Systems thinking as a platform for leadership performance in a complex world Tomas Palaima Warwick Business School, University of Warwick, Coventry, UK, and Aelita Skarzˇauskiene˙ Kaunus, Lithuania

1. LENY VASIDATUR ROCHMAH
145030207121008
INTERNATIONAL CLASS
BUSINESS ADMINISTRATION
FACULTY OF ADMINISTRATIVE SCIENCE FINAL TEST SYSTEM THINKING
BRAWIJAYA UNIVERSITY 06 January 2016

2. Systems thinking as a platform
for leadership performance
in a complex world
Tomas Palaima
Warwick Business School, University of Warwick, Coventry, UK, and
Aelita Skarzˇauskiene˙
Kaunus, Lithuania
Not only a conception towards the has changed (from conception of an organization as a
biological modeltosociocultural model)butalsoan attitudetothe methodhasshiftedfromanalytical
thinking (science, which operated independent variables) to systems or holistic thinking (science,
which operates interrelated variables) (Gharajedaghi, 2006).
Effective decision making and learning in a world of growing dynamic complexity requires
managers to become systems thinkers – to develop tools to understand the structures of complex
systems (Sterman, 2000). The relevance of systems thinking as a competence was disclosed in the
contextof leadershipinthe complexworldandhow the principlesof systemsthinkinghelpthe leader
to achieve higher quality in his activityand to find new productive forms and tools for organization
management.
Developmentofsystemsthinkingand leadershipperformance relationshipmodel:backgroundand
hypothesis formulation
Systemsthinkingisawayof understandingrealitythatemphasizesthe relationshipsamonga
system’sparts,rather than the parts themselves(Sterman,2000).The systemsthinkingisevaluated:
as a mean which helps to understand any system in a complex manner, where everything is
interrelated and, thus, one element of the system cannot be affected separately without affecting
other elements.
1. The systemsthinking approach to theorganization:organization asa socio-culturalsystem
Why is it important to treat the organization as a system in this age of changes? The importance of
systems thinking approach to the organization in management science rests on the following
assumptions:
 the socio-cultural systems are characterized by dynamic complexity that “arises from the
interactions of the agents over time” (Sterman, 2000);
 increasingcomplexityof the worldrequiresnew toolstointerpretpatternsand eventsinthe
organizations; and
 systems thinkingisatool,whichhelpstounderstandcomplexityandtosee an orderin chaos.
The environment in organizations is becoming more complex and changes more often and
suddenly,processesinorganizations,society andotherplaceshave muchmore variablesthancanbe
covered together. Managers try to manage socio-cultural systems in goal-oriented way, but it is
difficult to forecast results of their influence because of complexity of global systems.

3. The benefitsof systemsthinkingapproachtowardsthe organizationincomparisonwithanalytical or
mechanistic thinking are:
 A clearerwaytosee andunderstandwhatisgoingoninanyorganizationandits environment.
 A new way to create strategies, problem solving and find leverage points – keeping the
outcome/vision/goal in mind at all times.
 A way to manage the complex systems by focusing on the whole, its components, and the
interrelationships of the components, rather than by focusing on supposedly isolated and
independent parts and problems.
 A new perspective for managers to interpret patterns and events in their organizations
 A specialized language and a set of tools that can be used to address the most stubborn
problems in organization and enables us to understand the structures and dynamics of
complex systems and designs strategies for greater success
 An ability to actively influence events and form the surrounding environment rather than
mechanically react to environmental changes
 A new orientation to life. In many ways, it also operates as a worldview – an overall
perspective on, and understanding of, the world
Methods,means,and toolsof systemsthinkinghelptounderstandsocio-cultural systemsandto
impact them, therefore systems thinking is described as important and valuable competence of a
leader.
2. Systemsthinking asan intelligence competenceand its relationship to leadership
performance
Three clusters in a set of competencies that can cause or predict outstanding leadership
performance:
1. Cognitive competencies, such as systems thinking and pattern recognition.
2. Emotional intelligence competencies, including self-awareness and self-management
competencies.
3. Social intelligence competencies, including social awareness and relationship
management.
An integrated concept of intelligence competenciesoffers theoretical structure for developing
new theoretical model linking intelligence competencies and leadership/organization performance.
The competencies impact organization performance indirectly through construct of leadership
performance,forexample:the betterqualityof interactionbetweenaleaderandfollowerinfluences
the leadership performance and the leadership performance has impact of positive organization
climate, which affects organization performance.
The newtheoretical model restsonthe conceptof leadership,which encompassesdimensionsof
leadershipdelineated inmoderntheoryof leadership:
(1) Personal dimension:
 leadershipas personal development
 leadershipasthinkingandlife style
(2) Relationshipdimension:
 leadershipasrelationship betweenaleaderandfollowers
 leadershipasabilitytocreate a collective visionof the future
(3) Organizational/strategicdimension:

4.  leadershipas continuouschange,transformationof the organization
 leaderasconstructor inthe organization
The hypothesized model the mechanism of relationship between intelligence competencies
and leadershipperformance.The constructof systemsthinkingascognitive intelligence competence
has six sub constructs in this model:
The impact of systemsthinkingon leadershipperformance
The effectsof competenciesonleadershipperformance:
 The model has more explanatory power in manufacturing industry. The effect of systems
thinking on leadership performance is stronger (especially on organizational/strategic

5. leadershipperformance).The biggerpartof leadershipresultsinmanufacturingindustrycan
be attributed to intelligence competenciesand especially systems thinking. Manufacturing
orientedtoprocess managementandefficiencyismore dependentonglobalization.Results
of executivesinmanufacturingindustrycanbe improvedthroughunderstandingof principles
of processorientation,systemslogic,dynamicthinking,anduse of thisknowledgeinpractice.
 Weaker effect of systems thinking on leadershipperformance in retail trade industrycan be
explained by the nature of service management. Retail trade organization is a service
organizationandservicemanagementrequires havingmore socialintelligencecompetencies.
On other hand, retail trade is dependent from market cycles and equilibrium between
demand and supply and integration to market.