The Soul of Talent Management

In our daily work, we often forget that management is a tool, not an end in itself, and so we miss the reality of what it is we are managing. In the case of “talent,” we want to support the growth of people, and to this end management can be at odds with the needs of talent.

The goal of talent management is to find good people to hire, motivate them to join us and give the best of themselves, and support them in seeing their strengths and weaknesses and developing themselves in the time they spend with us. From the organizational side, it wants to understand the needs of the managers looking for talent, bring the right people together for the right functions, and enable the succession process which ensures that the best people will succeed the current managers in steering the fate of the company.

Management systems can do none of this by themselves, only people can. There is no replacement for personal contact and interaction, where experience and insight enable us to exercise good judgment about who we can and want to work with. Many companies have understood that they are in the “people business.” But very few seem to have grasped what it means to live with people as people, not functions, on a professional basis.

As always, grasping the soul of something is complex. At a first level, talent management is about relationship abilities.

At a talk over coffee this week, a friend who does global talent management and I reflected on some of the leaders she supports. What I enjoyed from the start was the absence of manager-speak. The way she talks about people is based in complex perceptions about, e.g. their ability to connect with their staffs (or not), how they are able to see interrelationships and relate details to big pictures (or not), and of combinations of great skills with breathtaking blindspots and how those go together in personalities with a history she knows and reflects upon as the context of her understanding. Her complex understanding lets her describe developmental paths that the personalities behind the functions could take to realize their potential, and the ways she could provide the environment and the resources they would need. If I were in their place, I would feel seen und supported in ways the management systems by their very nature cannot do.

When we focus on people like this, solutions are often quite simple. Difficult is managing the emergence of insight into the nature of the problem. How many talent management teams devote their time to emergent insight into the potential of their people?

At a second level, understanding the essence of a task takes a philosophical bent of mind. Thinking, as one of my philosophy teachers used to say, has little to do with logic and much more with the presuppositions which inform our reasoning. For example, if we believe that business is about making money, and people are but resources to be used to that end, then we can spare ourselves the effort of talent management from the start and reduce HR to the transactional processes of contracts and compensation. In a shareholder value environment, talent management is a waste of time. It is much more efficient to focus on performance through outcomes than to invest heart and soul into developing people.

But if the company embodies a philosophy of customer intimacy, great and innovative product development, or service to customers and society, not to mention the internal success factors of creating value through knowledge or design, talent management will be the company’s most important success factor (incidentally creating more shareholder value obliquely than the direct approach).

The contrast between these two philosophical world-views could not be more fundamental. In a rip-roaring blogpost on the consequences of the transactional model of management for employee engagement, James Altucher (@jaltucher) explains to the downtrodden and disengaged masses of workers 10 Reasons Why You Have to Quit Your Job This Year (e.g. reason 3: Corporations don’t like you). I suspect that one of the reasons many corporations with a shareholder value philosophy still survive in the face of the way they manage their talent down to its lowest possible denominator (viz. Dilbert), is that their people haven’t yet grasped the more dignified alternatives. Had they enjoyed a talent manager like my friend, they would have had no choice but to leave, which is another serious argument for not investing in talent management worthy of the name for classical corporations. It just creates a mismatch between people’s expectations and company vision which harms the bottom line.

A third level is strategic and concerns how we understand work. In “Race Against the Machine,” economists Erik Brynjolfsson and Andrew McAfee argue that one of the root causes of unemployment is not a slowdown in the pace of innovation, but quite the opposite. Technological innovation is accelerating, so that tasks can increasingly be automated which only a short time ago were considered to belong to an inviolably human domain. Google is bringing the driverless car close to the breakthrough point for production and public use; Philips is insourcing shaver assembly to Holland, not to flee rising costs in China and produce jobs at home, but because robots have reached the point where they can do fine mechanical assembly without many people; and the Singularity Hub reports on Philip M. Parker, Professor of Marketing at INSEAD Business School who has over 100,000 books to his name and 700,000 books listed to his company at, each written in about 20 minutes by a robot (a computer system which can write technical books, and whose cousins are working on doing novels). Automation is reaching the sphere of literary production!

