Complexity leadership generates innovation, learning, and adaptation of the organization

Complexity leadership
generates innovation,
Theoretical

learning, and adaptation of the

organization
Brenda Geer-Frazier
Capella University, USA

Today organizations come across situations where traditional methods no longer

bring the preferred results. When organizations use complex adaptive systems in
their strategy, it can lead to building systems that can quickly evolve solutions that
are effective and adaptive (Anderson, 1999). These dynamic systems necessitate
different leadership approaches. This paper will share how a leader would align
the organization’s strategy, structure, and processes with its external environment,
as well as assess the relationships between organizational structure, performance,
and dynamic environments, evaluate the relationship between environment,
organizational performance, and the inter-organizational and intra-organizational
fit, evaluates the application of paradox as a theoretical lens to understand and
to lead contemporary organizations in dynamic environments, and evaluates
how complexity leadership generates innovation, learning, and adaptation of the
organization.

Introduction

T
o lead an organization today, a leader must align the culture, structure, and strat-
egies to the environments that it works within. Today organizations come across
situations where traditional methods no longer bring the preferred results. Total
order and high probability is no longer certain (Lians, 2013). Anderson (1999) asserted
that when organizations use complex adaptive systems in their strategy it will lead
to building systems that can quickly evolve solutions that are effective and adaptive.
These dynamic systems necessitate different leadership approaches. This paper will
share how a leader could align the organization’s strategy, structure, and processes
with its external environment. In addition it will assess the relationships between orga-
nizational structure, performance, and dynamic environments, evaluate the relation-

E:CO 2014 16(3): 105-116 | 105

ship between environment, organizational performance, and the inter-organizational
and intra-organizational fit, evaluates the application of paradox as a theoretical lens
to understand and to lead contemporary organizations in dynamic environments. Last
it will evaluate how complexity leadership generates innovation, learning, and adapta-
tion of the organization.

Organizational structure, performance, and dynamic

environments

I
n order to remain competitive in the global business world, organizations may
need to change their systems that are run like machines where the top leaders de-
cide everything important (Duin & Baer, 2010). Instead organizations may need to
transform to dynamic systems of interconnected associations that are able to change
in ways that exceed the complex demands and expectations of today’s organiza-
tions (Duin & Baer, 2010). These dynamic systems necessitate different leadership ap-
proaches. Research suggested that today’s leaders must change from the old hierar-
chical systems to dynamic systems, where leaders change the structure, culture, and
the strategy, to meet the dynamic environments they are in (Duin & Baer, 2010). The
new approach is based on enabling people using more of a relational manner, with
shared or dispersed control taking place at all levels and reliant on social exchanges
and networks of power (Duin & Baer, 2010). Taking the organization from the tra-
ditional structure to one that is an adaptive complex system requires the leader to
acknowledge that the old system is flawed, old, and unable to produce the greatest
outcomes.

A large number of leaders still believe that the best way to lead is by controlling
people in a detailed way, which includes being the person that predicts the future and
picks the strategy (Houglum, 2012). Psychogios and Garev (2012) argued, however,
that there are also drawbacks to complex adaptive systems, such as employees not
always having the ability to self-organize and organize the alternative roles, and as-
sets for the task they are given. Richardson (2004a) argued that in a complex system
one person cannot “ever know it completely” and therefore would always be in the
“shadow of the whole” (p. 77). In traditional management the Chief Executive Officer’s
(CEO’s) main emphasis is obsessed on holding on to the control of the organization
in order to meet the expectations of stockholders, which would be the darkness prin-
ciple (Weymes, 2004). The knowledge of one leader may possibly have of a specific
organization is inadequate (Richardson, 2004b). Therefore, no one leader has the vital
diversity to control an organization as it is more diverse than that person could be
(Richardson, 2004b). Today an organization’s success is affected more by its social re-

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 Complexity leadership generates innovation, learning, and adaptation of the organization

sources, like its business IQ and the ability of the organization to learn and adapt, than
by its physical resources (Uhl-Bien, Marion, & McKelvey, 2007). This infers that it is a
necessity for a leader to give up his or her old ideas of leadership, and embrace the
new ideas of leadership.

