Systems Thinking Helps Executives Tackle Difficult Decisions

Complex decisions are a part of everyday life for orthopedic company executives. From managing big personalities in the office to responding to changes in regulations, decision-making is rarely straightforward for leaders. To excel in an evolving and multifaceted business environment, executives should implement a structured and predictable approach to making choices that result in improved outcomes, according to Jevon K. Powell, Ph.D. One of those proven methods is systems thinking.

“Systems thinking is a comprehensive or holistic way of considering the components, factors and interactions that result in any outcome,” Dr. Powell said. The concept can be applied to a business’ unique processes, whether that’s manufacturing medical devices or interacting with surgeons. “Systems thinking is a way for decision makers to see interrelated parts of their business and figure out how to improve the outcomes.”

Dr. Powell has a Ph.D. in clinical psychology and advises an array of executives at influential organizations, including Starbucks, Mattel, Microsoft, Electronic Arts and Eddie Bauer. He specializes in industrial organizational psychology, a field that studies executive decision-making. “Our mission is to help managers make the workplace work,” said Dr. Powell, who also owns the management consultant firm Scontrino Powell.

Dr. Powell explained that, by design, systems thinking accounts for how organizational systems (e.g., internal and external factors, processes and people) interact and influence each other and how these systems create and contribute to specific issues (e.g., high voluntary turnover) and strengths (e.g., stronger customer focus).

He used the analogy of a car engine to show how internal and external factors interact.

“A car engine looks like a contained system, but it takes in air and gasoline, and external factors influence its performance. The type of driver, the altitude of the location, the speed and the number of stops all influence how a car functions,” Dr. Powell said. “Systems thinking, by its nature, takes all of the possible factors into account in order to fully understand how an organization or a system performs.”

Renowned systems scientist Peter Senge, Ph.D., identified three characteristics of systems thinking: a consistent and strong commitment to learning, a willingness to challenge your mental model and the ability to include multiple perspectives when looking at a phenomenon. Scontrino Powell cited Dr. Senge in its case study: Systems Thinking: How to Lead in Complex Environments. 

Some business leaders might feel intimidated at the thought of implementing systems thinking into their decision-making processes, Dr. Powell acknowledged. He recommended starting with simple, easy-to-remember tools, like SWOT or PESTLE analyses, that break down and categorize complex information.

A SWOT analysis looks at a company’s strengths, weaknesses, opportunities and strengths, while a PESTLE analysis takes into account political, economic, social and technological factors. These analyses help leaders make difficult decisions by encouraging them to consider internal and external circumstances and communicate about and define ideas they wouldn’t usually have without structured guidance.

Transitioning to systems thinking is not easy and requires practice and consistency. “For a management team to get good at this, they need to apply it consistently and schedule it routinely, so that they’re not just dealing with immediate tactical issues,” Dr. Powell said. He also recommends that managers set aside time for strategic planning retreats throughout the year “to consider the full system.” These efforts help executives better manage their outcomes which contribute to sales in most businesses.

In an illustration of a business’ need for structured, thorough decision-making, Dr. Powell referenced a CEO whom he recently coached. “The CEO saw that the business had a lot of cash on hand, talked with the CFO, did a cash flow analysis and decided to distribute bonuses to employees,” Dr. Powell said.

Due to a lack of communication between leaders, the company failed to recognize serious expenses that were on the horizon, including an expensive IRS bill. Dr. Powell believed that mistakes like these can be avoided when executives view the entire system behind their businesses instead of their isolated roles within them. “The moral of the story is that this was a management team that failed to communicate with each other and consider the factors they needed to take into account so that they could maintain a healthy system,” he said.

Executives interested in systems thinking can search the phrase online and have access to a plethora of free models, guides and articles, said Dr. Powell, who believes that adding a visual element to the process unlocks its highest potential.

“This is where some of the rigor comes in with systems thinking,” he said. “Graphs and graphics show all of the components and interactions between factors and how everything works together.”

Dr. Powell also encouraged executives to find successful cases of how systems thinking has helped similar businesses navigate difficult decisions and to apply the lessons learned to their own companies and unique needs.

“Oftentimes, leaders are looking for best practices. That term is a pet peeve of mine, because best practices imply that we’re going to take a part of another system and bolt it onto our system,” he said. “Nonetheless, I think it’s useful for us to see the steps other organizations have taken to be effective and incorporate those learnings into our systems.”

Systems thinking doesn’t just apply to managers but to their teams as well. “It’s a crucial tool to help teams avoid working in silos,” Dr. Powell stressed. All too often, disparate teams only focus on their specific roles to the detriment of the entire system. “But when a management team works together well, they are able to see how their actions affect the other parts of the business and vice versa,” he added. “That’s absolutely crucial for effective team decision making.”