In a video post on the book, Rethinking Race against the Machine, John Hagel recognizes how automation makes many jobs vulnerable to elimination, but questions the framing of the fact as a technical challenge. The strategy of corporations has been to define work in ways which make it a perfect target for outsourcing and automation, by striving to define standardized, highly scripted work. But in the current environment of uncertainty, where black swans define our reality more than stability, such work provides little value and is in fact best done by machines. Hagel calls on managers to innovate our institutions and work practices to allow us to race with the machine, rather than compete with it. By inventing work which deals with complexity, our human capacity for pattern recognition and creativity once again comes into its own, and the machine can support us rather than replace us. The lazy dependence of companies and managers on the mechanical paradigm of work is creating a world in which work is an increasingly rare commodity–a paradoxical situation in a world crying out for innovative solutions to complex and systemic problems whose implementation will give everyone more than enough to do.

It is in such an environment of human and complexity-centred innovation that talent management, in the deeper sense of profound interest in the development of human beings to deal with complex problems, comes into its own.

Complexity-Based Talent Management

Compliance is killing our organizations, and the function in which this is most painfully obvious is Human Resources. People are among the many living things which cannot practically be reduced to ordered systems processes–at least not without destroying the very qualities like intelligence, passion, motivation and creativity that make us what we are, and which are the prerequisites for success in the knowledge and creative economy we are fast moving into.

In the quest to be seen as relevant business partners in corporate strategy, HR has attempted to take over the mantel of efficiency which is at home in the technical processes of production, and to gain a position of influence at the top mangement table by making a demonstrable financial contribution to the bottom line.

Much in the tradition of Kaplan and Norton of balanced scorecard fame, who see the main challenge of management as that of aligning the organisation to the mission/vision and strategy of top management along the lines of financal kpi’s, HR has tried to deliver value by aligning human resources to strategy. The result has been what Robert Bolten of KPMG HR has called the “doom loop” in the 2012 KPMG Rethinking Human Resources in a Changing World study, where the implementation of “…the latest best practice generic models… result(s) in a diversion of attention away from where the real value lies–in pursuing solutions tailored to the unique circumstances and requirements of any given business.”

By giving top management what top management thinks it wants, HR merely confirms its credibility gap. Henry Ford is said to have commented that had he asked his customers what they wanted, they would have said a faster horse-drawn carriage. HR’s dilemma is that compliance in terms of the ordered systems paradigm of production and finance does not give top management the agile, flexible and motivated workforce it needs, but quite the opposite.

(As a side-note on the origins of the HR-dilemma, whether the simple systems planning approach applied in Finance makes a productive contribution even to financial results is a question I leave to finance experts like Bjarte Bogsnes from Statoil, who questions the strategic planning paradigm of Finance most convincingly in Implementing Beyond Budgeting, but that is another story. Applying the principles of what doesn’t work in Finance to HR merely compounds the problem down the organisation.)

To make a strategic contribution to value in the knowledge and creative economy, HR will need to break with the ordered systems paradigm still governing the thinking of many Boards, to treat its subject matter on its own terms. People are living organisms, not trivial machines, and so belong to the domain of complex adaptive systems. A teaching metaphor by David Snowden at Cognitive Edge, a colleague from the field of knowledge management, helps to illustrate the difference between the three kinds of order that exist in nature (chaos, order and complexity), and their implications for managing people in this short video called How to Organise a Children’s Party.

The complexity solution to people management, which Dave describes as “managing the emergence of beneficial coherence within attractors, within boundaries,” provides an alternative to current ordered systems management and HR approaches which is based on self-organisation. But it is one which also requires a shift from the attempt to manage talent by establishing bureaucratic processes, to one of engagement with talent on an operational level, where solutions can be tailored to the unique circumstances and requirements of the actual business.

What Robert Bolton recommends for HR in the summary to the KPMG study is a shift in the operations of HR from cenralized planning and control (“the doom loop”) to a transitional role as a shared services organization staffed by “people agenda architects” reporting to a “Chief Change Officer:” Ultimately, “Some organisations could go even further and have leadership taking direct control of people programs…” HR responsibility would radically decentralize, and HR would morph into a change management organization driving strategic initiatives through its interaction with people.

