From the very first page, the authors of Corporation on a Tightrope stress the need to build a new type of organization. The key to this new organization is flexibility, which enables the firm “to grow quickly in the face of opportunity ... [and] reduce the pain of contracting when markets shift or falter.” The usual suspects are implicated in creating this need for flexibility (i.e., globalization and technological innovation). The increased turbulence and uncertainty created by these developments drives the need for “dynamic planning” (the title of an earlier book by the same authors) and continuous change.
Seeking an evocative name to christen their new organizational form, the authors were continually drawn to the image of the butterfly. The metamorphosis from caterpillar to butterfly symbolized the flexibility required of the new organization. Also, the butterfly’s ability to glide on the summer breeze was analogous to the new organization’s need to glide on the winds of change. It was only a short step from the “butterfly organization” to the “butterfly effect” of chaos theory.
In chaos theory, the authors found a ready explanation for the chaos and turbulence of the business world and the apparent complexity of modern management decision making. If a butterfly flapping its wings over Peking could create a storm in New York, then a change in technology or leadership style could certainly transform an economy.
The originator of the butterfly effect, Edmund Lorenz, discovered that mapping the three variables in his model (pressure, temperature, and wind) over time created a three-dimensional pattern reminiscent of the wings of a butterfly. Although chaotic systems are quite capable of producing many such patterns, the authors of Corporation on a Tightrope believe that the emergence of this butterfly was more than a coincidence. They argue that if the butterfly effect in meteorology could result from the interaction of three variables, then the butterfly organization could also result from the interaction of three key variables: leadership, governance, and technology.
However, the overall role of chaos and complexity theory in the book is slight. While chaos theory is used to demonstrate that only three variables are needed to create a butterfly, there is virtually no mention of chaos for the remainder of the book (a further nine chapters and more than 200 pages). Chaos theory is simply used as a convenient justification for the authors’ decision to focus on three variables that they believe are critical to an organization’s survival. Similarly, the butterfly organization is described as a “complex adaptive system” on p. 40, but no further mention is made of the importance of this attribution for the remainder of the book.
This is not to say that the authors have nothing to tell us about the role of their three variables in fostering flexibility. On the contrary, the book provides many useful insights into the limitations of traditional governance and the need to experiment with new organizational forms. It is simply disheartening that the writers felt that they needed to encase their insights in the language of chaos and complexity theory to be heard.
The book’s central recommendations revolve around the “seven principles of balance”:
While an emphasis on technology (connectivity), experimentation and core competencies is standard fare for new-age management books, the focus on ethics, social contracts and governance is more unusual. The authors argue that flexibility means being able to expand and contract an organization’s operations at will. This is extremely difficult when employees have expectations of permanent or on-going employment. Why should workers invest their valuable human capital in an organization that is liable to dismiss them at any time?
In a single word, the answer is trust. Organizations that can engender trust in their employees will achieve superior performance because they will be able to a) attract superior workers; b) retain superior workers; and c) encourage workers to improve firm-specific skills. An organization creates trust by acting ethically and creating a social contract with its employees. If an organization can no longer guarantee a job for life, then the next best thing it can do is ensure that its workers will have relevant skills to move to another employer.
In the opening chapter, the authors quote from Edward A. Filene, a millionaire philanthropist in the 1920s and 1930s, who, among other things, believed that “good business rested on prosperous customers.” Filene believed that demand could only rise by improving the position of workers (the end consumers of economic output). Filene went on to establish the Twentieth Century Fund (recently renamed The Century Fund), a well-known liberal think tank. The book’s blurb lists Beverly Goldberg as a Vice-President of the Twentieth Century Fund, so the book’s emphasis on the need for a business to support its workers is not surprising. Nevertheless, the authors make a strong case that success in the new economy will be a function of a business’s ability to attract talented workers in times of growth. This ability will itself be a function of the reputation and integrity of the organization and the way it treated its employees during contractionary phases.
Students of chaos and complexity theory will find little of value in the book. As mentioned earlier, terms such as “chaos,” “complexity,” “butterfly effect” and “complex adaptive systems” are only used in the most cursory fashion to support the assertion that the butterfly organization is the result of the interaction of the three forces of leadership, governance and technology. There seems to be little awareness that chaotic systems can produce mappings that do not resemble butterflies and that these mappings have nothing to do with the “butterfly effect” or sensitivity to initial conditions. Of course, there is no attempt to model the three variables using nonlinear equations to identify if their interactions are chaotic (or not).
Notwithstanding its flaws from a complexity science perspective, however, the book should be complimented for reminding us that the way in which employees are treated has important consequences for an organization’s success and survival. The authors succeed in linking the strategic and competitive imperatives of our age (downsizing, globalization, competencies, and networks) with a concern for people. This is a major accomplishment and a sufficient reason for reading this book.