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The BetaCodex Publishing series:

Volume 1 – Niels Pflaeging: Organize for Complexity.

How to get life back into work to build the high-performance organization, 2014

Also available: Organize for Complexity - Deluxe Edition

Copyright © 2014 by Niels Pflaeging

All rights reserved. This book was self-published by the author Niels Pflaeging
under BetaCodex Publishing. No part of this book, including the illustrations, may
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ISBN 978-0-9915376-0-0

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“If you want to truly understand something,
try to change it.”

Kurt Lewin
Contents

How to use this book xii

The same questions, everywhere... xiv

Part 1. Complexity: Why it matters to work and organizations 2

Part 2. Humans at Work: The secret ingredient 14
Part 3. Self-organizing teams and the networked organization 32
Part 4. Organizations as systems: Designing for complexity 42
Part 5. Dynamic-robust networks for all: This is how you pull it off 58
Part 6. Leadership in complexity: What remains of it, and what is needed 74
Part 7. Transform, or stay stuck: The way forward 92

Recommended reading/Complementary online content 114

About the author/About this book 116

Your own personal notes 120

How to use this book

You can read and use this book in a variety of ways.

As a textbook for thinking about organizations. It contains a selec-

tion of powerful thinking tools for dynamic-robust organization - all
visualized and illustrated. Some of the concepts build on each other. So
reading this book from front to back may be a good idea.

As a source of inspiration. You’ll find ideas and suggestions for chang-

ing your organization. Your leadership work. Your team. Your clients’
organizations.

As a dictionary. Organizing for complexity needs a new language;

new terms; precise distinctions. Without appropriate terminology and
vocabulary, we cannot conceive the organizational change needed
for this age, let alone produce it. This book is packed with new and
pointed terms. Those terms are often highlighted in the text, and
sometimes set in brackets.

As a workbook. The book can serve you as a companion in change or

transformation processes; individually, or for entire teams. Specific
pieces of advice with regards to this can be found in particular in Chap-
ters 5 to 7. At the end of the book, we added a few pages for your own
personal notes.

xii
{ Learn to fix the system, instead of fixing symptoms.
}
xiii
The same questions, everywhere...

This book addresses fundamental questions of interest to business owners,

managers, change agents and consultants, but also professionals of all kinds, in
general.

Don’t we all ask ourselves questions like:

• How can we adjust a growing organization, without falling
into the bureaucracy trap?
• How can my organization deal with growing complexity?
• How can we become more capable of adapting to new
circumstances?
• How can we overcome existing barriers to performance,
innovation and growth?
• How can my firm achieve higher engagement and become
an organization more fit to human beings overall?
• How can we produce profound change, without hitting
a wall?

In this book, we argue that in order to address these issues, we must create and
sustain organizations that are truly robust for complexity, as well as fit for human
beings. We also discuss how that can be achieved.

xiv
{ You will learn to design your organization for complexity -
regardless of size, age, industry, country or culture. }
Part 1
2
 Manufac- Age of global
Industrial age
turing age markets

Complexity: Why it matters

to work and organizations

(Big time.)

3
Management, the social technology:
Rise and fall of a brilliant idea

“Thinkers”/Managers:
strategize, steer, control, decide

In 1911, Frederick W. Taylor published his landmark

book “The Principles of Scientific Management.”
He proposed his new brand of organizational
science as nothing short of a “revolution” that
would eliminate the productivity constraints of
the industrial-age organization. Taylorism indeed
achieved just that. Taylor became the founder of
management as an organizational method that
would give wings to the quest for efficiency of the
industrial age.

What Taylor pioneered was the idea of consistently

dividing an organization between thinking people
(managers) and executing people (workers) – thus
legitimating the management profession as that of
thinking principals of the non-thinking human re-
sources. Taylor also introduced functional division
to shop-floor work. His concepts were soon decried
as inhumane and non-scientific, his consulting
methods as ineffective. But Taylor was a visionary
with the dream of pacifying workers and managers
through efficiency gains that would benefit all. “Doers”/Workers:
execute, obey, follow
The division principle became the DNA of manage-
ment, the social technology: hierarchical and functional division were widely
adopted after Taylor´s death in 1915, and to great effect. His principles were
later applied to non-industrial, non-shop-floor work - all kinds of work, in fact.
Management, as we know it today, is not much different from what Taylor pro-
posed a century ago. As we will see, however, command-and-control has turned

}
toxic for both organizational performance and human/social advancement.

{ We call tayloristic management Alpha.

4 Part 1. Complexity: Why it matters to work and organizations

The price of simplicity:
Three systemic gaps caused
by management

1. The Social Gap

Hierarchical division and top-down control
cause an erosion of social/group pressure
and dialog, and a bias towards management
by numbers and leadership by fear

2. The Functional Gap

Functional division leads to narrow and frag-
mented responsibilities. It produces a need
for managed/imposed coordination through
process control, interfaces, planning, rules, stan-
dards, hierarchic power etc.