What this would likely mean is that talent recruiting and development would no longer be managed, but fall within the domain of entrepreneurial decision-making and trial-and-error experimentation. As such, the Board would take a direct interest in its high potentials, as Brin and Page have famously done at Google (and which Eric Schmidt describes in this interview at 1:50 as “smart people want to work with smart people and want to be informed…” in an empowerment model of governance), even as the organisation has grown exponentially to corporate dimensions.

Like at Google, talent management would become “disintermediated,” meaning that decisions about talent would no longer be filtered through HR evaluation processes to be reported up the hierarchy in the form of metrics for final approval, but would be made directly by managers responsible for results. Unlike Google, however, whose top-down talent model of the start-up years cannot be replicated by established companies, decisions about talent would be decentralized and made at the operational level, where the practical knowledge about what is needed, combined with the social sense to know what works is located. What it would also mean is that “talent” in all its facets would stop being the focal point of an annual management ritual, but would be the primary focus of daily work. Talent development would become less an exercise in evaluation and training, and more one in experiential learning rooted in actual change management projects triggered by market challenges, where “talent” would have the opportunity to take responsibility for achieving business priorities, learn through trial-and-error, and show through performance what results it is capable of achieving.

Management would need to provide their people with the priorities around which they could self-organize, with the resources they would need to power their efforts, and with the ethical, legal and risk frameworks which would define the boundaries of their self-organization.

HR–to the extent that it would carry such a name or even exist in a recognizable form–would provide the tools (IT and processes) to enable transparency and communication, and do the mentoring and coaching the managers would need to keep their focus on their people and to do a good job of challenging and fostering them in their evolution and growth.

The Conflict between Learning and Results in Talent Management Strategy

Two clients of mine have posed the question to me about how HR can operate successfully in the emerging environment of complexity and Gen Y employees challenging companies today. The question is surprisingly difficult to answer, as a scan of the web turned up no approaches which I could in good conscience recommend, but much which represents the ordered systems paradigm of old style management.

My first client is responsible for HR in a family company operating world-wide, with a decentralized organization coordinating performance in largely independent country organizations, which are very successful and fiercely autonomous. His first attempt to professionalize HR by implementing bureaucratic processes failed, for the simple reason that the countries scented the danger to their autonomy and performance and blocked the initiatives.

When we had our first meeting, the client wanted to talk about organizing a world-wide high-potential group to bring the regions of the organization into better contact with one another, and about how to embed the meetings of the group in an HR selection, development and retention strategy which would support the company’s independent culture and avoid a second rebellion.

I suggested they skip the bureaucratic middle step and go directly for a participatory approach based on the insights of complexity strategies–an approach we will be developing together over the coming months in preparation for the next global meeting.

Here are the first outlines of what we are thinking about, starting with some context in the current norm, before we go to more complexity-based approaches.

The modern HR model saw its most prominent initial large-scale implementation at GE under Jack Welch, who focussed talent development not only on what people in the company deliver, but on how they deliver it based in a competence model which describes behavioural success factors for leadership and performance.

A good representation of this approach is given by Gary Steele, the Head of HR and Sustainability at ABB in Zurich in an interview, where he describes people and talent management as the “spine” or “thread” that determines everything ABB does. The purpose of the programme is to drive the culture of performance and delivery across the organisation. Part of the programme is top-down, through leadership assessment based on a competence model to look at how performance is delivered, and the other part is bottom-up through performance reviews that include the competence model criteria for assessment. At its heart is the attempt to develop core values, which describe the way the company as a whole does business, and to which a large part of the work of coordinating activities company-wide can be devolved.

As Steele explains, the competence approach seeks to create an advantage in the “war for talents” by dealing with the problem that leaders with bad behaviour drive away valuable talent, so that even if they bring in good performance short-term, their cost in terms of people involves unacceptable risk to success. Given the good intention behind the competence model approach to widening performance management to include good behaviour in leaders, it is tragic, then, to see the results in how people experience the process, especially in large corporations that have done their homework in thoroughly implementing a talent management strategy.

