Exploring organizational theory and leadership through the framework of complexity and neural sciences

Following paper has been inspired by my own experiences of leadership in six different countries, as well as the last ten years of multidisciplinary research based on reading and self-reflection. Here, the emphasis has been profoundly based on self-reflective approach, that is, concepts are not abstracted conceptually but situationally, on a situation-by-life basis. The goal is that with the help of self-reflection, to think about how key thoughts relate to what one does in actual work. So, coming very close to things to do and activities. After all, Aristotle spoke of such a concept of practical reason, or better practical science. This work should create the foundation for Post-Industrial work. The theoretical framework comes from psychology, sociology, relational psychology, network theory, cognitive neuroscience, computer science and the sciences of complexity – mainly complex adaptive systems. I hope you enjoy the intellectual journey and find it as thought provoking and inspiring as I have felt.

Traditional theory of economics, but also organizational theory and business management, has certainly been under turmoil due to the global financial crisis in 2007-2008, economic and political polarization and destabilization of the EU leading to Brexit, and pandemic outbreak. Businesses, markets and economies, but also the whole process leading to growing international interdependence what we call ‘globalization’, is approaching some kind of turning point. Idealized policies and theories around market equilibrium, regulated by cybernetic control systems, are not clearly effective ways to capture and make sense of the complex phenomena taking place around us. Exponentially advancing digitization, machine learning and application of artificial intelligence are all creating a virtual economy, where as a result, technological unemployment and wider imbalance of wealth distribution is a big risk factor.

As a response to growing uncertainty, economists and politicians are pointing out that current problems are the derivative from too liberal laissez faire -capitalism, sometimes too open or close international collaboration and interdependence, and with marginal variations, suggest to tackle these problems by increasing more cybernetic control systems, aiming of providing more robust level of predictability and stability, by means of new policies and legislations. Besides this, groups of people in crisis situations and high levels of uncertainty develop a strong tendency to become passive and submissive, looking towards idealized leaders to navigate them out of a crisis. Here anxiety and paralyzing fear of the future is ‘outsourced’ as dependency towards idealized leadership figures.

Based on my perspective, the challenge is far more complex and to be able to understand where we are now, we need to understand how and why we have arrived to this point, both from a historical and ontological standpoint. The perspective I’m proposing here is that we as human beings tend to believe and build our theories and explanations based on equilibrium models i.e. supply-demand patterns of macroeconomics. This, as opposed to far from equilibrium models of nonlinear dynamics. With these assumptions emerges the idealized notion of certainty, stability and control. In terms of business and organizational management, this means we have a tendency in organizations to promote idealized models of conﬂict management and change management (Shaw, 2002). I claim that it’s the historical reductionist and determinist view stemming from the natural sciences and classical physics, which is not only molding our core beliefs/views, but also influencing our habits of thought and speech, which tends to blind us from far messier reality. Today we communicate, make sense of the world, and are being formed by this dehumanizing language of design, regularity and control. However, constellations of factors such as underlying human picture, the view of organizations, as well as the causality applied to these models, contributes to certain shortcomings of the present models and paradigms. My intention is that this text as a form of creative inquiry, but also as an alternative lens on organizations, economics and leadership, allows the reader to navigate in a more meaningful and pragmatic way.

Before the birth and even conception of economics theories and management sciences and practices, people believed in some kind of God or similar, a supreme being as the ultimate ruler or manager of the earth. Their purpose as human beings was to worship and glorify God and to follow His laws which were written in the Holy Scriptures. Obedience of the laws was believed to lead to eternal rewards while disobedience led to eternal punishment. God was presumed to know all things and knowledge was said to be given by God to his people through divine revelations. In addition, people associated themselves as part of a community rather than as autonomous individuals, and each person had a role to play in his/her community which they inherited by birth. So, for example if a man was a carpenter by profession then his sons were expected to take over the same trade just like in a monarchy and the profession of roles were passed down from generation to generation. The church and the state were often viewed as one unified entity and therefore people equated obedience to state law as obedience to God, and they believed that at the end of life, they would reap eternal rewards. A particular theory of causality is implicit in this view of the person and how the person changes – natural laws revealing God’s glory and intent.

