Growing Adaptive Organizations

Step C2: Review Operational and Environmental Interactions


Review Systems two and three. Check if they are adequate or what needs to be done to improve their functionality.


We will now look at the internal environment of the organization – the entire complex of interacting Operational units and Systems 2 and 3 which are there to stabilize and optimize.

If it is out of balance, then there will be instabilities (lots of conflict, people competing for the same resources, confusion about who should be doing what), a lack of optimization (clear ways that overall efficiency could be improved, but no way of either planning it or of getting it implemented), and the Operational units may be working in isolation from the rest of the organization.

The solution to these kinds of problems is to ensure that there is a balance between the complexity of the problems affecting the Operational units and the capabilities of Systems 2 and 3 who have to deal with them.

The approach is as follows:

First  Deal with as many of the problems at the Operational level as you can.

Then Increase the capabilities of Systems 2 and 3 to ensure they can deal with the remaining issues competently.


C2.1 Note Interactions

Look at your big VSM diagram and add notes about the intersection of the environments. In some cases they may be large overlaps – for example a series of shops supplying the same market. In others they may be minimal – for example divisions of a company which deal with different parts of the world.

C2.2 Reflect Alternative Interactions

Think about any ways that these overlaps could be changed to deal with current problems or to improve the overall performance of the Operational units.

C2.3 Detail Interactions

Add squiggly lines between the Operational units and note what materials or information pass between them.

C2.4 Draft Ways to remove or change Interactions

See if there are any ways these can be altered to either deal with problems or to improve overall efficiency.


In the previous step we have looked at

  • Making the Operational units autonomous.
  • Operational accountability and allocation of resources.
  • Intervention rules.
  • Environmental intersects and how to use them to make System 1 more efficient.
  • Operational interactions and how they may be used to to make System 1 more efficient.

All of these techniques enable the Operational units to deal with day-by-day problems without interference. They are ways of generating the maximum amount of autonomy within the limits of the larger whole.

The question now is:

“Do Systems 2 and 3 have the capabilities to deal with their jobs of stabilizing and optimizing the internal environment?

You have already identified the parts of the organization that do these jobs at the moment.

  • You will have a rota or some sort of scheduling system to make sure people know where they should be working.
  • Someone will have to decide on yearly budgets.
  • At some stage there will be discussions on optimization – “If we put more emphasis on manufacturing and less on publicity we could do lots better …”

But are the existing systems adequate?

As the rate of change of markets continues to escalate it becomes more and more essential to monitor and deal with problems continuously – and so monthly committees are becoming progressively more useless.

How thorough is the information you have from your Operational units? How good is the model of System 1? How up-to-date? If this is inadequate, then any decisions made by Systems 2 and 3 will be made in some degree of ignorance.

After thinking about issues like this you may decide to increase the capabilities of Systems 2 and 3 to ensure they can do their job. This may involve more time, more people, more thorough monitoring or whatever.

The opposite case is also possible: the management does too much, limits the autonomy unnecessarily or micromanages the organization.

Whatever you decide, it is essential not to interfere with the autonomy of the Operational units, unless it is absolutely necessary.The steps involved in completing the internal balance make up the next step.

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