066 – ‘Big History’ and its extension

Big History Project

You may have heard the term ‘Big History’. It comes from historian David Christian, at Macquarie University in Sydney, Australia. He has a TED talk describing what his team has been up to with Big History, a project that has received some funding from the Gates Foundation. Big History is the story of how life and eventually civilization have emerged on Earth, building upon one another. The story starts with the Big Bang roughly 13.7 billion years ago. The discussion introduces a puzzle. In a universe ruled by the Second Law of Thermodynamics (paraphrased: everything runs down over time), how could the complexity that we see today have come about?

Well, it seems that the universe can produce complexity in spite of the Second Law, but it is very difficult, and it requires special conditions, found only where suitable conditions are present at each stage of the process. Professor Christian calls this the Goldilocks conditions, not too hot, not too cold, just right. Even then, it was necessary to cross eight difficult thresholds to arrive at our present-day reality. It is not clear how much longer this can continue.

But let’s start at the beginning of the Big History story according to the best available evidence. Before the Big Bang, it was completely dark. This was before time and matter existed. Then suddenly, our universe emerged from a single point in space/time about 13.7 billion years ago. That was the first threshold to be crossed, and scientists have little idea why or how it occurred, as they can only see the after effects.

When our universe first emerged, it was incredibly dense and hot, theoretically no bigger than an atom, yet it began to expand rapidly. Within the first second, the forces of electromagnetism and gravity were unleashed. The universe continued to expand for thousands of years until, after about 380,000 years, it had cooled enough that protons and electrons could combine to form simple atoms. Once this happened, gas clouds were formed, largely made up of hydrogen and helium atoms (the lightest elements in the periodic table).

One of today’s satellites recently peered back into the early universe and took a picture of the cosmic background radiation left over from the Big Bang. The temperature was close to the same everywhere, but there were minute differences, indicating differences in density in the clouds of early matter. Since gravity is stronger where there is more stuff, compaction of these clouds took place gradually over time where density was highest. Where compaction occurs, temperatures rise. Some 100-200 million years after the Big Bang, the temperature in some parts of the universe exceeded 10 million degrees, where protons began to fuse, and stars were born. This was the second threshold. Today, it is believed that there are some 200-400 billion stars just in our galaxy, the Milky Way (not counting all of the other galaxies out there).

With the presence of stars, the creation of more complex chemical elements became possible. When very large stars age and run out of their lighter elements such as hydrogen, then helium, they collapse upon themselves and create temperatures so hot that they fuse more and more protons together to create heavier elements. Very heavy elements in the periodic table are formed when large aging stars are finally blown apart in a supernova event. If you have a gold ring on your finger, its elements were formed as part of a supernova explosion from a dying star. The creation of these denser chemical elements was the third threshold that was crossed, and they have been gradually scattered into space as a result of many, many supernova explosions.

Some 9.2 billion years after the Big Bang, or about 4.5 billion years ago, our solar system and its planets (including Earth) were formed. When this happened, the fourth threshold had been crossed. Of course, most of the solar system was still inhospitable to the creation of living organisms, being either too hot (near the sun) or too cold (far from the sun). Earth was just about perfect for the creation of life, especially because it had large amounts of water on its surface in the form of oceans. Wet chemistry is important for the creation of life. For instance, oceanic vents, where heat is released from the earth’s mantle, was a good place for complex molecules to form through wet chemistry involving the electromagnetic force. The remarkable thing that occurred was that a template for life was created (the complex DNA molecule), whereupon life began to reproduce itself based on that information. This was the fifth threshold. As life reproduced itself, DNA would occasionally make mistakes. Evolution relies on the fact that some of those mistakes work better in the environment than the original, so DNA appears to learn what works best over time, building greater diversity. Single-celled organizations were all there was at first, but slowly small multicell organisms began to emerge, then many others, large and small over millions of years, including famously the dinosaurs.

About 65 million years ago an asteroid crashed into the Yucatan peninsula (in current day Mexico), creating conditions akin to a nuclear winter worldwide. That was bad news for the large dinosaurs that were wiped out in short order, but good news for mammals that began to populate the niches that they left behind. Birds, as it turns out, are today’s decedents from the dinosaurs.
It was not until about 200 thousand years ago that humans appeared. This was the sixth threshold. Their big brains allowed them to learn in real time. Through human language, and eventually writing, the human species began to accumulate knowledge and pass it on to its future generations. About 10,000 years ago, farming began, unleashing another energy source needed for the foundation of complex civilizations, crossing the seventh threshold.

Only 500 years ago, humans began to link up globally after voyages of discovery opened major trade routes by sea, and humanity became a single global force manipulating the environment. This was the eighth threshold. Humans are now over 7 billion strong. Fossil fuels, agriculture, the industrial revolution, and a multitude of evolved technologies explain the complexity of civilization that we see around us today. Yet with all this apparent success, there is evidence that the Goldilocks conditions that have allowed our flourishing are rapidly being undermined on this planet. Climate change is a real and present danger due to the current overreliance on fossil fuels, releasing CO2, and producing the greenhouse effect.

