Emergence: it boosts your finances if you

Don’t ignore these Emergent Value & Cost Drivers

“As long as you have certain desires about how it ought to be you can’t see how it is.” — Ram Dass

When I took my financial mathematics exam at university, more than a decade ago, my professor vehemently taught linear stochastic models in the standard economic approach to finance based on rational agents. How could I argue with a 30-year-experience academic that emergent behavioral patterns in complex adaptive systems not present in their individual parts — which led to nonlinear dynamics methods — were to be considered, too? Well, I did it. And, of course, I got a very low grade! My only one.

Some years later, boom boom: global financial crisis! Stock Markets, an example of emergence on a grand scale, depended heavily (beside bad credit, speculation, macroeconomic maneuvers, etc.) on the self-organizing expression of collective behavior. Oh, really?!

Then in 2011, as a professional, I was taking a training Master course during which Andrea Cioffi — a brilliant professor of Performance Measurement — pronounced two ‘incomprehensible’ words (for my economics background): system dynamics. With just two words he opened a window in my mental models. No wait … He didn’t open a window, he opened a gate to discover a ‘whole’ world! Per analogy, you shouldn’t miss this Emergent Value & Cost Drivers Map. You have no idea what you will find in the ‘chest’ of your management practices if you open to a broader view and adopt a less mechanistic approach in your management style. The powerful works of some connections of mine, distinguished experts in their study fields were of inspiration to me to research and outline the following Emergent Drivers of Organization Management — the ones we experience every day in our work, yet many can’t see how they’re translated into Costs and Value.

ENVIRONMENT

Adopt an Open System View

The boundaries of open systems, because they interact with other systems or environments, are more flexible than those of closed systems, which are rigid and largely impenetrable. A closed-system perspective, instead, views organizations as relatively independent of environmental influences. How can an organization with suppliers and clients all over the world remain ‘independent’ of environmental influences’, such as customers and competitors? Not adopting this view leads to the direct consequence of being, sooner or later, ‘pushed out’ of the market.

Even the best decision usually runs into snags, unexpected obstacles, and all kinds of surprises. Even the most effective decision eventually becomes obsolete. Unless there is feedback from the results of a decision, it is unlikely to produce the desired results. — warned Peter Drucker

Take the Behavioral Approach

The goal in introducing change models, more productive processes, or internal communications platforms is to obtain behavior results, which implies drive and persuasion — from ‘managed’ to ‘organic’ — rather than simple mathematic objectives. Ego or dominant positions and a top-down approach are deleterious to find a ‘meeting point’ in the ecosystem of the various stakeholders and organization interlocutors. — I was beautifully told during a workshop by Piero Nicoli — Industrial Group Controller.

Through a Rational Agents Approach instead, can you see the average homo economicus or the homo reciprocans in social networks? Or in the compulsive rush to sales? Or in the mass divestment after media breaking news? Behavior emergence is your driving ‘alert signal’.

INTERCONNECTEDNESS

Harness the Power of Collaborative Networks

If organizations are not ‘over-engineered’ by their leaders, there is an emergent process of individuals coming together, which produces effective coordinated action among self-selecting employees. This is what we need to foster, this brings value, according to Julian Birkinshaw — Professor and Chair of Strategy and Entrepreneurship at London Business School.

Most of our intellectual achievements as humans really result not just from a single person working all alone by themselves, but from interactions of an individual with a culture, with a body of knowledge, with a whole community and network of other humans. — affirms Thomas W. Mallone — MIT Sloan Faculty Director

A ‘cord-vibrating’ example? He is BB King, but the ‘ensemble’ is the real emergent value. If there is no collaboration, that ‘thrill is gone’.

On the other side, collaboration is a powerful at mitigating the unpredictable costs of a potential butterfly effect. “It has been said that something as small as the flutter of a butterfly’s wings can ultimately cause a typhoon halfway around the world.” — after the famous mathematician Edward Lorenz. What does it have to do with business costs? Well, where are your plants and your clients?! All over the world, maybe? Fragile supply chains tossed by a storm, economies of scale under shock because of a monsoon flood? All depending on such a tiny little thing like a ‘strategic decision’ to deal with ‘unpredictability’ and ‘week signals’.

Foster Knowledge Sharing

Learning Value in a self-selection/self-improvement process is huge and, surprise: science confirms it! You have a question or topic and you’d like to get different points of view quite quickly? Through a discussion in an internal communications platform you might get more feedback saving hours and hours of research in an encyclopedia or technical literature. The ‘cost function’ is an important concept in learning, as it is a measure of how far away a particular solution is from an optimal solution to the problem to be solved. You can refine the research later, in the meantime you get value in time, beside involving and sharing a purpose with the various stakeholders.

