Author's Preface to

the English Edition 2010

In this book I am presenting a new kind of management for a new kind of world. It is my concept of right and good management for functioning organizations in functioning societies of exceeding complexity.

The need for such a concept arises because conventional management - by which, basically, I mean the US-type management theory and practice now applied worldwide - has come to its very limits as it is unable to deal with the consequences of its own success. The result of its tremendous achievements is a world of inextricably interrelated dynamic systems which are incomprehensibly complex. This has largely been ignored by the dominating US management approach because it was never designed for such conditions. It now fails exactly for this reason, thereby causing the present crisis. I have actually been predicting this for years in many of my publications, including the German version of this book which was first published in 2005.

The fact that success almost inevitably breeds its own failure is often overlooked, although it is well known in many fields and in particular in those that accept complexity explicitly as their research subject such as biology or ecology. Albert Einstein already remarked that one cannot solve problems with the same methods which produced them.

Failure to manage complexity as the major cause

of the worldcrisis

What, at present, a majority - at least in the West - considers to be a mere financial crisis can probably be much better understood if it is looked at from an altogether different perspective: the failure to understand and manage complexity.

Business and society seem to be undergoing one of the most fundamental transformations in history. Only on the surface, and only if perceived in conventional categories, do present changes appear to be financial and economic in nature.

What is happening might better be understood as an Old World dying because a New World is being born. There will hardly be any bridges back to the old state of affairs. Perhaps the most practical premise to navigate by is that whatever can change will change.

If so, we are witnessing no less than the almost complete collapse of the formerly so efficient US management approach, which was developed mainly in the context of business administration and taught in business schools as the ultimate wisdom with regard to the running of corporations in a world where its premises applied to an ever lesser degree. Its realities have already been changing for quite some time but this went largely unnoticed because most people tend to see only the old familiar patterns in the new realities.

We are experiencing in particular the failure of the US-type of corporate governance and the kind of top management which is dominated almost exclusively by financial variables only. We see the collapse of the shareholder value approach, which due to its short term profit orientation is largely ignoring the customer and is hostile to future-oriented investing and innovating, thereby systematically misdirecting the allocation of societal resources. The failure of the US-approach is, among other aspects, the consequence of mistaking financial investment for real investment, thereby undermining the former strengths of the US-economy, of confusing mountains of bad debts with sustainable wealth, and of failing to distinguish between healthy and pathological growth.

Ironically, what collapsed first was the financial system which appeared to be the most highly developed and sophisticated system ever designed. It was believed to be free of systemic risk by most experts and run by the world's most excellent executives educated in what were thought to be the best universities and business schools worldwide.

However, complex systems have properties and laws of their own. Their driving forces - if systematically ignored - make them inevitably go out of control. Such systems are incomputable and unpredictable in principle and incomprehensible to the conventionally educated mind. They are non-linear, self-dynamic and continuously self-changing and self-restructuring in unforeseeable ways. They are largely self-organizing and self-regulating.

Nevertheless, they can be - up to a degree - controlled and regulated albeit only by a fundamentally different kind of thinking, a new approach for managing complexity and by applying the right methods and tools which are the subject of this book and its companion volumes.

Reliable Functioning by Wholistic Management Systems

Economic and financial measures on the macro level alone will hardly cure the crisis. What it takes on the level of societal institutions is a new way of functioning which is described in my six volume series Management: Mastering Complexity in which I present my Malik Wholistic General Management Systems. This first volume contains an overview of the system as a whole whereas the other five volumes will describe the constitutive parts of the system. The second volume "Corporate Policy and Governance: How Organizations Self-Organize", was published in 2008 in German and will be available in English soon. The third volume on strategy is still due in 2010. The remaining three volumes will be dedicated to the new structure for functioning complex organizations, their appropriate culture and the kind of executives who have to be able to understand and master complexity.

Together these six volumes will contain the essence of the most comprehensive General Management System worldwide. To the best of my knowledge my Wholistic General Management Systems are globally the only ones explicitly designed to ensure reliable functioning under conditions of exceedingly high and dynamic complexity.

For this reason and because my Management Systems are universally applicable conventional business administration plays a limited role in my book. For practical reasons, however, I am going to illustrate the application of my systems mainly in the context of the business enterprise. Familiar concepts and terms are left unchanged wherever possible in order to avoid confusion for the practitioner whereas their meaning and most contents are new and different.

The important new knowledge for mastering complex systems does not come from economics or business administration but from what I call the Complexity Sciences, i.e. Systemics, Bionics and Cybernetics, which can also be called the Sciences of Functioning.

For the term "Functioning" I often use the synonym "Right and Good Management" as opposed to wrong and bad management. By this I want to point to the need to understand management as a true profession with its own standards of craftsmanship as indicated in the subtitle of this book.

If the institutions of today's and more so of tomorrow's societies are supposed to function, management needs to liberate itself from fashions and fads and has to become a profession of the same status as for example the profession of the surgeon, the aircraft pilot or the lawyer all of which have as a matter of course their standards of professionalism. The foundation for a profession of effective management for functioning institutions is to be found in my earlier book Managing Performing Living.

My General Management Systems - with the support of the experts of my own organization - have been developed, tested and implemented in numerous cases over more than 30 years in all sorts of institutions in business and non-business areas mostly in Europe and particularly in the German speaking world including their worldwide subsidiaries. What works in the complexities of these areas will almost certainly work worldwide. Having discussed the structure, functioning principles and effects of my systems with tens of thousands of executives of all levels I have strong arguments that there is only one kind of management that works effectively, namely Right and Good Management as I present it i...