People thought in this way for hundreds of years until the age of reason, better known as the Enlightenment. These advancements in philosophy as well as in natural sciences were the starting point to the scientific revolution which was a movement of thought in which people came to hold that the eternal and timeless laws of nature could be understood not through revelation but through reason (Stacey et al., 2007). Laws that govern nature such as the movement of the planets and gravity were now explained and understood through reason rather than divine revelation. At first this way of thinking was not accepted as people saw it as a direct disobedience of God and his laws but over time it began to gain more prevalence and after a long process it ultimately led to the weakening of the church and absolute monarchies systems, consequently changing the way people thought (Stacey et al., 2007). Science grew out of religion. At the heart of the scientific revolution was the scientist who objectively observed nature, formulated a hypothesis about the laws governing it and tested this hypothesis against quantified data and came up with a logical and rational explanation of how the law works. We can reflect the intellectual and methodological heritage from Copernicus to Galileo and beyond. One can clearly see a paradigmatic shift gravitating towards rationality-centric scientific method (positivism) and reductionist view of objective observers, initially challenging and eventually replacing the old doctrines and bodies of belief. It’s important to understand how influential this intellectual heritage is still today. Also, the causality has clearly changed to that of the Natural Law Teleology.

In physics, nature was thought to be strictly deterministic (i.e. Newton’s thinking and Classical mechanics). It was believed that when the laws of nature are known, nature can be predicted and controlled. Understanding the governing laws with appropriate mathematization and modeling the laws of movement through the universal mathematical ideas of calculus. It was also thought that everything in the world is made up of parts (atomistic view). The idea was that if one breaks the whole into parts and understands their interaction, then one also understands how the whole system works. The situation in physics was like this for a very long time (in fact until the emergence of quantum mechanics) and it influenced deeply also other disciplines. Physics provided a model for other disciplines, in the following centuries, humans were also thought of as a machine and the Universe was thought of as a clockwork machine. By the time the 16th and 17th centuries had become the first mechanical devices to illustrate it. Belief in the power of numbers and the lens of scientists as an external observer was immense. We can reflect and see how this intellectual domain has influenced the evolution of managerial ideologies and organizational practices. In natural sciences the upheaval occurred in the early 20th century with the advent of relativity and quantum theories, long before Hawking.

René Descartes' (1596-1650) rationalist philosophy laid the foundation for the Enlightenment thinking. Francis Hutcheson (1694-1746), a moral philosopher, described the utilitarian and consequentialist principle that virtue is that which provides, in his words, "the greatest happiness for the greatest numbers". Much of what is incorporated in the scientific method (the nature of knowledge, evidence, experience and causation) and some modern attitudes towards the relationship between science and religion were developed by his protégés David Hume and Adam Smith. Immanuel Kant (1724-1804) was an influential German philosopher in the Age of Enlightenment. In his doctrine of transcendental idealism, he argued that space, time, and causation are mere sensibilities; "things-in-themselves" exist, but their nature is unknowable. In his view, the mind shapes and structures experience, with all human experience sharing certain structural features. In one of his major works, the Critique of Pure Reason he drew a parallel to the Copernican revolution in his proposition that worldly objects can be intuited a priori ('beforehand'), and that intuition is therefore independent from objective reality. Kant believed that reason is also the source of morality, and that aesthetics arise from a faculty of disinterested judgment. Stacey describes the differences between Kantian and Hegelian thinking, whereas Kant created dualistic paradigm of human and nature, where one causality deterministic natural laws applies to nature (efficient causality), and another, rational choices made by autonomous individuals (rationalist teleology), applies to human action (Stacey, 2003).

