Decision Making: Controlling Different Levels of System Complexity

In Canada, there is considerable recent discussion on the need for a national energy policy/strategy/program, whatever. The clear bias is that we should have one as we are one of the few countries that doesn’t have such scheme. This post explores the the notion of how best to “control”  systems with different levels of inherent complexity.

Why do we have this desire to control systems? I would suggest that at its heart it is our abhorrence to uncertainty and risk (U&R). We just don’t like surprises, especially ones that go against our (singular or plural) views of how the world/universe should operate.

In manufacturing we abhor variance as it reflects quality control concerns and resulting waste. In information processing we abhor errors in data field records as we get the familiar GIGO result. So variance is another way of thinking about U&R. If the variance has some predictability regarding its frequency then we are dealing with  risk like circumstance. Any other circumstance (where we have little useful concept of frequency/likelihood or even the possibility of a “surprising” event occurrence) are considered uncertain. I believe that we live in more of a U like universe than R one.

U&R in our systems have consequences, sometimes terrible ones. So we are reinforced to abhor U&R. So the desire to “control” systems so they eradicate or at least minimize the possibility of U&R is understandable. The question though is how best to control for system U&R.

For me the approach to system control is a function of system complexity. By complexity, I mean any systems where there are a multitude of choices and possible outcomes and/or the consequences of choices are difficult to see during decision making moments. The future is blurry is my rule of thumb.

By this operational notion of complexity we can order the various systems in our lives according to their inherent complexity.

We have systems where choices are little more than binary (yes/no, this/that, etc.) in nature. I would consider these most simple of systems.

We have systems where the range of outcomes is and has been consistent over time. These are systems I consider to have minor to moderate levels of complexity as they are driven by the range of possible outcomes and the the fact that they are consistent over time does not preclude “outlier” like surprises.

A variant of these kinds of systems are where we have gaps/delays between decision and action consequences. For example the historical dilemma of how to rule an empire where the delays in communication/verification of suitable follow through is that of months. All empires are limited in size by this dilemma: the impact of communication time delays.

And of course we have systems where we are pushing the boundaries of our understanding of implications, choices (even create new options), or our appreciation of causally impacting interrelatedness between system parts we are/are not  aware of. I consider these the most complex of systems that we actively participate in. There are undoubtedly systems that fall outside of our human knowledge, but until we become somewhat aware of them, we are in no position to consider the applicability of “controls” to them.

Given the simplistic (sic) description of the range of system complexity, How can we gainfully approach how best to “control” them.

Simplistic systems are best controlled by rules, procedures and regulations. These systems have very little U in them and if we exercise diligent quality control we are highly unlikely to experience “surprises”.

Moderately complex systems can be effectively controlled though processes and policies. These control approaches enable judgement and discernment regarding specific uniquenesses to permit a range of options and possibilities that are deemed acceptable. Because judgement is at play, we need to expect more variance and surprise in outcomes.

Systems where there are delays between decision and feedback on resulting action(s) results or outcomes are best handled by control systems that create agent “act with consistency”. This is of course the realm of guidelines and values where we attempt to indoctrinate our “field agents” to assess, evaluate, decide and act as if it were us who were in the their shoes.

Systems where we see the high levels of complexity are best controlled if they are operated like market places. As the variety of outcomes is beyond the ability of anyone person to envisage, we allow diversity of responses to decision choices. HOWEVER, the dark side of U&R in such a control system (which understand ably freaks many of us out) is the possible consequence of one system player bringing down the whole system through their set of choices. Here I would suggest is where we need to fully appreciate what performance management really entails. I would be prone to establish a performance management like control/governance that achieved two particular outcomes for those who engage in devastatingly widespread carnage:

  1. They are only permitted to use their own money/skin. If they choose well they are rewarded. If they choose poorly they only ruin themselves. A corollary following out of this principle is that the issue of “too big too fail” is dealt with.
  2. They are allowed to fall by the wayside (i.e., no longer get to play as it were) if they fail. I appreciate this notion has social policy implications about helping those who no longer can help themselves.  Failure must have consequences.

The keys to the above thoughts is that anyone who chooses to play in the most complex of systems has no right to put unwitting U&R on the ignorant. And, they should only be allowed to play for as long as they demonstrate some level of successful prudence.

So what is the role of strategy in this discussion? Well, the process of doing strategy is amongst other things the set of decisions on how best to “control” what we choose to set out to do.

Back to the energy policy question. There is an old adage in strategy work: “Doing what everyone else (i.e., your competition) does is the route to mediocrity”. The energy system is a global one, so we can safely say it is highly complex. Ideally , highly complex systems are best controlled in market like governance methods. Practically speaking, the global energy system is a  mixture of political, market, and large scale players. Hence it is a mixed system. Maybe it is in Canada’s best interests to have a counter strategy. Maybe it is best for the country to not have any kind of “non-market” like program.


About 123stilllearning456

As a management consultant I am passionately interested in talent management and risk/uncertainty issues. In the area of talent management I propose that we seek strategies that look beyond the staffing/employee centric frames of reference. I have been frustrated at the "closing down on possibilities" by these more conventional staffing/employee centric approaches. I have been impressed where people have found systematic solutions to their talent management issues by going beyond the conventional approaches. In the area of risk and uncertainty, I am interested in making this topic relevant to more normal decision making situations. My conceptual foundation is to use the micro-economist's fixed/variable cost theme. I also think it is important to look at these issues for people through their emotional and psychological lens. As a premise I think risk and uncertainty only exist where there is a person who cares about possible events and its consequences. Hence, risk and uncertainty are social based concepts (no sentience, no risk and uncertainty). A major influence on my thinking in this area is Nassim Taleb of "Black Swan" fame. This BLOG provides me with an opportunity to express my thoughts on topics that interest me. As this is an online diary, content is more important to me than polish. I apologize if this distracts from readers' enjoyment and learning. Still I find this a useful way to live up to my namesake, learn more from others and hopefully provoke creative thoughts and ideas in others.
This entry was posted in Creativity, Decison Making, Performance Management, Risk & Uncertainty, Strategy, Values and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s