Documente Academic
Documente Profesional
Documente Cultură
Volume 18 Number 2
ABSTRACT
KEYWORDS: competitive
advantage; reputation; strategy; systems thinking
INTRODUCTION
www.palgrave-journals.com/crr/
It should be emphasized that there are common characteristics between categories but
they can also be differentiated. Awareness
does not imply an assessment, and assessment
does not imply transformation into an asset
(Barnett et al., 2006: 33). A denition of
reputation suggested by Barnett et al. (2006)
is:
Observers collective judgments of a
corporation based on assessments of the
nancial, social, and environmental
impacts attributed to the corporation
over time. ((Barnett et al., 2006: 34).
This denition emphasizes that reputation is
something that someone outside of the organization sets. At the same time, the denition
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BUSINESSES AS SYSTEMS
71
72
SYSTEMS THINKING
Figure 1:
systems
73
Traditional thinking
Systems thinking
74
Actual
Condition
Desired
Condition
+
+
Gap
Action to
+
Change Actual
Condition
Figure 2:
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inflows
INVENTORY
outflows
STOCK
producing
delivering
depositing
CASH
acquiring
CAPITAL STOCK
withdrawing
scrapping
Figure 3:
earning
LIQUIDITY
paying
BOOK VALUE
paying expenses
depreciating
together through the decision logic, or decision rule, that takes the current stock level as
inputs, compares it to a target level, and acts
on the rate variable to make corrections as
needed. The most obvious analogy is that of
lling water in a bathtub. The variable of
interest is the amount of water in the tub.
The water level is adjusted by either controlling the taps or opening the drain, or a
combination of the two.
Figure 3 gives some typical examples of
stock and ows. Resources are stock variables and are shown as rectangles. These are
the system variables that indicate the state of
the system at any given time. The units of
the stock variables are those of the resource,
in this case various items such as cash, staff,
shares, etc. Typically, these are variables that
managers want to control. However, the
values of the stock variables can only be
affected through changes in the rate, or
ow, variables that are indicated as valves
on the double lined arrows leading into and
out of the stock. The rate variables represent
the decisions that are made to maintain the
level of the stocks at target values, for
example hiring to increase staff and downsizing to reduce staff. The rate variables are a
function of time.
In Figure 4, the resource stock is made up
of the people comprising the workforce. The
level of the workforce is directly controlled
by the hiring function. Management takes
this decision in conjunction with, for example, needs for labor in the production process
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hiring delay
(months)
Workforce
(people)
+
losing workers
(people/month)
+
-
Workforce loss
fraction (% per month)
Workforce gap
(people)
+
desired Workforce
(people)
Figure 4:
average knowledge
per employee
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Action
Decision
Making
Piping and
Waterflow
The Strategic
Goal
Figure 5:
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Symptomatic
Solution
+
Problem
Symptom
Side Effect
+
Fundamental
Solution
Figure 6:
archetype
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Other actions:
advertising, sales effort,
word of mouth, media
Positive (reinforcing)
feedback loop
Negative (goal-seeking)
feedback loop
+
Growing action
+
R1
Demand for Firm's +
offerings
Demand
External
influences on
Positive
Reputation
Figure 7:
PerformanceStandards
R2
R5
Firm's value
Secondary effect of
B4
performance, Reputation creating activities +
Positive influences demand
Internal pressure for
Performance
Reputation
performance relief
+
+
+
Pressure to lower
Performance
Gap
+
B3
Forming
+ Standards
Positive
Reputation
Capacity to
perform Ability of the Firm to
Reputation affects Firm's
+
+
+ meet demands for
ability to perform by
performance Perceived need
R6 influencing access to
resources
Reputation affects
to invest
+
Investment in
the tendency to
R7
Effect of Reputation on
+
capacity
lower performance
capability to perform
standards
<Positive
Reputation>
+
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expectations. The performance gap is an indicator of how well the rm is doing. If the gap
is acceptably small, then there is no problem
and no changes are needed. If the gap
becomes unacceptably large then action is
needed. One consequence is to increase the
perceived need for investment in production
capacity, which takes time as indicated by the
double slash marks between investment in
capacity and capacity to perform. If the performance gap persists, the pressure to lower the
standards may increase. This is a quick x type
of solution because it does not address the real
cause of the poor performance. If this action is
selected, the performance standards are revised
downward and the performance gap decreases. This is very much a stop gap measure
because the consequences of relying on slipping the standards, a continual reliance on the
quick x, will feed back to the reinforcing
loops R1 and R2. Since these are positive
feedback loops, a downward movement of
the Performance variable (due to lowered
standards and insufcient production capacity)
will resonate through R2 to R1 and eventually affect the demand and the growing action.