Through the ever tighter requirements of corporate governance, combined with a focus on short-term results, talent management largely backfires. Among the hires who come to my clients’ companies, there are a large number of corporate refugees who want out of the bureaucratic straightjacket of competence-based perfomance reviews, and into an environment in which they can work productively and focus on results–and remain the individuals that they are. As employees vote with their feet, it is apparent that talent management is making a major contribution to exactly the problem it was designed to prevent.

To understand the failure of the classical approach to talent management, it is helpful to look at the dilemma it finds itself in for most corporate systems:

Performance is social, in the sense that no one is successful alone. Companies create value through the work of people in groups, whether these are organized through the machine paradigm or, more modernly, in teams or networks. Although companies are social organizations, they exist not for their own sake, but for the external purpose of creating value for others in a market. There are, therefore, two coordinating principles for social organization in companies (see below).


The source of the failure lies in the complete difference in nature of coordination based on judgment of results, and coordination based in social relations. The first system is transactional: we sign a contract in which we are paid for measurable performance based on explicit indicators. We fulfil a function or a role in a structure of power, and we can be replaced anytime. We follow rules, and perform functions. If we overperform relative to benchmark, we get bonuses and promotions; underperformance means stagnation or firing. Having a place in the company social group depends on what we do and how well we do it, without regard to our history, reputation, or who we are as people. Our positon is fragile, subject as it is to the vagaries of power and control and to the incalculabilities of the market and company politics.

The second kind of coordination is rooted in social dynamics: in a complex reality whose vagaries cannot be known ahead of time or planned for, we look to each other as people for orientation. Through give and take, we learn to rely each other, and the history of our behaviours forms our reputation and instills trust or mistrust towards us in others. In the absence of full knowledge, we orient to values to inform our decisions, and how reliably we do so contributes to our standing in the group. Our influence is based more on our experience in dealing with uncertainty, on our tacit knowledge and who we are as people, than on our position in the organisation, and so is resilient to the changes in the power structure.

When in the talent management process behaviours are evaluated, we effectively collapse the second world of social coordination into the first of performance and results–with catastrophic results:


Picture for a moment the dynamics of the goal-setting meeting between a manager and an employee in sales. The manager’s incentive is to set a high goal for the sales represenative, both to maximize performance and to minimize the bonus. The incentive of the sales representative is to agree to a minimal goal, both to reduce effort and increase his certainty of achieving results, and to maximize the bonus. The boss says 20%, the sales rep. 0%. Then it is 15-5, and agreement might come at 10%. There are always good arguments for both sides. However it is achieved, the result is not an objective response to market realities and a reflection of personal abilities, but a negotiated settlement which has to do much more with the illusion of planning and with tactics. In the worst case, top-down planning is simply imposed through the agreement, and the employee is told to perform accordingly.

When behaviour is treated on the basis of the same logic, the result goes beyond the pseudo-objectivity of the planning process to effect cynicism and distrust in the social fabric of the organisation, as an employee report on the Stack-Rank performance review system at Microsoft under Steve Balmer devastatingly shows. In the video above, the interviewer mentions to Gary Steele that talent is an emotional issue, and asks him (without any apparent sense of irony), how to mandate the emotions aimed at by the talent management process. Steele doesn’t lose his stride.

Picture the same sales representative negotiating about the evaluation of his behaviour as a communicator and team player. His manager may criticise his behaviour, and the sales rep. will explain or justify himself. The manager will find examples, the sales rep. counter-examples. In the end, the evaluation is just as arbitrary as the planning number, with the employee trying to show himself from his best side, while the manager tries to reduce him to his failures to satisfy the bell-curve of possible evaluation distributions. The best managers, who genuinely try to support their people’s development, learn how to game the system, giving their team a leg-up relative to others in the rating game, against which HR must find counter-measures, and so the irrationality potentiates itself up the system.

The simple answer to the question of how you mandate emotions is, “you can’t.” Values, beliefs and emotions cannot be mandated, and attempts to do so bring with them all of the nasty consequences of social engineering. To enable people to develop their potential, what my client and I are working on is how to ensure that performance appraisal on the one hand, and potential for development and growth on the other, are treated differently, each according to its own logic and mechanisms of success, and the one is not collapsed into the other.


