the complexity of systems, every manager is thus a cyberneticist - a "kybernetes" or steersman - whether they like it or not and whether they know it or not.

It is the astronomically large number of possible conditions that complex systems can in principle generate which makes controlling and regulating them a problem. How does nature solve this problem? Who or what governs, regulates and controls their complex systems? As banal as it is in one respect, it is equally remarkable in another: natural systems have no regulators but regulate themselves; they have no organisers but organise themselves. Two of the main cybernetic principles of nature are self-regulation and self-organisation.

In the systems of nature, self-regulation and self-organisation are abilities that are built into their structure. There are no natural systems of any other kind. In the systems made by humans, whether these are technical or social systems or hybrids, self-regulation and self-organisation do not generally occur by themselves; in fact they must be specifically "organised into" the systems. Their design must be consciously and systematically based on the functional principles of cybernetics. In so far as that is the case, one talks about system design. The basic pattern for the strategy of cybernetic management is thus: organise the company so that it can organise itself and regulate itself to the greatest possible extent.

The law of requisite variety

The last idea leads directly to the central natural law that was discovered in cybernetics, the law of requisite variety. It was discovered by the British neurophysiologist and cyberneticist, W. Ross Ashby, another of the great pioneers. It is occasionally referred to in the literature as "Ashby's Law" after him.

A slight modification makes it easier to understand: only variety can absorb variety. How is that to be understood? The extent to which it is possible to bring a system under control depends on its own complexity and the complexity of the means of regulation that one has at one?s disposal.

Simple systems can be brought under control by simple means. Complex systems require complex means. In order to bring a system under control, one needs at least as much variety (or complexity) as the system itself has. If - for whatever reasons - one has a deficiency of variety, the system is out of control to that precise extent. For example, one cannot generate three responses from a device using two commands.

With a vocabulary of three thousand words, Shakespeare cannot be translated into German; those who do not have a considerably large repertoire of behaviour can hardly manage a complex company. A football team must be at least as good as the opposing side if it is to have a chance of winning. The same applies to armies, chess players and competing companies. Banal? Perhaps. Just as banal as objects falling under the influence of gravity. On an intellectual level it is perhaps banal, though it is the key to success if one wants to survive in a competitive economy.

The widespread slogan, "Keep it simple", is therefore clearly - though only in a narrow sense - justified. If one succeeds in keeping things simple, the controlling and regulating mechanisms can also be simple. On the other hand, simple systems never have greater abilities - as mentioned before, this is the downside. If the environment is complex and if customers become ever more demanding and competitors perpetually improve, then the company must also be in a position to develop adequate complexity in order to respond correctly.

So "keep it simple" is only half of the truth, although it is effective where it is applicable. "Learn to cope with complexity" is the other half of the truth. The better one can cope with complexity, the better one can assert oneself in an ever more complex world.

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