In a traditional structure the leader is seen as knowing everything and is the only
person that can make the right decision for the organization. This leadership style
is exhausted and no longer meets the needs of the growing complex system it has
become. Research argued that this is due to the need to retain predictable or the
“old ways of seeing” view which is mostly mechanistic (Stevenson, 2012). A leader
that uses the traditional structure bases his or her decision-making of a new issue
using results of past solved or failed earlier issues (David, 2013). Stevenson (2012)
suggested this could be due to the leader’s inability to escape the servitude of linear
thinking. This narrow inability or need to comprehend prevents them from embracing
a system’s viewpoint, which causes decision-making to be constructed on predictable
linear thinking (Stevenson, 2012). If a leader has the capability to understand the need
to change, the leader may then be open to recommendations. The panel at IBM made
some great suggestions on what leaders should be like and how they should collabo-
rate instead of control. They include:

1. Avoiding individual biases;

2. Not giving into individual biases or limited knowledge;
3. Thinking beyond the limited knowledge;
4. Use the collative intelligences of the group;
5. No one person is in control, and;
6. Empowering people to get around biases (IBM, 2011).

The key is to enable instead of control, which is a hard concept for traditional
management and leadership to understand and embrace.

A leader also must be aware of the dynamic environments, both internal and ex-
ternal, so that the organization can adapt. For instance, the two giant cola companies,
PepsiCo and Coca-Cola, have always had a rivalry due to the nature of their organiza-
tions. However, they also have competitive interaction. Nair and Sclover (2012) ex-
plained the each of these two organizations have strategies that are not independent,
but exhibit interdependent relationships. The relationship between the two suggest
that neither one is consistently the leader (Nair & Sclover, 2012). There are times when
Coca-Cola leads PepsiCo and times when PepsiCo leads Coca-Cola as they make their

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competitive moves (Nair & Sclover, 2012). This strategy does not weaken either orga-
nization. Instead it shows that both are aware of the external dynamic environments in
which they conduct business.

Of course one person cannot understand and control all of these dynamic envi-
ronments; the fact is it takes a team. Bajer (2009) asserted that today’s leaders must
“attempt to develop leadership cultures where everyone in an organization is active-
ly working together to create changes and add value” (p. 38). According to Gilstrap
(2013), organizational structures that are profoundly partial to self-organizing teams
undergo looping periods of development that leads to unrestrained chaos in leader-
ship and decision-making practices. Scharmer (2010) explained leaders who perceive
the emergent future as the beginning of something intensely new, let go of the past,
and look at the future probabilities, a future that may perhaps be very unlike the past.
In a sense this means that chaos is vital to the development of evolution and adap-
tation because complex adaptive systems are “most adaptive when near the edge
of chaos” (Schneider & Somers, 2006: 355). Leaders who embrace a complex adap-
tive system will adjust through the evolving characteristic of self-organization, which
comes from the inter-dependency of the sub-systems (Schneider & Somers, 2006).
Uhl-Bien et al. (2007) explained, the old traditional management structure was de-
signed to control behavior, whereas complex adaptive systems are changeable struc-
tures with numerous, intersecting hierarchies. These interdependent agents interact
and are bonded in a supportive dynamic by shared goals, outlooks, and needs (Uhl-
Bien et al., 2007).

The inter-organizational and intra-organizational

A
s internal organizational methods become more complex, the external situ-
ations also have become more complex (Smith & Lewis, 2011). Thus creat-
ing conflicting demands that a leader must respond to which can determine
the organization’s destiny (Smith & Lewis, 2011). In the study conducted by Mena,
Humphries, and Wilding (2009), they found, in contradiction of past assumptions, in-
ter-organizational actually have higher levels of collaboration than intra-organization-
al relationships. Bajer (2009) pointed out, “Leadership is a competence that everyone
in an organization should have and continuously develop” (p. 38). A great example
of an organization that is making the change away from the traditional leadership,
to one that empowers everyone is PepsiCo. Indra Nooyi, CEO is working on shifting
from a hierarchical structure to a dynamic, networked structure, acknowledging that
PepsiCo has to change (Colvin, 2012). This organization aggressively supports lead-
ership development and educational programs for all associates (PepsiCo, 2013). By

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 Complexity leadership generates innovation, learning, and adaptation of the organization

developing all associates the organization is able to make more globally responsible
decisions that affect the inter-organizational system in a positive way. Therefore, it is
vital for the organization and its leader to understand the influence that takes place
both inside and outside the organization.

