Systems Thinking in a Global World

By Eric Denniston, Managing Director, Denner Group International

Takeaways: 1) Systems within systems, 2) Seeking out root causes, 3) Interconnectedness

Good day gentle readers! Here is a Systems Thinking item for your consideration. I was recently reading the monthly magazine of a global service club and got caught up in a letter to the editor from a member. The gist of the letter talked about how member dues are used to further the mission of the organization and the percentage that appeared to be used for operations.

For many non-profit boards, there is a shared best practice that keeping operating costs below 15% of the total budget is a key aspect to ensuring sustained support from major donors. Those donors generally care as much about operating efficiency as they do for the good works of their favorite non-profits. An official of the organization responded that the member dues income is only a part of the organization’s income and that, in fact, a significantly greater source of revenues are donations – by a huge factor. The result is that operating costs are significantly below that soft standard of 15% of total budget, and have been consistently so for decades.

Systems Thinking: Systems within systems

Systems Thinking teaches us to be aware that all systems operate within other systems and to keep searching for root causes. In this case, understanding that the author had compared the operating cost figure only to dues income and not to total or gross income, which is a better metric.

Another comment by the author of the letter referred to the non-profit’s recent announcement that they were outsourcing certain member services to India, and this was objectionable to the author. Now, not everyone in the world is engaged in global trade or international business, nor has everyone studied the economic and competitive advantages that global trade offers.

Perhaps because I have, I see the world differently from the author of the letter in regards to issues such as outsourcing services or goods to/from other regions of the world.

Some folks say they don’t like Walmart, for example, because of all the products they sell that are made in China; however, much of the clothing they purchase may also be made in China. Yes, it is attractive to buy good products inexpensively. Today the USA imports a huge volume of products from overseas simply because they are either made less expensively or better or both in other markets. This also occurs because the US consumer demands high quality at low prices and has been trained this way through US marketing techniques.

Not a one-way street

But this is not a one-way street. Last week I heard an interview on NPR with a gentleman who pointed out that India outsources billions of dollars in services that it buys from where? The USA! Consulting and engineering services in particular. This is only one example of how the USA, in fact, is benefiting handsomely from other countries outsourcing their purchases of goods and services from the USA.

The Systems Thinking point is about the interconnectedness of our world. If we keep playing Ross Perot’s “sucking sound” cassette in our heads about perceived trade imbalances because the sound bite about jobs going overseas hits close to home, we lose sight of the advantages of trade in general. A hundred years ago there was a “sucking sound” of jobs moving from New England to USA’s southeast as the textile and other industries moved there to achieve the competitive advantage of lower operating costs. This is as natural as a person leaving a job for a better salary elsewhere, where at some point everyone does win, unless they don’t adapt to the new paradigm.

Keeping a Systems Thinking approach to situations like this helps us understand that bigger picture. It prevents us from wasting energy and time focusing on forces that are in fact, incorrect, unreal or actually affecting us in a manner opposite to the one we perceive without a whole system viewpoint.