What incremental change can’t do

A senior planning manager in a bank was complaining to me the other day, “So many of the plans presented to us don’t actually stack up. They describe why things must change and then state what changes they will implement. But they don’t demonstrate whether the planned change will meet the need.”

It seems that plans are often long on analysis of the current situation and short on where they are going and whether their plan will get there. This makes it hard for the C-suite and board to make informed decisions. The status quo is familiar and understood. Even when there are severe problems, it can be easier to tinker than head off boldly in a new direction.

This is actually a common problem with system change projects: many things need to undergo transformation before the reformed system functions well. Small incremental changes or isolated actions may never overcome the tendency of the system to revert to old ways. Even worse, those small actions may cause chaotic changes and make the system even more unmanageable.

The problem facing my planning friend is that when contemplating systemic change, we are usually unlikely to be able to describe the ideal future in detail or describe the precise route there. This makes planning hard and can lead to inertia. Conspiracy theorists will claim this is deliberate – that the financial institutions are colluding to maintain the status quo. They believe the plan is to never change. The absence of change just confirms their suspicions.

Those of us on the inside know that if we knew where to go and how to get there, we would set off immediately. None of us want to work in a system that is universally despised. We are looking at each other, wondering what the effects of potential changes will be. To go too far ahead is a dangerous move, when you don’t know it is the right direction. Uncertainty about direction or destination create inertia. Within the industry, we are influenced by each other. Our internal stakeholders watch the caution or the futility of central initiatives. Our external stakeholders hear nice words but don’t believe there is substance behind it. So, in a simplistic sense, the conspiracy theorists are right: we are colluding to stay still.

The question is how do we shift from a static system to a dynamic system? Strangely, this will require us paying greater attention to these internal and external stakeholder relationships, not less. Explicit management of the relationships in the system holds the key to freeing us from paralysis.

The trick here is to get right which stakeholders are included in our organisation’s network of influence. Neither isolation nor collusion will be good for the system as a whole, but intentional proximity will be. For example, if competitors are more transparent with each other and less transparent with customers and other stakeholders, then dysfunctional collusion will occur. That would constitute a form of insider trading. If, on the other hand, the way information and influence flows is more transparently managed, all parties in the market can have confidence that it is a fair and open market even while it is changing. The biggest risk of instability or distorted (dysfunctional) markets comes from shocks to the system. Those shocks occur when unexpected information is revealed. Allowing visibility and discussion about the relational dynamics between stakeholders as the market evolves is key to transitioning the system.

So my reply to my planning friend was that if he was looking for system change, he couldn’t use the traditional planning methods to confirm the validity or progress of a plan. Instead, he needed plans that pay attention to the relational dynamics in their network of influential stakeholders. This becomes more achievable when the system can be described in terms of a relational balance sheet with relational flows. The validity of the plan can then be assessed by looking at whether the relationships are working the way they are expected. By using a structured relational framework (like Relational Proximity®) such assessment of the state of the system can be consistent over time and across a range of stakeholder relationships. This enables discussion between stakeholders in the system as well as organisational/system learning.

This perspective requires that a different set of disciplines and capabilities be developed through the organisation. Perhaps a Chief Relational Officer will be required in every bank, helping the organisation manage its relational capital and relational risks. Maybe all managers need to become as conscious and fluent in their relational activity as they are in their financial activity. Either way, if we don’t actively manage who is in our influence network, our wilful blindness will continue to be a problem and system change won’t happen.

Isolated incremental change will not bring systemic change. Collaboratively reinforced change can.