Most environments today are unpredictable, and therefore organizations cannot

predict to a greater degree the nature of the demands they will be faced with (Fjeld-
stad, Snow, Miles, & Letti, 2012; Schraagen et al., 2010). In response to unpredict-
ability, organizations are starting to adopt complex adaptive system structures, where
the organization is decentralized, team-based, and has a distributed power structure
(Schraagen et al., 2010). Complex adaptive systems are changeable structures with
numerous, intersecting hierarchies (Uhl-Bien et al., 2007). On the other hand, in a hier-
archical system, the CEO is the only individual with an overall view, and decisions are
made from the top/down (Schraagen, Veld, & de Koning, 2010). In contrast, complex
adaptive systems operate using a bottom/up strategy. The old fixed organizational
structure worked well when the environment was stable; however unstable environ-
ments require original structures (Schraagen et al., 2010). The interdependence of
each agent creates success of the overall system (Smith & Lewis, 2011). Dering (1998)
explained that a leader’s behavior will help an organization get past the theory and
recognize profound, lasting change.

Leaders may also apply network theory to assist in shaping the organization. Seg-
re (2004) explained network theory from a sociological viewpoint centering on the
structural examination of social networks, and looks at individuals, or actors, actions
as controlled by these networks. Moliterno and Mahony (2011) stated that the ac-
tors in a network of an organization are individuals, groups, or the organizations they
do business with. Kilduff and Brass (2010) expounded that there are main concepts
that make up an organizational social network. These ideas are: embeddedness, so-
cial relations, utility of network connections, and structural patterning (Kilduff & Brass,
2010). The actors in the network are embedded in a relational system (Rowley, 1997),
which connects and divides them (Kilduff & Brass, 2010). Kilduff and Brass (2010) ex-
plained that individuals rely on social networks to make essential choices that forge,
and renew social ties. A great example of this is when Nayar, former CEO of HCL Tech-
nologies, and his organization created the U & I portal, which produced transparency
and built trust, with questions going both ways, thus creating a social network within
the company that had an informal structure (Nayar, 2010).

Actor characteristics, agency, and cognition are all necessary parts of the value
of social connections (Kilduff & Brass, 2010). Cohesive networks offer chances for in-

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novation, collaboration, execution, and the learning of complex information (Kilduff &
Brass, 2010). Segre (2004) asserted that when actors are directly related to their soci-
ety by means of robust ties creating a dense network, the consciousness of the actor
is at such a degree that everyone may perhaps create strong ties with everyone else.
In an organizational network, where actors have a wide variety of functions, they are
aware of the importance of their social parts for the organization’s society as a whole
(Segre (2004). An example of this would be the over whelming responses Nayar (2010)
received when he shared his problems. Nayar (2010) stated that it seemed that every-
body in the company wanted to help their CEO and had an opinion on the problem.
Organizations have nested organizational networks because the social network per-
spective entities are not separate, and instead they are entrenched in systems of social
connections (Moliterno & Mahony, 2011). Rowley (1997) asserted that the “interaction
of interactions” in an environment impacts an organization’s actions and can affect the
tendency to adopt new technologies. As in the case of HCL Technologies, the signifi-
cance is in the fact that actors are well connected providing actors with an environ-
ment that offers many alternative sources of information and resources that would
not otherwise be available (Rowley, 1997). Nayar’s sharing with his employees that no
one person can have all the answers and every employee’s suggestions or thoughts
mattered, helped HCL Technologies develop a network that can be applied to any
organization. Today it is easy for other organizations to start adapting this concept as
well. This would bring about a social network that would allow for greater transpar-
ency and build trust.