9 am:
thinking
3. The Time Gap
The division between thinking thinkers and non-
thinking doers, between planning and execution,
results in the need for managed/imposed roles,
complicated IT, strategy, targets, forecasting, and 3 pm:
planning doing

{ None of this feels good. None of this creates value for people,
customers, or owners: the three gaps all lead to waste. That´s
a high price for the illusion of control. }
5
The historical course of market
dynamics and the recent rise of
complex, global markets

We call the graph shown on the right the “Taylor Bathtub.”

The industrial age brought with it a brief period of fast-growing, spa-

cious mass markets with relatively little competition. Monopolies or
oligopolies dominated, markets were dull, or sluggish. During that
period, Alpha became the standard organizational model: because it was
possible, for the first time in human history, to largely eliminate com-
plexity from value-creation with the help of machines and standards. For
this task Taylorism, or Alpha, was the perfect solution.

Those days are gone. High-dynamic value creation re-emerged around

the 70s, due to the rise of global, high-competition markets and the
return of more individualized demand that made customization para-
mount and enabled “mass-customization.”

High-dynamic value creation, in turn, calls for an increase in the human

part of problem-solving processes. Alpha has become a roadblock.

* The terms dynamics and complexity will be used synonymously throughout this book,
most of the time - for the sake of simplicity.

6 Part 1. Complexity: Why it matters to work and organizations

 Local markets, Spacious markets, “Outperformers” exercise
high customi- little competition market pressure over con-
zation ventional companies

high sluggish/dull, high

dynamics low dynamics dynamics
Dynamic part
of value
creation
Solution: man

Age of Industrial Age/ Age of

Crafts Manu- Age of Global
facturing Tayloristic Industry Markets
Formal part
of value
creation
Solution:
machine
1850/1900 1970/80 today

{ The dominance of high dynamics and complexity is neither

good, nor bad. It‘s a historical fact.
}
7
The difference between
the complicated and the complex

Complicated systems operate in standardized ways. In

complicated systems imprecision is diminished and non-
objectivity and uncertainty are reduced as far as possible.
Such a system can be described through non-ambiguous
cause-and-effect chains. It is externally controllable.

Any high-precision machine is complicated: everything is

done to avoid imprecision/to increase precision. A watch,
for example, is calibrated to diminish mistakes and uncer-
tainty. It is configured to supply objective data, certainty
and a minimum of illusion.

Complex systems produce surprises. They have

presence or participation of living creatures. They are
living systems - that’s why they may change at any
moment. Such systems are only externally observable –
not controllable.

A complex systems´ behavior is non-predictable. In a com-

plex system, it’s natural that there is a level of error, uncer-
tainty and illusion that is much higher than in complicated
systems. A complex system may possess elements that
can operate in standardized ways, but their interaction
would be constantly changing, in discontinuous ways.

{ To treat complex organizations as complicated systems is

a fundamental thinking mistake, an over-simplification. }
8 Part 1. Complexity: Why it matters to work and organizations
Consequences of complexity:
The importance of mastery for
problem-solving today

The only “thing” capable of dealing effectively with complexity

is human beings.

What matters in complexity, as far as problem-solving is concerned,

is neither tools, nor standardization, nor rules, nor structures, nor
processes – all those things that used to serve us well in the indus-
trial age and its dull markets.

In complexity, the question isn’t how to solve a problem, but

who can do it. What matters now is skillful people, or people with
mastery or prowess. People with ideas. We call them professionals.
Professionals who have pupils are called masters.

Problem-solving in a life-less system is about instruction.

Problem-solving in a living system is about communication.

{ Complexity can be neither managed, nor reduced.

We can only confront it with human mastery.
}
9
The improvement paradox:
In complexity, working on separate
parts doesn‘t improve the whole.
It actually damages the whole
Working on individual parts of the system
does not improve the functioning of the
whole: in a system it is not so much the
parts that matter, but their fit.

Thinking and acting mechanistically, additively

10 Part 1. Complexity: Why it matters to work and organizations

What really improves a system as a whole is
working not on the parts itself, but on the inter-
actions between the parts.
One might call this attitude “leadership.”

Thinking and acting systemically

{ Systems are not improved by tinkering with the parts,

but by working on their interactions.
}
11
Symptoms, or problems?
Not everything that looks
like a problem actually is one

Most of the time when we

talk about “problems” in
the context of work and
organizations, we are not
actually discussing problems,
but rather symptoms. Symptoms
are the visible, touchable effects
of a problem. They include defects,
mistakes, bugs, or unpunctuality,
and resistance against change.

A simple thinking tool that helps to

“sharpen” problems, and to get to
the roots of problem´s symptoms,
is the “5 Whys” technique that
became famous through Toyota. It
prevents giving in to the tempta-
tion of hastily jumping to conclu-
sions or solutions whenever symptoms are observed.
The attempt to find solutions for symptoms alone, or the tinker with symptoms
before the problem has been understood, is called activism.

In complexity problems´ complex portions tend to be connected, forming messes.

Because of this individual problems often cannot be solved in an isolated fashion.
Just as an uncountable number of water lily leaves may cover a lake´s surface - all
coming from only one or a few plants rooted in the bottom of the lake. In organiza-
tions, you may find hundreds of problem symptoms, but only a handful problems
which may go back to one or two messes. By acting upon the messes with ad-
equately complex solutions, many problems dissolve.

