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At the beginning of the Industrial Era in the 20th century, the challenge was to optimize production and physical flow of products. Hierarchical form of leadership, based on top-down influence, positional power and the need for stability would have been ideal for the production-based industries where the focus was on physical assets, efficiency and control. With the change of economic, political and technology dynamics from ‘industries’ to ‘knowledge’, it is necessary to re-examine the key success factors for leading a knowledge-based economy.

The knowledge era is defined by its competitive landscape shaped by globalization, technology, deregulation and democratization. It is an environment in which a company’s success depends on its ability to promote faster learning and lies more in its social assets (corporate IQ and learning capacity) than in its physical assets. Hence, the goal in the 21st century economy is to create an environment where knowledge accumulates and is shared at a low cost and to cultivate, protect and use difficult to imitate knowledge assets. 



In the knowledge era, there is an intense focus on speed and adaptability. Further, while companies in the Industrial Era emphasized a simplification and rationalization of its environment, companies in the knowledge era focus on increasing their complexity to the level of the environment in order to optimize their capacity for learning, creativity and adaptability. 

Although businesses have entered a new age, leadership theories still remain grounded in an Industrial Era bureaucratic framework. One such example of this is the traditional idea that goals are rationally conceived and that managerial practices should be structured to achieve those goals. Another is that leaders are traditionally thought to be able to influence others towards desired objectives within the formal top-down, hierarchical framework as in Figure 1. 

Recognizing the anomalies in applying the Industrial Era learnings to knowledge era situations, Professor Mary Uhl-Bien, Co-Director of the University of Nebraska’s Institute for Innovative Leadership, came out with the Complexity theory of leadership outlining the shift from a hierarchical form of leadership to a ‘connectionist’ one. 

According to her, a hierarchical form of leadership no longer works because it is based on a rather simplistic assumption: the role of leadership is to integrate and align interests, no matter how diverse they are, towards a common vision. In reality though and given the complex world in which we live, what happens when leaders push for more integration is that they get more differentiation. Resistance to alignment often surfaces in the form of stronger clusters of localized self-interest in an organisation. 



Complexity Leadership Theory 
Complexity Leadership Theory (CLT) is a framework for leadership that enables the learning, creative and adaptive capacity of Complex Adaptive Systems (CAS) in knowledge-producing organisations or organisational units. It addresses the contradiction between centralized power found in bureaucratic systems still in use today and the needs of the knowledge era by focusing on leadership that is grounded in complexity rather than in bureaucracy. 
Leaders working for a knowledge economy can learn from complexity science, a rapidly growing discipline which draws lessons from workings in nature. It provides a helpful metaphor for social systems – families, communities, organisations, etc. – as living systems. According to the Complexity theory, such systems are not mechanistic arrangements of many moving parts but a dynamic and continual entwining and interaction of elements that organise and reorganize themselves into more adaptive systems over time as shown in Figure 2.

In a complexity view, leadership is distributed and emerges from micro-interactions of people in an organisation. The phenomenon of differing self-interests is not a problem to be conquered but an opportunity to flourish because the adaptive outcomes needed in the knowledge economy are only possible if there are heterogeneous perspectives. Knowledge workers are motivated to act because of interdependence and not necessarily because they subscribe to an overarching goal. Adaptive leadership is the informal emergent dynamic that occurs among them, producing innovative ways to address the challenges posed by complex systems. Some practices of adaptive leadership include spanning boundaries to identify new ideas, interacting with others to generate novel solutions and building relationships and networks.

At its best, adaptive leadership should co-exist with another function - administrative leadership. This function addresses the bureaucratic demands of the organisation without stifling the complex dynamics capable of producing adaptive change. This is the leadership occurring in the formal roles and positions in the organisation. A third leadership function mediates between administrative and adaptive leadership is enabling leadership. Its practices include creating appropriate organisational conditions to foster effective adaptive leadership in places where innovation and adaptability are needed and facilitating the flow of knowledge and creativity from adaptive structures into administrative structures as in Figure 3. 
In complex environments—characterized by high variety and pressures for adaptability— organisations need complex responses, i.e. enabling dynamic interaction and emergence although this goes against natural instincts of many managers (and employees) who want to respond to complexity with directives and control (to generate feelings of order). Given that these leadership functions are needed to thrive in complexity, the challenge organisations are facing will not be how to eliminate administration and hierarchy. Rather, it will be how to create a system where these leadership functions enable each other through entwinement.



(This is the 25th column of the leadership series by Eng. Gamini Nanda Gunawardana [BSc Eng (Hons), MBA, CEng, FIE (SL), MCS (SL), MIDPM (UK), FIAP (UK), MBCS (UK)], a Management, HR, OD and ICT Consultant, Corporate Trainer, Executive Coach, Consultant - HRD - Goodhope Asia Holdings Ltd. He can be contacted at [email protected])