Business systemics LO5759

Orbis (
20 Feb 96 14:51:23 EST

Replying to LO5727 --

Rol's posting weaves together several of the issues being discussed,
including LO & Big Layoffs and Shift to Seeing Systems.

I would like to build on this and use some LO concepts, to analyze what
seems to be going on.

There seems to be a shared mental model out there among several of the
posters that senior management, particularly CEOs, engage in layoffs to
achieve short term profits and also benefit their own salaries. Despite
other posters offering many other reasons, such as Rol's references to
A,T&T and General Magic, this theme is repeated by others.

As Rol indicated, many layoff decisions are driven by a change in the
company's business model, often brought about by competitive forces,
benchmarking and/or core capability type analysis. I was in one company
that basically decided to get out of component level manufacturing and
thus did not need those jobs associated with it.

One of the reasons used to support this mental model is how profits and
stock prices can go up when layoffs are announced. In systems thinking
terms, people are assuming a direct relationship between the two events
when the system is a lot more complex than that. Most senior managers, and
analysts, will tell you that the "market" has a simplistic view of
business operations and that any apparent cost cutting activity is assumed
to be good. In my experience, most of senior management, and CEOs, have a
more complex, longer term view of business operations. Much of the reward
system for such folks is also based on this more complex, longer term view
of business. They gain little benefit from short term gains unless they
are also holding stock that they choose to sell at the time.

The fact that a decision to reduce layers of management, or outsource
certain activities, results in these short term gains does not necessarily
mean that the decision was made to produce such results. If you read the
detail of what is going on at A,T&T, you will see that it is a fundemental
change in their business model. The fact that their stock went up, when
they announced it, can be seen as the market's support of the decision,
but not the reason for it.

Which brings me to another LO concept. Many practitioners of dialogue use
the "ladder of inference" model. This encourages people to better
understand and analyze why and how they draw inferences about actions and
behaviors, when the "real data" available to them does not support the
inference. In reading the Layoff thread, it has felt that many people have
been moving up the ladder of inference rather quickly.

Businesses and their related markets are part of a very complex system. If
we truly believe that LO concepts can help people better understand this
system and make better decisions -- in whatever terms you wish to define
"better" -- we need to be seen as using these concepts and tools
ourselves. For me, this links to yet another LO concept -- Personal

Peter A. Smith
Orbis Learning Corporation

"Individual learning is a necessary but insufficient force
for organizational learning." Argyris, C. & Schon, D.A.

Orbis <>

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