That brings us to the question of how this progression will play out in the future. How do we ensure our world will serve future generations? What is the next threshold that we need to cross and what conditions need to be present for it to happen?
Well, one way to extend this story (which just happens to be relevant to this podcast) is to focus on the super-organisms that have emerged over the last 200 years to encompass and magnify human activities. I am speaking of organizations (in the forms of business, government, and non-profit entities). Here humans are encased within a large social entity (if only during part of their day), gain an energy source, band together with other like-minded individuals to find purpose and meaning, and accomplish things together that they could not do on their own. A successful organization has access to considerable power and resources over time. It is no wonder that organizations large and small dominate the world around us, and we find them indispensable.

Yet all is not well with the ecosystem of organizations, and the capitalism that drives them. A story is emerging about organizations need to enter a new age, one that we have called The Age of Organizational Effectiveness. There are several threads to the story. One recounts the difficult situation that society finds itself in on multiple fronts, with limited options, and no clear path forward. Another thread is about widespread dissatisfaction with what capitalism has now become.

It is questionable how far current management technology can take us into the future. Current management philosophy revolves largely around the goal model, which forms the basis for management by objectives. This is risky because the approach accepts virtually any goal that management wants to use. This means that arbitrary goals such as profit maximization, shareholder value maximization, or any other arbitrary objective or goal, can be entertained to drive an organization. Bringing in a new C-suite team with a new set of objectives can be a risky proposition. That coupled with the fact that in many public corporations, C-suite executives have been highly incentivized with stock offerings, encourages the use of financial accounting tricks to artificially inflate stock market valuations. This may be good for the C-suite (at least for a short time), but not so good for the firm and its employees in the longer term. It often leads to counterproductive actions at the first sign of financial trouble, such as layoffs, downsizing, and general efforts to do “more with less”. The approach encourages cost reduction approaches and asset sales, which strip productive value from a firm and contribute to employment instability and income inequality inside the firm, reducing the firm’s ability to be productive in the future.

Just as DNA has provided a biological code to replicate and evolve organisms from the distant past to the present, new management theory and practice are needed to provide a template for a reliable future. The single-minded pursuit of profit, shareholder value, or any other arbitrary objective can create instability in an organization’s complex adaptive system, as we have discussed in previous podcast episodes. Furthermore, the market cannot be relied upon to stabilize the economy because we now live in Alfred Chandler’s managerial economy rather than Adam Smith’s free market economy. For example, the financial debacle of 2006-2008 and beyond in the USA was precipitated by investment banks that were focused on generating financial profits from complex investment vehicles in the housing market, without the vehicles being sufficiently supported by underlying assets on their books — thus increasing market risks and increasing environmental instability over time. To stabilize the planet, we need organizations that serve their environment effectively and cooperate to improve the common good. Today’s discussion highlights, even more, the view that we all need to find a way to live together on Earth, a little blue dot in the vast expanse of space. New-style organizations will be needed to extend ‘Big History’ into the future.

For more information, refer to a recent book: Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness (2017). A link is provided in the show notes.
Charles G. Chandler, Ph.D.

Link to Big History Project:
https://www.bighistoryproject.com/home

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065 – The new management technology that every organization needs

A technology is the application of scientific knowledge for practical purposes. When it comes to management technologies that can be used to guide the overall performance of an organization, new ones appear very rarely. One was introduced in 1911 by an American engineer, Frederick Winslow Taylor. Taylor’s technology (often called ‘Taylorism’) attempted to improve the efficiency of industrial firms. Taylor invented what he called ‘task analysis’ or ‘task management,’ later called ‘Scientific Management’ in his book by the same name. At the time, Taylor’s methods were meant to increase the productivity of unskilled manual workers by improving the efficiency of their tasks (using time and motion studies), thus increasing the efficiency of the firm in the process. Today we know these methods as part of industrial engineering.

The principles of scientific management were extended from industrial firms to other firms of the time by Henri Fayol in 1916. Today, Fayol’s 14 principles of management are widely known, and his 6 elements of management— forecasting, planning, organizing, commanding, coordinating, and controlling — still serve as an underlying core of management practice. While Fayol considered organizations to be largely closed systems, this would have been consistent with the drive for internal efficiency improvements that dominated early management thought. Efficiency is an internal measure which compares the ratio of outputs (such as products and services) to resource inputs.