This is simple to do, but difficult to manage within a short-term performance measurement environment. The key lies in the concept of “obliquity,” and in the ability of the company culture to tolerate the disconnect between supporting the development of employees on the one hand, and planning for and getting results on the other. Very much according to the maxim of giving unto Caeser what is Caeser’s, key performance indicators need to be aimed at, and results measured. But since only a tiny part of what takes place in companies operates on the transactional level of planable ordered systems, the rest is beyond direct control. For system two, managers need only to foster human potential and… to trust! And that is what makes system two management so intolerably uncertain for classical management. The highest performing groups are the ones whose skills we support, but whose behaviour we do not measure. The whole point of transactional goal-setting is that it does not matter how we get there–only the results count.

How then do we deal with the legitimate concern about abusive or destructively instrumental behaviour in our leaders? Healthy social groups take care of that on their own. Thieves, liars, the abusive and the sociopathic are quickly disposed of by a team with a purpose, that knows where it wants to go, and has a healthy values culture among the team members. Those who want a place in their group will gladly be honest and reliable and get results to best of their abilities. (The same principle counts when we look outside the company to customers and markets, who are more than able to regulate what is socially acceptable and what not in their relations to a company when empowerd to do so through, for example, the internet.)

What organisations can do to support the process of social self-regulation is to provide their people with the resources and opportunities to do so, not to sabotage their efforts through bureaucratic, pseudo-objective planning and control systems, to listen, and to take the opinions of their people seriously when it comes time to make decisions about talent. For the rest, “talent manages itself,” as Kevin Wheeler and Murry Christensen of Jet Blue say in an interview snippet from the Future of Talent Retreat 2009. That is of course a simplification, as talent flourishes best in a rich environment full of experienced people, interesting challenges, trustworthy leaders, and immediate reality-based feedback– things which do not happen by accident. That will also be the point of the Talent Management strategy, to focus on creating the environment and resources talent needs to succeed.

My second client is at a different point in his trajectory, having come to the insight that the traditional and informally highly networked family corporation lacked even the most rudimentary global processes in many areas, including HR, and the new General Managers have embarked upon a thorough and consequent strategy of making the organisation compliant through stricter process-orientation. While getting their ordered systems processes created and under control will be a boost to solving many of their challenges, it will be interesting to see where the system type boundary is seen and what influence it will have on Talent Management.

Post Scriptum: By the way, the talent development challenge in business is logically identical to the problem of learning and performance measurement in the education of our children, as the more we measure learning performance in schools, the less education our children receive, leading to poorer–not better–performance in the jobs market, as a lucid RSAnimate video of a talk by Sir Ken Robinson explains for the curious, and from which I am tempted to see an analogy between the “epidemic” of ADHD in children and the alarming rates of burnout among managers who are caught between competing imperatives of the two systems they work in, and which companies do not help them to resolve.

On the Emptiness of Thinking and the Richness of Experience

Reposted from the Cognitive Edge Guest Blog I am writing this week:

I’d like to comment on Keith’s comment about my notion in my first guest post that ideas in themselves are empty. I agree that many ideas lack substance not because they are empty in themselves, but because they have not been fully thought through. Even when they have, however, they remain just ideas. There was a nice report on research into the evolutionary function of reasoning a few months ago, which posited that thinking had developed to win arguments about decisions post factum. My sense that this is true is reinforced whenever I listen to people’s opinions (something I try to avoid as much as possible), and get caught up in the infinite progresses and regresses of reason Kant warned us about which they engender (the sound and the fury, signifying nothing, of Shakespeare and Faulkner).

What interests me is the process that takes place prior to thinking. Or, put differently, how thinking might be understood as but the superficial manifestation of physical processes on a higher level of abstraction. When I do change processes in companies, breaking down strategy into practical initiatives is infinitely more difficult (it is logically simple, but never really works) than picking up on the tacit knowledge of the people doing the work, i.e. on their lived experience, and to refine that knowledge into policy and strategy (a lot of hard work, but very fruitful). In this second approach, the priority of experience is respected, and thinking adds refinement and consciousness to what people already know (something which works well as long as it has management buy-in and support).

