System thinking and organizational learning: Acting locally and thinking globally in the organization of the future

To learn more rapidly and increase flexibility in a world of growing complexity and change, firms are experimenting with new modes of organization, new reward systems, and less authoritarian values-for example, reducing hierarchy, increasing local decision-making responsibility and individual incentives, and rewarding innovation. But local decision making and individual autonomy lead to management anarchy unless managers account for the interconnections and long-term side-effects of their local decisions. Laudable goals such as ‘empowering’ and ‘enabling’ individuals often prove counterproductive unless managers can act locally and think globally. Managers must become ‘systems thinkers’ as well as better learners. This paper reports on one approach to these issues: forming collaborative action research partnerships with corporations to (1) develop new tools to accelerate learning, and (2) test those tools in real organizations where managers face pressing issues. We argue that simulation is an important element of successful learning laboratories to develop systems thinking and promote organizational learning. A case study focused on improving quality and total cost performance in the insurance industry is presented to illustrate how these tools can both produce insight and focus change.