Kant – still today highly influential in various disciplines – can be thought as forefather of systems thinking. Kant suggested that a regulative idea could be to think of Nature as though it were made up of parts and whole. He cautioned against including human beings in this regulative idea, for although we are also part of Nature, we are rational autonomous beings and thus cannot be a part of any other whole. This injunction not to include human beings in the regulative idea has been highly forgotten. Kant also assumed that we cannot know things in themselves, noumena, but could only know phenomena drawing on a priori categories of thought. For Hegel knowing was thoroughly a social process. We come to know the world, and ourselves, through intersubjective experience. It's a simplification but Kant thought of us as ahistorical discrete and autonomous beings contemplating the world; Hegel considered it to be historical and social beings, where thought moves in the process of thinking. Hegel’s dialectic is actually a critique of Kant’s dialectic, although he embraces the premise that it contains, that is, human reason alone will eventually lead to erroneous conclusions about nature. That is, through (pure) reason, we have the opportunity to experience the phenomenon, but not the actual one behind it. Hegel therefore accepts that this is a limited starting point for ‘an sich’ awareness, but not the subjectively inculcated emphasis on Kant's presentation. This is quite different from Kantian dialectic which combines rational teleology of human action motivated by chosen goals with the formative teleology of systems thinking, where movement into the future is unfolding of what has been enfolded already. Let’s take a deeper reflection of the importance of this difference slightly later.

An organization achieves its goals through optimal performance, which is a complex and multifaceted phenomenon encompassing the results and outputs of the organization that can be measured against its mission and objectives (Al Khajeh, 2018:3). Whereas leadership is a social process in which leaders deliberately exert influence over followers to enable activities within a group or organization. Over time the tasks and responsibilities of organizational management has become increasingly complex. Today it is their job to understand the scope of the organization’s activities, its future direction and understand how it can secure competitive advantage over its competitors and substitutes. At the same time, leaders are expected to manage, develop and motivate a group of individuals and direct their activities in a way that will help the organization to achieve its goals and objectives. During recent decades, a number of different paradigms of business management such as organizational development, organization as learning systems, change management, transformational management, strategic management etc. have been developed, each promising its followers a ‘recipe for success’ to help them improve the performance of the organizations as a whole. The general idea is that designed criteria must be established in advance of any changes; measures for performance should be set so that people knew what they had to do; performance should be judged and rewards given according to the criteria; action plans should be articulated and the meeting of targets was to be ensured." (Stacey, 2010). Today’s business environment is complex as it is characterized by countless interactions among the various ‘agents’ (employees, suppliers, customers, competitors) resulting in non-linear relationships between their actions and the outcomes. However, our managerial language speaks about missions, visions, trajectories, roadmaps, etc. These spatial metaphors of maps, routes and pathways are common currency in organizational life, and sit comfortably within the ‘life as a journey’ cliché (Mowles, 2020).

The practice of management can be traced back thousands of years. Even before modern management theories were developed the Egyptians built the majestic pyramids while the Chinese built the Great Wall of China, both without the use of many of the glorious machines and technologies that we have at our disposal today. It took thousands of workers over a long period of time, working together to achieve a common goal. Modern management and organization as we know it today began primarily during the middle of the nineteenth century with the rise of automation and mass production. Over the course of the next 150 years, core concepts about individuals, managers, followers and organizations were developed and these concepts have helped to shape the thinking and behaviour of managers, employees, and policy-makers today. Management goes beyond an organization’s internal operations and involves also management of the business relations. Whereas the internal operations focus on the employees, finances, machines and technologies that are within the organization, the external environment includes its customers, competitors, suppliers, governments among others. Currently, dominant ways of talking and thinking about organizational change, based on engineer’s notion of control, make the implicit assumption that successful change occurs when people are persuaded to hold the same beliefs. Those who give a central role to conflict are rare and the call is usually for strongly shared cultures and harmonious teamwork (Stacey, 2010).

Obvious and repeating themes here are the ones that reflect the formal, conscious and legitimate aspects of organizational behaviour. The prevalent theory during the 19th and early 20th centuries in Western areas of the world was that leadership is an inherent rather than something one can learn. The favorable and required characteristics behind effective leadership were seen as heritable characteristics usually found in members of upper class. The 20th century saw the rise of trait theories, which focus on personal attributes and how it drives behavior and performance. The leadership discipline and research has expanded rapidly driven by the growth of the global economy, increased international competition and the object to leverage leadership as means of achieving company and shareholder objectives. As an example, this research covers different leadership approaches and styles. Here influential has been a study conducted by a group of psychologists regarding behavior of school children (Lewin, Lippitt & White, 1939). This study identified three primary styles of leadership; authoritarian, participative and delegative. The three basic leadership styles are still evident in organizations and institutions, where they make a significant impact on performance (Lewin, Lippitt & White, 1939).