Thinking that sees its function as making conscious lived experience adds genuine value. It does so by introducing useful distinctions into the undifferentiated mass of experience, thereby giving us influence over what we do. On a second level, thinking allows us to test our distinctions against reality with experiments, which produce second order experience and provide additional food for further refinement through reflection in a trial and error process of conscious evolution.

A colleague of mine likes to make a distinction between “decision” and “decisiveness.” Decisions are intellectual. They are usually model-based, and are ultimately inconsequential (or, they often produce catastrophic consequences, but these are usually framed as having been unintentional, showing how irrelevant the thinking which led to them was). Decisiveness is not something we can do, but is much more something that happens to us. I experience it as coming from our tacit knowledge, and it is less something we think about than something which we know. We experience decisive action as deeply embedded in reality, such that reality moves with it of its own accord because, I suspect, our decisiveness is part of that reality. (What exposes pseudo-decisiveness is the way it seems to skip off reality and reveal itself as posturing without connection to any deeper sense of what is needed).

The first ten years of my adult life I spent at York University in Toronto, which at that time had a strong focus on the humanities. The program I was in was called Social and Political Thought, and was a collecting basin for Marxism, Feminism and Post Modernism. I was one of the few people studying classical philosophy, politics and religion, and my take on the intellectual processes around me happened from a certain distance provided by my old fashioned interests.

It was a time in which I believed in the ability of thinking to know truth (a fundamentalist arrogance I put down today to youthful folly and learning). What I took away from the decade was a deep sense of the futility of ideological battle, as it is not amenable to scientific testing and so to resolution beyond agreement on the level of opinion.

What I have come to appreciate and respect deeply is less a thinking about things than the ability to influence them. For example, many managers have theories about leadership, but only few go beyond administration and actually lead organizations to sustainable success. Many therapists talk about neuroses, but only few are genuine healers who enable their clients to change their state. Whether we look at consultants, politicians, military leaders or teachers, there are few whose thinking is so deeply rooted in ability that what they think has any positive transformational effect on what they do.

These are the kinds of people I seek out and, to the extent that I can, strive to be as well. Anyone who has had the good fortune to have a good teacher (I am lucky to have had several) knows the difference. A good teacher’s thinking changes you as you follow it.

On the Blind Spot for Complexity

Written in response to a comment on my guest-blog contributions at Cognitive Edge:

I too have been getting questioning looks when I present enthusiastically some insights from complexity theory to clients. To me, at least, it all makes perfect sense, and it takes a serious act of self-distancing to understand the perspectives from which it does not, or is misunderstood. Yesterday I saw a charming ad video by Nilofer Merchant for her last book, The New How, in which she talks about the “air sandwich” which exists in organizations because of the separation of strategy and execution, in which “murder boarding” replaces “white boarding” in the day-to-day operational process of creating value (with great drawings by what I assume is Gaping Void throughout). It is the old story of Tayloristic division of labour we all know, with a novel take. But the blanket education in Tayloristic ideas is not enough to explain the blind spot to complexity we see around us. I suspect there are psychological reasons, for example, in the need of traumatized individuals and communities to stabilize themselves through external systems of order (as opposed to an internal ability to trust in relationships and sense). There are money and power interests, which we learn to become blind to when our living depends on upholding even the most dysfunctional ideas. There are developmental issues, if one thinks in terms of developmental lines, in the ability (or rather inability) of clan or authoritarian social environments to create any connection at all to the dynamics of conscious complex systems. And of course there are ideological reasons, based in belief systems, which can lead to a complete cut-off from reality-based thinking. Often it is just a lack of exposure to the thinking, as most of what determines our everyday experience in the formal context of work gives us no useful experience with complexity approaches.

The result of the many compensatory strategies for many people struggling to make sense of our rapidly changing world is a vast disorientation, in which we tend to hang on the the familiar for want of credible alternatives.

