Accountability in a Complex World

1
Accountability in a Complex World

• Jim Falconer
• Eagna Research and Consulting
• Managing the Complex IV
• Fort Myers, Florida
• 7-10 December 2002

2
What is Happening

• A single coherent schema to demarcate corporate
  valuation has been rejected
• Profitability is being relegated to a relative
  role in valuation from an absolute the most
  formalized measure but certainly not the only and
  perhaps not the best
• Accountability is taking on a more viable role
  than profitability in corporate valuation
• Organizations are ill-equipped to operate in this
  changed state, and need to consider what this
  means for them and how they need to adjust their
  behaviour

3
Dilberts Version
4
Fortune Article
5
Recent Observable Threads

• Marginalization of profitability (legacy of the
  dot-coms)
• Cycle has returned to a period of questionable
  ethics (or of more attention to it) a public
  backlash and new demands
• Increasing emphemerality of the business cycle
• Return to management of public perception (PR)
  over distortion of public perception (advertising)

6
Symptoms of the Shift

• Senior executives in charge of ethics being
  appointed
• Watchdog organizations gaining strength
• Series of new accounting methods being developed
  and introduced (value chain, ABC, scorecard, EVA,
  treatment of intangibles)
• Reporting invention through loopholes and broad
  interpretation
• Breach between those criticizing tradition and
  those defending it
• More litigation

7
Accountability Defined

• The state defined by stakeholders in a firms
  destiny holding it up to judgment in terms of
  strategy, operation, performance, viability,
  behaviour, and image
• Stakeholders are
• Direct and indirect shareholders
• Customers, suppliers, alliance partners,
  competitors
• Financial analysts and assorted business media
• Interest groups and watchdog agencies
• The general public
• The company itself

8
Accountability Forces at Work

• Real economic and political power increasingly in
  the hands of TNCs
• Corporate transparency being driven out by
  technology
• Corporate responsibility seeing some growth

9
Complexity Redux

• Systemic state between chaos and order
• Systemic state in which uncertainty, variety,
  dependency, and interconnectedness are high
• Systemic state in which understanding is
  fragmented, localized, and fleeting

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Nature of Accountability (1/2)

• Has no mutable, consistent nature
• Subject to many realities
• Subjective, tacit
• Has vague boundaries and limits that are only
  superficially explored
• Loosely tied to its object
• Stakeholders hold myriad visions
• Stakeholders respond better to uncertaintys
  risks than accountable firms
• Susceptible and reactive to environmental novelty
  with environment evanescent and novelty
  unpredictable

11
Nature of Accountability (2/2)

• Multiplex
• Multidomain, multiplayer
• Complex overlay of conjoining interrelationships
• Lack of easy traceability inhibits understanding
  of its influence on marketplace attitude and
  behaviour
• Prone to emergent phenomena and attractors, is
  adaptive, and abets the emergence of patterns
• Provokes a complex response, even as revealed
  through new and complex organizational forms
• Represents a challenge to the power base and
  demands a departure from its language

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Implications of Viewing Accountability as Complex

• Need a new set of tools
• Organizations need to
• Embrace the multiplex of interests and
  stakeholders
• No master and all masters, rather than one
  master
• Decrease reliance on overly simple models
• Embrace every new experience, and look for
  patterns
• Become flexible and responsive regarding
  uncertainty, rather than attempting to control
  it
• Deploy scenarios, strategic flexibility
• Treat strategy as emergent, rather than discrete
  or prescriptive
• Approach it as an open, ongoing, continuous
  process

13
Future Considerations

• Even if ascendance of accountability wanes,
  progressive organizations will see value in
  continuing to focus on it at least as much as
  traditional paradigms such as profitability,
  risk, and control
• Organizations that think about themselves as
  being inherently complex are ahead of the game
  regardless of the character of their environment
  or the nature of the dominant paradigm
• All organizations will be held to account
  somehow, in some way, at some time, by someone

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Questions

• Comments, questions, requests for earlier papers
• falconer_at_eagna.ca

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Accountability in a Complex World

• Jim Falconer
• Eagna Research and Consulting
• Managing the Complex IV
• Fort Myers, Florida
• 7-10 December 2002