An organization is a group of people working together in a structured and coordinated way to achieve a set of goals (Griffin, 2001). Different organizations have different goals and objectives however; every organization regardless of its size, type or location uses managers. Organizational models can be thought of as institutionalized ways of analyzing problems and devising solutions (Guillén, 1994). A manager is a person responsible for using an organization’s resources (people, finances, information and infrastructure) with the aim of achieving the organizational goals in an efficient and effective way. Management is commonly thought to be “what managers do” however this is not a sufficient definition of management. Management is the process of forming a strategic vision, setting objectives, crafting a strategy and then implementing and executing the strategy. Manager’s role and responsibility can be summarized to diagnose the current performance, plan and decide the strategy and targets as a composite of conditions about future activities of the company, aiming to improve its solvency and liquidity, financial stability and profitability. There’re a number of well-known metrics (KPI’s) such as quick ratio, current ratio, ROI and ROCE to track the operational and financial performance and its enhancements. Company may continue to grow its revenues organically or through M&A strategy, in which case the Due Diligence process leads to valuation through EBITDA multiple, asset-based approach or other sophisticated techniques such as discounting the future cash flow which defines company's capital value.

Organizations differ greatly in size, function, and makeup. Nevertheless, the operations of nearly all organizations big or small are based on a division of labour, a decision-making structure; and rules and policies. The degree of formality with which these aspects of business are approached vary tremendously within the business world. Firstly, organizations practice division of labour both vertically and horizontally. Vertical division includes three basic levels—top, middle, and bottom. The chief function of top managers, or executives, typically is to plan long-term strategy and oversee middle managers. Middle managers generally guide the day-to-day activities of the organization and administer top-level strategy. Low-level managers and laborers put strategy into action and perform the specific tasks necessary to keep the organization operating. There’re then functional or department specific KPIs which are linked with the overall performance and strategy of the organization. Horizontally organizations are divided into task groups, or departments, which assign workers with applicable skills to carry out their own predefined activities.

The second basic organizational characteristic is decision making structure which is used to organize authority. These structures can either be centralized or decentralized. Centralized decision structures are referred to as "tall", or “bureaucratic” organizations because important decisions usually emanate from a high level and are passed down through several channels until they reach the lower end of the hierarchy. On the other hand, flat organizations, which have relatively more decentralized decision-making structures, employ only fewer hierarchical levels and allow for more employee empowerment and individual autonomy in their management philosophy. A formalized system of rules and policies is the third standard organizational characteristic. Rules, policies, and procedures serve as templates of managerial guidance in all sectors of organizational production and behavior. They may document the most efficient means of accomplishing a task or provide standards for rewarding workers.

Another important aspect regarding organizations and leadership is the concept of power. How do we make sense of power as property of individuals or perhaps as an enabling and constraining factor of each and every relationship? Michel Foucault, a French philosopher and social theorist, who developed archaeological and genealogical methods which emphasized the role that power plays in society. Foucault’s theories (Foucault, 1969, 1975,1980) explored the complex and interwoven relationship between power and knowledge, and how they are used as a form of social control through societal institutions. Power is a relationship, a relationship which can direct or determine another's behavior. Power is a constraint that excludes some communicative actions and includes others (Streatfield, 2003). Governing someone in a sense that one's behavior can be determined according to strategies using number tactics. These relationships are sustained by ideology. Organizational ideology serves not only as a justification of authority but also a cognitive tool to frame problems in such a way that the mass of often ambiguous or contradictory worldly experience can be interpreted (Guillén, 1994). Ideology is thus a form of communication that preserves the current order by making current order seem natural. Ideology exists only in speaking and acting of it (Stacey, 2003).