I think that the biggest part of our work lies in finding the “frames” that allow people to relate to emergent processes. People I have found helpful in tilling the soil are John Hagel and John Seely Brown with their Power of Pull, Umair Haque with his New Capitalist Manifesto, and Tapscott and Williams with Macrowikinomics, among others. These are people who are driving a shift in consciousness about how to understand the current challenges, and what they point to we could see as the principles behind complexity (though they don’t call it that). For people who have begun to absorb these new perspectives on our reality, complexity provides the nuts and bolts methodology and tools to implement the shift in practice.

I think we need to approach people with helpful overarching frames, before we get into the epistemology and methodology of complexity, or we quickly lose them.

Narrative Strategies and the New Approach to Irrationality

Enlightenment reason is dead. The final nails in the coffin are being provided by neuroscience, which has made clear that our thinking is embodied (Antonio Damasio) and not Cartesian, emotionally inspired and dependent (Daniel Goleman) and not objective, and based on pattern recognition rather than logic. Dan Ariely (Predictably Irrational) has debunked the premise of homo oeconomicus, or the rational, self-interested economic actor on which economic theory is based, by showing that if we can predict one thing about decision making, it is that thinking is shaped by the forces of emotion, subjective comparison and social norms far more than the other way around.

Yet what we know in advanced research is still a long way from being integrated into the way we act as a society or in business. In a Science and Democracy Lecture  given at the Harvard Graduate School on the role of emotions in politics, policy and life, David Brooks encourages listeners to learn to love the irrational mind. Colleagues attending, like Steven Pinker, were apparently skeptical, holding on to the notion that trusting irrationality could only lead to bad decisions (like voting for George W. Bush because we would like to have a beer with him!), and that quantifiable measures like IQ were clearly a better indicator of success.

Here we face a gap between what science knows, and how policy is made. I think one reason may lie in a confusion between two notions of irrationality—one pre- and the other post-rational. The one we (justifiably) fear is the pre-rational orientation to superstition, blind faith, unreflected emotion, and the reliance on untrained instinct which invariably expresses itself in the incompetence and corruption that give us poor decisions.

Post-rational thinking, by contrast, simply understands how our brains actually work, and takes this into account. A research colleague of mine here in Germany, Klaus Grochowiak, has come to view the biological functioning of our brains as simply flawed. In an article on the neurobiological aspects of compulsion disorders, he explains (in German), for example, that our dopamine system makes no distinction between sustainable and unsustainable behaviors, rewarding the intake of addictive substances and addictive behaviors as freely as success in achieving goals that improve our lives and our chances of survival. Irrationality is hardwired into the very biology of our brains. Rather than despair at the results of our biological evolution, however, we can celebrate the insights we are developing into the lack of its perfection.

Since it is our very nature, it would seem to be better to understand irrationality than to fight it. For if we can predict the ways in which our brain misleads us into poor decisions, we can design policy to deal wisely with our irrational nature. Just as there are two kinds of irrationality, there are (at least) two kinds of reason, and the two are not equally qualified to deal with irrational complexity. The first is atemporal and is expressed in logic and analysis, and is the objective reason which reached its end in the Enlightenment. The second kind of reason is subjective and narrative, and is expressed in our giving reasons for what we do.

Reasons can be understood. Motives, no matter how “irrational” from a given perspective, can be taken into account. Dealing intelligently with our irrationality is likely the highest expression of reason we are capable of. Narrative strategies show us how to deal rationally with our irrationality. Listening to stories in the context of lived experience gives us the chance to recognize patterns in the stories that make sense of what we perceive. What we can make sense of, we can deal with, though the actions we will need to take will seem counter-intuitive to those identified with pre-rational instinctual approaches to decisions, or planning approaches based on analysis. Narrative approaches to strategy require a new and different skill set:  the trust in the face of uncertainty typical of entrepreneurs, the ability to deal with ambiguity which is a mark of emotional and social intelligence, and good judgement in the face of a broad range of potential solutions to complex problems, to name a few. And it requires a network of relationships in which our stories can be told and understood, and actions be taken to respond to them intelligently.

All of this points in the direction of sense-making as becoming the key ability for developing the successful strategies we need to solve the challenges we face.