Advertising
information
WoM
information
Personal
experience
information
experiencing
Media
information
saliency
threshold
Short Term
Memory
repetition
retaining
Long Term
Memory
LT forgetting
ST forgetting
LT memory
loss fraction
Direct sales
information
ST memory
loss fraction
changing
Positive
Reputation
effect of LT
memory on
reputation
Figure 8:
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hiring delay
(months)
hiring new workers
(people/month)
Workforce
(people)
losing workers
(people/month)
+
-
capacity to
perform
average knowledge
per employee
desired Workforce
(people)
+
+
Performance
Workforce loss
fraction (% per month)
Workforce gap
(people)
<average knowledge
per employee>
Knowledge
gaining knowledge
through hiring
Part of Loop B3
(Figure 7)
+
losing knowledge
through attrition
knowledge per
new hire
increasing
knowledge
through learning
knowledge per
exiting employee
+
learning
productivity
Figure 9:
<Long Term
Memory>
Note - from
Figure 8
<effect of LT memory
on reputation>
changing
Positive
Reputation
Reputation effect on
attracting applicants
Workforce
Applicants
attracting
applicants
hiring new
workers
+
losing workers
other
factors
Figure 10:
Applicants. Figure 10 shows the main elements of the new structure. Since the stock
variables Applicants and Workforce are connected on the same ow stream they must
have the same units of measure. Both are
measured in units of people but the
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CONCLUSION
alone a senior manager tasked with its oversight (Dowling and Moran, 2012: 29). Leaving aside the question of the need for a
corporate reputation ofcer, our proposal to
apply the systems thinking methodology to
understanding how reputation inuences an
organization enables managers in different
functional units to be more proactive in their
relationship to this resource. Using this methodology, the question of bolt-on versus builtin can be evaluated with an eye towards
understanding both the expected and, perhaps
more importantly, the unexpected consequences of each approach. Systems thinking
operationalized through system dynamics
provides managers with a powerful and exible tool for developing deeper insights into
how resources can be best applied to creating
value for the rm. It can also improve the
ability of the rm to learn and, through that,
remain more competitive in the long run.
While the model developed in this paper
to illustrate the systems thinking approach to
reputation is hypothetical, the considerable
empirical work conducted by, for example,
the Reputation Institute can play an important role in specifying many of the relationships that need to be examined in detail in
order to develop a functioning model. Currently, application of this type of data is limited to the level of patterns in Figure 1.
Claimed relationships at this level are correlational, often based on normative theoretical
perspectives that are quite removed from the
daily realities of management.
The systems thinking approach is concerned with developing and testing operational explanations of organizational behavior.
This process is demanding and can be lled
with conict as deeply seated beliefs and
assumptions are surfaced and tested for veracity; and very frequently replaced by other
perspectives. Systems thinking does not claim
to be able to provide The Answer; but it is a
powerful language and a methodology for
exploring relationships, understanding the
consequences of existing and proposed
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strategies, and for uncovering and communicating high leverage strategies to secure the
future of the organization across a range of
competing and often conicting interests.
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