Paradox as a theoretical lens

A
s organizations transform from the traditional machine systems, to ones that
are viewed as a natural open system with fewer defined limits within its ex-
ternal environment, leaders must embrace the paradox of organizing (Macey,
2011). Organizations were once viewed as self-contained, today’s organization are
viewed as social structures that are influenced by dynamic systems of interconnect-
ed associations (Macey, 2011). Macey (2011) asserted that the paradox of organiz-
ing looks at organizations as open systems that react to the interdependence using
strategies like enactment and deviation. There are two parts to the paradox; first the
inflexible structures that are designed to solve issues have unintentional costs and
the resolutions experience an uncomfortable dualism because they are designed to
control as well as are influenced by the organizational environment (Macey, 2011).
For organizing to transpire, predictable influence and dependent embeddedness must
occur (Macey, 2011). Smith and Lewis (2011) proposed that the dynamic managerial

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 Complexity leadership generates innovation, learning, and adaptation of the organization

equilibrium approach involves a paradox that uses complementary and intermingled

strategies of approval and resolution. Leaders must accept that tensions must and can
coexist; therefore, these tensions can be carefully explored (Smith & Lewis, 2011). If
leaders can manage the organizational paradox, then a dynamic equilibrium will pro-
mote imagination and learning.

A paradox is conflicting, interconnected components that concurrently continues

over time (Smith & Lewis, 2011). Organizational leaders should understand that both
flexibility and stability is needed, thus creating the paradox. Organizations must have
flexibility in order to create adaptability, innovation, collaboration, cost control and
sustain a competitive advantage (Melin, 2010). Flexibility allows the organization to
change or be changed effortlessly depending on a situation (Melin, 2010). Yet, stabil-
ity is also needed because it creates predictability which reduces uncertainty (Melin,
2010). Melin (2010) explained that stability is about holding a permanent position
that is not likely to move or change and sustain a competitive advantage. The goal is
to find the balance between the two in order to produce practical outcomes (Melin,
2010). For instance, whenever a leader is looking at short term performance the leader
has to take into account the long-term adaptability (Macey, 2011). Caraan Messara
and El-Kassar (2013) argued that long-term adaptability includes transforming the or-
ganizational culture.

Organizations are complex adaptive systems that continue to grow in complexity

demanding an increase in shared interdependence. Each of the different sub-systems
has a different way in which they function, which is limited by how its members expe-
rience and understand their environments (Macey, 2011). These different sub-systems
cause underlying tensions. Some of these tensions are: collaboration and competi-
tion; learning and belonging; the need for change and the desire to stay the same; as
well as become enablers and hurdles to change and development (Macey, 2011: 384).
These tensions often cause agents to force an either/or decision instead of a both/and
perspective, which is more productive (Smith & Lewis, 2011). With the overwhelming
rate of change today, organizational paradox has become even more a part of ev-
eryday life because change makes conflicting demands on individuals. Organizational
paradox is a natural consequence of change. For example, when a decision is made
to adopt a new technology, tension is created. This tension takes place because the
technology becomes both an obstacle one must learn and an enabler to those who
find the technology easy to adapt to. Leaders must learn to understand that there will
always be paradox within the organization and develop a way that everyone can un-
derstand it and use it as an advantage.

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Complexity leadership

L
eaders today must shift away from viewing their organizations as machines,
to viewing them as complex knowledge centers that can generate innovation,
learning, and adaptation. The rules transpire as an unstructured order; they are
not initiated intentionally by one scheming mind (Lee, 2011). Instead everyone in the
organization plays a part in how rules are formed within the organizational system.
Organizations, which are systems, are made up of an assortment of sub-systems and
people with various freedoms for independent action (Wilson, 2009). These actions or
patterns are not always predictable, yet they can impact other sub-systems or people
inside the complex system, possibly changing its circumstances (Wilson, 2009). Com-
plexity from emergence of simplicity is complexity theory. Complexity theory uses the
living system with its non-linear ability to adapt and is founded on two concepts; how
sensitive the system is to its starting environments and the feedback from the system
(Wilson, 2009). Lee (2011) explained that the emergence of patterns comes from local
interactions. Complexity theory refers to relationships and patterns between the com-
ponents, and the randomness connected with working with individuals in a dynamic
organization or system (Wilson, 2009).