On exactly the opposite corner are the emergent costs from the ‘gossip effect’ in offices. Animated people become silent, conversations stop when you enter the room; people begin staring at someone; workers indulge in inappropriate topics of conversation and so on. Most ‘emergent’ costly results’? Wasted time, erosion of trust, increased anxiety, hurt feelings and reputations, unhealthy work atmosphere and final ‘turnover’.

STRUCTURE

Move with Agility

The ability to change and adapt to environment dynamic forces is the real competitive evolutionary edge; the ability to accept the inevitable and conform to the unavoidable by innovating and integrating change. It has its maximum expression in collective action-driven organizations towards evolution to continue to be present in global markets. While many ‘dinosaur’ companies find it hard to acknowledge market-induced changes which impact their strategy paradigms, both from a process/product and talent acquisition standpoints. It is surprising how some institutional organizations still adopt limits and entry barriers to talent acquisition attributing more value to academic qualifications than to the professional evolution acquired by recruits in their background work experiences. This alters dramatically the relationship between demand and supply and their better match.

Hire Skills

Looking for the purple squirrel — the candidate with precisely the right education, experience, and qualifications that perfectly fits a job’s multifaceted requirements — is more a matter of luck than of a realistic hiring process in our global uncertain market. And the cost of such endless hiring processes? As Dr. John Sullivan, Professor of Management, states the ‘cost per hire’ impacts negatively recruiters’ focus who tend, then, to prioritize cost reduction rather than high-performing hires, while skills in the workplace still mismatch.Therefore, to minimize surprises after hiring people that I would suggest? Invert the trend: why not try first — through skill simulation/demonstration platforms — and hire later? Compare costs.

Experiment Processes

Like in a Bathtub Curve, the organizations which recognize vulnerabilities and integrate failure risk awareness in their product and mitigation capabilities to anticipate emergencies have more chances to survive. The organizations which, through openness’ to a diversity of voices and ideas leave room for constant experimenting and emergent ‘learning’ from previous failures really innovate. In those organizations, instead, where beaurocratic practices and processes reign sovereign, humans execute and human interactions are given, emergent costs multiply. Constantly, human emotions defy the rules of emphasizing formality over interpersonal relationships … and they end up to be a huge organizational ‘liability’.

BEHAVIOR

Connect with Empathy

Even the most different people can create proactive bonding which allows ‘a way to identify bridges’ and that is key to a healthy workplace — according to Daniel Goleman — prestigious Director of the Consortium for Research on Emotional Intelligence in Organizations. When the opposite occurs, ‘personal wars’ from seeing others as ‘enemies or obstacles’ have a high price; an unpredictable cost coming from emergent human interaction. Besides, he highlights apathy, “often the result of what matters to a person and what they’re asked to do”, as the number one demotivator at work in contrast to ‘play’. The latter, by releasing dopamine, stimulates the brain rewarding system in a precious way: making workers more productive.

Start a Conversation

As Katrina Pugh — Academic Director of Information and Knowledge Strategy at Columbia University — underlines in our research about Smarter Innovation: How Interactive Processes Drive Better Business Results:

With Conversation come opportunities to draw in diverse insights, backgrounds, contexts and perspectives — diversity that is the hallmark of the “bridging” dimension of innovation. Given the emergent nature of conversation, it can be perceived as a wasteful side-track. It happens best with one or more facilitators. That is people open to the unexpected, encourage a diversity of lenses and model respect and nonjudgemental language.

Counterposed to ‘conversation’ is the ‘relationship failure’. As Dr. Travis Bradberry — Coauthor Emotional Intelligence 2.0 and President at TalentSmart — draws attention to in his research work, top performers avoid The Four Horsemen (Criticism, Contempt, Defensiveness, Stonewalling), real killers of productivity.

Integrate People

I could find ‘care’ as a driver to mitigate the cost (heavy burden) deriving from toxic people who create unnecessary complexity and stress in the workplace. The alarming finding is that exposure to stimuli that cause strong negative emotions is “the same kind of exposure you get when dealing with toxic people”— reports Dr. Travis Bradberry, according to research.

Care enables unfettered thought. Having the confidence that team members are working with the whole you, not just the professional you, or the you in the moment of the team meeting, reduces the burden of always thinking you should be doing something else, or being somewhere else. Care supports “bridging,” particularly by the individual who can bring constraints to the group and inspire our empathy and curiosity. — Katrina Pugh

This is a map, not the territory. You will not find these drivers directly in the Profit and Loss Statement; they’re there, hidden behind Emergent Drivers. Dig deeper!