Continuing the ongoing thread on systems thinking, I thought it would be relevant to focus on two extremely common challenges that are frequently brought to light by applying systems thinking: feedback loops and delay effects. In our business simulations, we often notice a tendency to react to information and make quick judgments. This is true in businesses and often emerges during professional development training programs, but also in our day-to-day lives. Let’s take a quick look at an everyday example—a couple’s credit card debt—and then see how the same kind of thinking can get businesses into trouble.
Regardless of the reason, the couple went into debt, once a debt hit occurs, it can take a long time for them to pay it back due to a delay effect, particularly if most of their monthly income is already going toward “essential” living expenses.
Delays occur after it seems the initial results are in. An organization conducts an initiative, assesses the results, and finds that the program is achieving the goals projected. Days, weeks, or months later, a delayed effect can set in, causing astonishing and unexpected results. The longer the delays, the harder it is for people to make good decisions.
The issue exists between the flows (monthly expenses and new debt) versus the debt and ability to pay. First, they have to get the flows in balance again, and then they have to generate enough surplus each month to start working down the debt.
So, if they are living 15 percent beyond their means each month, they have to cut their lifestyle by 15 percent just to get the flows to balance, and then they have to cut it more to start working down the debt. So instead of cutting their lifestyle by 15 percent, they might have to cut it by 30 percent for a long time.
Now, take this simple example and think through how delays impact process, decisions, or change initiatives within your organization. Let’s say that something goes wrong for your company and the organization mandates a policy. Months or years go by, and now that policy is bad, so a new policy is implemented. Each policy results in changes, but the original reason for the policy is forgotten.
Delays can cause a solution to appear to be working in the short term, only to create very adverse effects at some later point. They can also cause a solution to appear not to be working at all, causing people to give up and retract an action, or to put unwarranted effort into that solution.
Delayed effects lead to oscillations, which are visible in business, economics, and power, among other areas. An effective way to understand them is through the use of simulation training as part of a professional development training program, which can be even more successful as a teacher than real-world experience can be, since it is often difficult for learners to connect actions to outcomes that occur only months or years later. That gap is one big reason why it is so difficult to hold people accountable for their actions in the workplace.
Adding to the complexity are feedback loops. As noted, a traditional way of viewing the world involves linear cause-and-effect understanding: event A causes B causes C, and so on. A systems view of the world takes this a step further by showing the interrelationships: it identifies where A affects B and B, in turn, affects A. In this view, the connection back to A from B is called feedback. As A shapes B, B gives A feedback that will further shape A. This reinforcing loop grows over time, producing something that is either desirable or undesirable.
Feedback loops exist everywhere in life and throughout organizations. Unfortunately, they can be difficult to understand without a systems perspective. Organizations may overlook them unless they take the entire system into consideration because a small alteration can appear nonthreatening. However, when a change continues to expand due to a feedback loop, it will ultimately affect the company.
Feedback loops can provide engines for growth, as success breeds success and satisfied customers attract even more new customers. Or they can create limits to growth, as it becomes progressively harder to tap the remaining market or get one more product out each year. Either way, feedback loops should not be overlooked when implementing professional development training programs as they are capable of creating significant unintended consequences.
Michael Vaughan is the CEO of The Regis Company, a global provider of custom business simulations and experiential learning programs. Michael is the author of the books The Thinking Effect: Rethinking Thinking to Create Great Leaders and the New Value Worker and The End of Training: How Business Simulations Are Reshaping Business.