What takes place in the emergence of complex systems is evolutionary change

that comes from “adapting beyond the circumstances that gave them birth” (Lee,
2011: 516). The creation of non-formal and formal social structures and relationships,
which comes from human beings bounded rational nature, affects the choice and use-
fulness of the action, as well as the outcomes of such actions (Lee, 2011). Lee (2011)
explained, “What emerges is a form of “social mind” that solves complex organization
problems without conscious cognition” (p. 516). Consequently, what materializes is a
social organization that performs as a united problem-solving unit, which occasion-
ally supplements and replaces the decision and resolution procedures at the single
level (Lee, 2011). One organization that has found a way to encourage its people to
become part of the problem-solving unit is the Cheesecake Factory. The Cheesecake
Factory has created a video learning portal, which is a YouTube-like learning portal
that allows any member to upload a video showing themselves performing their job
well (Bersin, 2012). The member can share any job that they have from making food to
cleaning, thus encouraging them to share how they solved issues that they had on the
job (Bersin, 2012). Thus, allowing them to perform as a united problem-solving unit.

Great leaders make it easier for people to: connect, have different ideas, and have
disagreements (Wagner, 2011). Uncertainty, diversity, and rapid technology changes
are adding to complex organizational systems (Ilinitch, Aveni, & Lewin, 1996). The key

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 Complexity leadership generates innovation, learning, and adaptation of the organization

is to enable instead of control, which is a hard concept for traditional management

and leadership to understand and embrace. Bersin (2012) asserted that when a huge
mistake takes place in an organization it creates the most learning. The key is to learn
from these mistakes (Bersin, 2012). Wal-Mart is a great example of an organization
that helps its people look at their mistakes and learn from them so that they can share
it with the entire organization. Whenever Wal-Mart puts out a new initiative they re-
quire the manager and supervisors to create a list of what could have been better and
an action plan with best practices included in it (Frazier, 2008, personal experience).
The goal of Wal-Mart is to create an environment that stresses the importance of
honesty, respect, open communication and innovation (Walmart, 2013). This allows
the entire organization to learn and adapt. By embracing the complexity and working
within it, organizations may succeed in today’s complex market.

Conclusion

I
n order to remain competitive in the global business world, organizations need to
change their systems which are run like machines where the top leaders decide
everything important, to dynamic systems of interconnected associations that are
able to change in ways that exceed the complex demands and expectations of today’s
organizations (Duin & Baer, 2010). Today’s leaders must change to dynamic systems,
where leaders change the structure, culture, the strategy, to meet the dynamic envi-
ronments they are in (Duin & Baer, 2010). A leader also must be aware of the dynamic
environments, both internal and external, so that the organization can adapt. As inter-
nal organizational methods become more complex, the external situations also have
become more complex creating conflicting demands, that leaders must respond to,
which can determine the organization’s destiny (Smith & Lewis, 2011). Organizations
were once viewed as self-contained; today’s organizations are viewed as social struc-
tures that are influenced by dynamic systems of interconnected associations (Macey,
2011). The paradox of organizing looks at organizations as open systems that react
to the interdependence using strategies like enactment and deviation (Macey, 2011).
By shifting away from viewing their organizations as machines, leaders can turn their
organizations into complex knowledge centers that can generate innovation, learning,
and adaptation. By embracing the complexity and working within it, organizations will
succeed in today’s complex market.

E:CO 2014 16(3): 105-116 | 113

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Brenda Geer-Frazier is a professor of Leadership/Management at several colleges,

including Northcentral Technical College, Lakeland College, and American Public
University. She is in the process of receiving her PhD in Organizational Development
Management from Capella University. She holds both a Bachelors of Business
Administration and Master of Business Administration from American Intercontinental
University in Business Administration. Brenda has owned and managed several
businesses over the last 25 years. Brenda has over 25 years of management experience.
She has owned several restaurants, worked for Wal-Mart in management, and owned a
state licensed daycare. She has lived in Central Wisconsin with her husband her entire
life. She has four grown children, and six grandchildren with whom she spends all of
her extra time with. If it were up to her she would spend every waking moment with her
grandchildren, as they bring so much life and energy into everything they do. It gives
her an opportunity to look at things though their young eyes, and it is fascinating! She
enjoys learning new things, reading, golf, and the beach.

116 | Frazier
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