{ }
Tools are unsuitable to deal with messes.

Activism breeds failure and makes learning impossible.

12 Part 1. Complexity: Why it matters to work and organizations

Consequences of complexity: The
importance of mastering problem-
solving in dynamic contexts

In sluggish markets, organizational success was produced by applying Alpha

methods and behavioral repertoires. Therefore, people in many organizations
know and command just this one kind of repertoire. It is similar to having been
raised in England and being used to driving on the left side of traffic.

We tend to ascribe experienced success to our own behavioral repertoire:

“I was successful because I acted so and so.” In fact, we were successful be-
cause the behavior matched the context.

Today, in high dynamics, success demands another repertoire, one that is ap-
propriate to this new context, but also one that has hardly been practiced or
learned. This new repertoire may even be ridiculed. Then they say: “Soft skills
are for people who don´t know anything else,” or, “That’s a nice-to-have, but
not performance-relevant.” Failure is ascribed to changes in context, but not
our own behavior. So organizations today tend to deal badly with problems by
reflex. It is like driving a car in England after having just arrived.

{ We must re-train our reflexes.

}
13
About the author

A way to describe myself: I am a consultant, speaker and author living in New

York City and Wiesbaden, Germany. I regard myself as a serious business thinker,
but also as a practitioner: as an advisor, I help managers and organizations of all
kinds to master profound change. For five years, I was a director with the Beyond
Budgeting Round Table BBRT, a think tank. Before that, I had worked as a control-
ler at multinational industrial corporations for a few years. During this period, I
discovered my passion for organizational transformation, with which I have been
engaged full-time since 2003 in a variety of roles. This is my fourth book about this
topic, and my first book ever to be published in English. All concepts presented in
this book are both research-based and practically tested.

Another way to describe myself: Early-on, I wanted to experience and understand

the world. So I looked for opportunities to get to know different cultures and
countries, and to work in diverse contexts. I spent one of my college years in Seville,
Spain, and later worked in Buenos Aires for a while. I lived in São Paulo for 12 excit-
ing years. Through my work, I found and find opportunities to experience work
and life in in many countries, and I got used to working in four languages. All that, I
believe, has shaped my view of organizations. Despite differences in language and
culture, our handling of work is surprisingly homogeneous, globally, which is prob-
ably explained by conditioning during our formative years. Learning and education
have consequently become a matter of strong interest to me as well. Since 2011,
I have been teaching leadership and high performance in complexity at several
universities and colleges. I am a dedicated promoter of and activist for profound
reform within business education.

My white papers in English are published on the portal of the BetaCodex Network,
a movement I cofounded. You can access the white papers from this page: www.
betacodex.org/papers . I look forward to hearing from you. So get in touch, if you
like. E-mail: contact@nielspflaeging.com. Follow me on Twitter at @NielsPflaeging

116 The rest

About this book

Organize for Complexity turns out to be quite a distinctive book, compared to

my previous ones. I enjoyed gaining some experience with writing and publishing
books on leadership. Between 2003 and 2011, I wrote three, all in all, among them
“Leading with Flexible Targets” and “Bye-bye Management!”, which were published
in German and a few other languages. I am pleased that reviews and feedback
from readers and critics were always predominantly positive and even enthusiastic.
Including a few business book awards.

But I could not help noticing that the ideas on leadership, change and learning
that I endorsed in my books only reached and (more importantly) touched a tiny
fraction of their intended audiences. I wanted my readers to have a similarly in-
tense, fun and engaging experience that I saw audiences having in my workshops,
seminars and keynotes! But that did not quite seem to happen with the books.
The traditional textbook format may convey that kind of experience to some - but
certainly not to everyone.

So with this one, I am trying a fresh approach to the business book. It is designed
to reach “readers” and “non-readers” alike. Those who like words. Those who like
imagery, visuals, color, playfulness, aesthetics. And those who want to experience
fun while learning something useful about business, organizations, and leadership.
This book is designed to be “read” and experienced in greatly varying ways.

Writing, editing and publishing this book felt very different from what I experi-
enced with my other books. It was a much more intimate process: approaching the
work without a traditional publisher gave me full control over all elements of the
book, for the first time. Which was and is truly refreshing, and exciting.

I hope this book will be the start of a journey for you. I hope you enjoy it and that it
will inspire you to act on it!

117
 Updating organizations
and work for the knowledge age
A book about complexity and work – and about how to deal productively
with both. A condensed introduction to the theory and practice of
organizational high performance. A manifesto for contemporary leadership
and profound transformation in organizations of all kinds.

Praise for books by Niels Pflaeging

“Boldly, Pflaeging dissects classic management theory and

in a well-humored manner, offers coherent alternatives.“
Harvard Business Review

“Niels Pflaeging is the father of the end of management.“

Winfried Felser, competence-site

“When Pflaeging shakes the dogmas of management,

they crumble in his hands.”
Financial Times Germany

“Niels Pflaeging is always right up front, where the

new in business is getting measured and mapped.“
Peter Felixberger, changeX

BetaCodex Publishing, New York

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