In order to reach the business and strategic objectives, designing and enforcing healthy organizational culture has been highlighted. Culture in this case is considered as a set of shared values, procedures, beliefs. These patterns are persistent over time, communicated and transferred to newcomers through socialization, and become entrenched in the company through its processes and reward systems (McGregor & Doshi, 2015). The key question and object of research has been the link between organizational culture and organizational performance. This way organizational culture – encoded to mission and vision statements – has along other managerial tools and frameworks such as balanced scorecard and the performance prism.

In the first chapter of this paper we have explored the development of knowledge, history of thought and the leadership and organizational behavior paradigm. The trajectory points out towards the sciences of certainty which is a natural tendency following the development of philosophy and natural sciences of modern times.

In many modern definitions of leadership, leading is inherently positioned as the ability to drive a vision. Leaders need to envision future possibilities and need to be able to enlist others to share in this vision. Mission can be defined as a clear and compelling goal that serves to unify an organization’s effort (Collins, 1998). It should stretch and challenge the organization, and be inspiring, concise, and easy to understand. In contrast to core purpose, it should have a clear end date and mechanisms for measuring whether or not the goal in question has been achieved. These are then cascaded through strategy and culture into a set of actions enabling organization to have control over their future. Consistency of values and culture, inspiring and powerful set of standards of excellence and shared purpose and mental models addressing the possible future state.

We formulate and act based on implicit models and abstractions [human picture, form of causality, view of organization, etc.]. It’s therefore very fruitful to stress the importance that all models and abstractions are idealizations – some more fertile than others. These abstractions and models always reflect the choices and power relations which can be traced socio-historically. Therefore it’s of an essence to look at the history of science and explore how paradigms have fluctuated over time providing time-dependent conclusions obvious at one time and absurd at another. We also recognize that the long traditions of reductionist science are becoming increasingly inadequate to cope with the complexity of the social reality we are now trying to understand, manage and influence.

Richard Levins in his paper Strategies of abstraction [Levins, 2006] has highlighted four very powerful points:

The idea to challenge the common assumption that scientific theories arise from and 'summarize' data, when often, theories precede and guide data collection; without theory, in other words, it is not clear what data to collect. Among other things, it also argues that the modeling enterprise enforces habits of mind essential to freedom.
Our daily life is based on using a plethora of implicit models in which the assumptions are hidden, their internal consistency is untested, their logical consequences are unknown, and their relation to data is unknown. The choice, then, is not whether to build models; it's whether to build explicit ones. In explicit models, assumptions are laid out in detail, so we can study exactly what they entail. On these assumptions, this sort of thing happens. When you alter the assumptions that is what happens. By writing explicit models, you let others replicate your results.
Science proceeds from observation, and then models are constructed to 'account for' the data.' The social science rendition— with which I am most familiar —would be that one first collects lots of data and then runs regressions on it. This can be very productive, but it is not the rule in science, where theory often precedes data collection. Maxwell's electromagnetic theory is a prime example. From his equations the existence of radio waves was deduced. Only then were they sought … and found!
The student of human affairs is also a part of that system, with perspectives that are formed in the networks of which she or he is apart. This leads to the biases that are most difficult to detect because they are shared in the scholarly community and serve to determine respectability of ideas and define common sense. The second pathway examines our expectations themselves to ask why a wrong conclusion seemed so plausible. This is the more radical response since it can challenge fundamental assumptions of a field. If done with care it can show us new directions. But if every table in our notebook leads us to proclaim a new paradigm there would be total stasis.

Complexity sciences understood as a model rather than theory may support to illuminate the core dynamics, suggest dynamical analogies and enable researchers or practitioners to discover new questions. At the heart of it is the phenomenon in which macroscopic patterns—large scale regularities such as wealth distributions, spatial settlement patterns, or epidemic dynamics— emerge in a local interaction by populations of heterogeneous individuals (agents) under plausible behavioral rules. Concepts such as emergence, self-organizing and non-linear dynamics enable us to illuminate the uncertainties of underlying, and often taken-for-granted assumptions related to sciences of certainty. In the following chapter to be published after 2 weeks we’ll focus on the psychology and sociology underlying today’s paradigmatic schools of leadership and organizational behavior.

BlackSmith Consulting Oy, Juho Partanen
Chairman of the Board
+358 40 153 5606
juho.partanen@blacksmithconsulting.fi