Episode 9 Organizational Dilemmas - Learnings from The Fifth Discipline

The fifth discipline is a book written by Peter Singe, along with several collaborators who are experienced in different aspects of organizational change. It's a long book, over 400 pages, that is packed with a lot of useful information. As with all the books I reference, I am not claiming to be an expert in them, and I don't have to be.

Like the vast majority of people, I can learn from a well-written, well-researched book, good enough to do better in life as I navigate this amazing world we live in. One thing this book attempts to do is to break down how organizations work in ways that ordinary people, like you and I ,can learn useful guidelines to apply in our own lives as we navigate whatever organizations we are a part of.

And one of the guidelines in the book has to do with resisting the tendency we have to react to situations quickly ,using our current state of knowledge, and just going into problem-solving mode. Now, there is nothing wrong with going into problem-solving mode per se.

There are times when it is in fact necessary. If you see someone injured, you run over to see the extent of their injuries, perhaps call 911 if they seem serious enough. Or the gas gauge or electric meter on your car gets low so you get more gas or plug the battery into the recharger. Those are examples of good problem solving where you have enough information in the moment to know what you need to do.

But all too often in an organization, there are times when there are delays in information that can make good old problem solving in the short run, turn into a disaster. To illustrate this, Peter Zenge uses the example of a simulation developed in the 1960s at MIT's Sloan School of Management. It was called The "Beer Game".

The participants are invited to role play as retail sellers, wholesales distributors, or manufacturers of a brand of beer. Each player is free to react in a way that seems prudent to them to maximize their profits at each turn of the game. And each turn represents one week in their lives. The retailer orders a certain number of cases of the beer, the wholesaler keeps a certain amount on hand to deliver to all the real retail establishments they serve, and the manufacturer has the capacity to make enough beer and maybe a little more than needed to keep everyone happy. The people running the game then introduce a situation where the number of cases purchased at the retailer level jumps from four to eight cases a week for several weeks.

Each of the players in the system only sees what is in front of them. The retailer sees eight cases sold over two weeks, so orders 16 cases the next week. Why? Because they get deliveries every four weeks and the last two weeks saw their sales double. The wholesaler starts getting double the order from all the retailers they serve, so they double their orders to the manufacturer who ramps up production as much as they can.

Because of the way the system works, the players down the line from the retailer are reacting to information that is two to four weeks old already. Each one gets behind in the beer they have on hand until after several weeks or plays of the game, the retailer and wholesaler, all of a sudden, having gotten the backlog of beer that they had been ordering, have more beer on hand than they can sell in months.

The problem is that each player is using the standard problem solving method of temporarily ordering more beer, until the beer they have on hand matches their current sales. They were all thinking either that the actual sales were jumping higher and higher at the wholesaler and manufacturer's level, or that they would never get the amount of beer they needed at the retail level.

In reality, the amount of beer sales jumped from four to eight cases a week and never changed. But the methods used by each player produced the disaster of massive oversupply. The disaster might have been avoided if any of the players had done more research and connected with the other players to learn what was actually going on rather than just reacting according to the old ways of thinking.

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