The Emergence of Complexity Theory in Consulting

During a change project at a car parts supplier a few years ago, a process consulting colleague of mine went off on a rant when he heard that the company had just paid a six figure sum for the months long analysis and report of a strategy consultancy on operational issues in the plant. “Give me full access to talk to managers and employees, and I’ll give you 90% of the information in that report and all of the important decision points in four days!” I believed him, having experienced his pragmatic competence and his uncanny ability to intuit when and where to find the key issues in the improvement process as he worked with the people in the company.

Complicated systems analyses are not only expensive, they often miss the point, as the reality they are applied to is complex and unpredictable and not reducible to the results of linear analysis. Most executives I know are aware of the gulf which exists between what analysts say and the way reality behaves. That is why reports are sometimes commissioned to provide secondary rationalization for decisions executives already want to make, based either on their own experience or motivated by political considerations, and as long as shareholders and supervisory boards share a belief in analytic results, they serve their purpose.

Applying systems analysis to complex environments, however, can also lead to catastrophic failure, as we have seen in financial markets when even honest bankers fall prey to the limits of the assumptions on which their system models are based, or in Japan, in which an unexpectedly strong earthquake turned reactor risk management into a disaster which in hindsight seems to have been waiting to happen, or with the Western military response to terrorism, whose violent interventions have served not to diminish radicalization but to foster it.

But despite awareness of the limits of systems analysis, until recently there doesn’t seem to have been much of an alternative. One that I have just found, and hope will be very fruitful is the work of Dave Snowden at Cognitive Edge. Dave and his colleagues have been working on using complexity theory to translate narrative from any given context through software into objective facts that can be used as a basis for decision making—an approach that promises to close the gap between decision making and reality which our increasingly painful failures in risk management are making obvious.

Some colleagues and I invited Dave for dinner in Frankfurt last week to learn more about his thinking and his software. Dave is taking an open source approach to his services, but in contrast to the prevalent models, the software is proprietary as SaaS, while it is the methodology of complexity theory it is based on which is open source. Dave wants to do for consulting what open source did for software, i.e. to democratize decision making (and make proprietary consulting methodologies and expert approaches within complex environments essentially obsolete!). 

There is no better sensor for understanding the complex human systems we make and live in than our own lived experience. That is why an experienced process consultant like my colleague can sense the neuralgic points in the system by listening to the stories people living in the system tell him. Our brains are pattern recognition organisms, not trivial machines. We perceive elements of the systems we experience, and we connect the dots based on patterns we have learned through our evolutionary development and lived experience better than any purportedly objective model we could invent.

At the same time, however, we are limited in our capacity to know what is important through the way in which we connect the dots: Our brains, David explains, do not connect the dots of our perception through a best fit strategy, but rather latch onto the first pattern they come up with. This is where the Cognitive Edge methodology comes into play. Analysis of a system is done by collecting stories about a particular context one wants to understand. Narrative fragments are then indexed to signifiers designed to frame the questions one wants to put to the system. The storytellers themselves index the key words to the signifiers, cutting out the middle men who would normally do the interviews and analysis as consultants, thereby eliminating the first fit distortions introduced by the consultants’ analytic models. Executives who need information on which to base decisions simply click on the signifiers in the user interface in the ongoing report to access the narratives behind the patterns. The software makes vast quantities of information available through the visualization of the valuations of the key words in signifier pairs or triads. The access to experience within the system which the software provides is in real-time. Without the distortions introduced by the experts, executives listen directly to the experience of their people, close the reality gap, and can use their judgement to the greatest possible effect.

Even strong decision makers are doomed to fail when their decisions are based on unrealistic information. What I hope is that the narrative-signifier strategy Cognitive Edge has derived from complexity theory can dramatically improve information quality for my clients. This will not save executives with poor judgement or a political agenda from running us off further cliffs. But a potential side-effect of a narrative information strategy is that bad judgement and its effects will themselves be reflected in the ongoing collection of narratives in real time, so that poor executives will have less places to hide from the consequences of their actions.

For consultants, this means a radical departure from past business models, if we are to have a productive role in future projects. The expert systems approach to consulting looks like it will be coming to an end. For enablers of complexity strategies, on the other hand, there is a world of challenges ahead of us. I’ll be attending the next European workshop offered by Cognitive Edge in Amsterdam from May 31st-June2nd, and will report on my insights.