Over a century has passed since Taylor and Fayol published their works. Looking back over the decades, Peter Drucker credited the management principles of Frederick Winslow Taylor with a 50-fold increase in the productivity of manual work during the 20th Century, an increase upon which rested, he noted, “all of the economic and social gains” of the times. The improved productivity of the manual worker created what is now called a “developed” economy. Taylor’s principles can be seen in the widespread application of equipment in production processes to allow workers to become more efficient and productive. As Taylor was the father of industrial engineering, Taylorism foreshadows and embraces all of the techniques that have served over the years to improve the efficiency of the worker and the quality of the end product. Despite its success, Taylorism focused on internal efficiency improvements alone, and did not focus on how well the organization was serving its external environment (including its customers).

That brings me to the new management technology that I want to focus on today. Unlike Taylorism, this new technology aims to improve the overall effectiveness of the organization rather than its internal efficiency. It deals with how well an organization serves its external environment (including its customers and other stakeholders). Organizational effectiveness has been the missing holy grail of management thought. It was given up for dead and labeled as an unworkable concept by scholars in the mid-1980s. That was because none of the prominent models that described effectiveness at the time could be verified in the field through direct observation.

That situation has potentially changed, however, with the publication of a new book: Become Truly Great: Serve the Common Good through Management by Positive Organizational Effectiveness (2017, by Charles G. Chandler). The book introduces a new model for organizational effectiveness that can be verified in the field by direct observation. It also turns out that Positive Organizational Effectiveness is the engine of greatness.

Let me clear about what I am discussing here. Organizations utilize many different technologies for different purposes within their production processes, but I am limiting my discussion of management technology to that which is used to judge the overall performance of the organization. The question of organizational effectiveness has long been recognized as being at the very center of this issue.

When it comes to judging the overall performance of the organization, current management technology is not reliable. Most organizations use the goal model, wherein the organization is judged to be effective if it achieves its goals. Even advocates of the goal model admit that not all goals are created equal, and few would argue that all goals relate to organizational effectiveness. Often, goal setters are simply admonished to set clear goals, with the emphasis on clarity. Another framework for goal setting calls for SMART goals (Specific, Measurable, Attainable, Relevant, and Timely). But it is not sufficient to set goals based on so-called SMART criteria, as these criteria do not ensure effectiveness.

The problem with organizational effectiveness has always been the need to define the concept in a way that would allow its verification in the field through direct observation. Until now that had proved to be elusive. The new technology I am describing is called Management by Positive Organizational Effectiveness, and it allows organizations to determine their effectiveness through a well-defined process that is verified in the field through direct observation.

The new approach departs from the goal model, which has remained dominant in the daily practice of management around the world, but with limited success. Many people are familiar with Management by Objectives, which is based on the goal model. The goal model serves an aging, and largely top-down, bureaucratic reality. Let’s call it “last century” technology. It is not reliable because it accepts arbitrary goals that may not be related to effectiveness (i.e., profit, shareholder value).

Management by Positive Organizational Effectiveness uses a new model, called the Outcome-focused Model, to determine effectiveness. Within this model, the goal of every organization is the same, that is, to be effective within its environment. Yet effectiveness does not operate here at the level of the organization as a whole; it operates just below that, at the level of its individual offerings to the environment. As such, efforts to improve organizational effectiveness focus on an organization’s portfolio of offerings that serve its environment.

The new management approach defines effectiveness as the conversion of the supply-side intentions of an organization into favorable demand-side responses in the external environment. Results chains are used to describe the linkage between inputs & outputs on the supply side, and outcomes & impacts on the demand side. The strength of expected outcome-level behaviors can be observed directly to verify effectiveness.

The new model focuses the attention of the organization on its external interface with its customers and stakeholders, and is encouraged to be in-tune with the immediate and future needs of these actors. The focus on expected external outcomes changes the way that outputs are designed and delivered because internal actors come to realize that outputs of the organization (including its product and service offerings) are simply waste without the achievement of expected outcomes (such as the favorable demand-side behaviors of uptake, adoption or use of those offerings).
Many organizations are still driven by inappropriate objectives that promote efficiency rather than on effectiveness. This can lead to false-positive indicators of effectiveness where true effectiveness may not exist. An outcome-focused organization avoids these problems by focusing its objectives on expected external outcomes, that is, on the behavior of external actors who can adopt and use its offerings.

While Taylor’s “scientific management” increased firm performance and manual worker productivity by increasing task efficiency, Management by Positive Organizational Effectiveness converts an organization’s offerings into relevant demand-side responses through the management of benefit exchanges at the supply/demand interface. If you are still using the goal model in business and continue to focus your primary goals on the maximization of profit or shareholder value, you need this new technology. In fact, every organization needs it because it can be applied to government, and nonprofits as well.

This episode has provided a brief explanation of a new technology to manage organizational performance, one that every organization needs. The approach is described in more detail in the book I have mentioned (Become Truly Great), for which there is a link in the show notes (below).

Charles G. Chandler, Ph.D.
cchandler@AssumptionAnalysis.com

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