A systems thinking framework for problem solving and design in worker co-ops

1. A systems thinking framework for problem solving and design in worker co-ops 2008 AGM & Conference of the Canadian Worker Co-op Federation Ikiene 15th November 2008

2. Why systems thinking? The name of the real devil “The name of the real devil is sub-optimization: Finding out the best way to do something which should not be done at all” Boulding, EK. 1970. Fun and games with the Gross National Product. In The Role of Misleading Indicators in Social Policy.

3. Why systems thinking? The name of the real devil • Sub-optimisation is like putting the ladder against the wrong wall for where you want to go • When the marketing department pushes the organisation to produce a greater variety of products and services than can be handled cost-effectively, the higher cost of production can be to the detriment of the organisation as a whole. • Many organisations have experienced this kind of sub-optimisation, pushing for the efficiency of parts of the organisation at the expense of the whole. • More generally sub-optimisation is like solving the wrong problem, or adopting a false solution due to a partial understanding of the problem • The aim of systems thinking is to understand the functioning of the organisation as a whole, the big picture. It’s wholistic thinking

4. Presentation Outline • An introduction to systems thinking • A systems thinking framework for problem solving • The Ideal design approach to problem solving • The potential role of the co-operative system in Sub-Sahara Africa • Time for questions and discussion

5. An introduction to systems thinking

6. What is a system? • A systems is a discernible whole (Dostal, E. Et al) • A system is an organised whole (Dostal, E., Et al) • A system is anything that has a name (Vickers, 1983) • Examples of systems are: a person, a car, a co-op, a company, a country • Let’s think of our co-op as the system being referred to for the rest of this presentation

7. What is systems thinking? • A body of thought that describes the organisation and functioning of systems • Systems thinking is based on a very specific view the world: • namely that the world is made of systems which relate to and interact with each other, and that each such system is part of one or more larger systems, and in turn consisting of smaller systems or sub-systems. • A co-op might have a production department, a marketing department and a finance department, which are sub-systems within the co-op. At the same time, it forms part of an industry, a province, a country, etc. • Other terms that are often interchangeably used for this body of thought are systems approach, systems theory, and systems model. • Practically, systems thinking is applied or used for problem solving and for systems design and can be remembered as such.

8. Core principles of systems thinking that set it apart from other paradigms • The whole is more than the sum of its parts • Means that new properties /characteristics or qualities emerge at the level of the system from the interaction of the parts, which are not inherent in the parts. • E.g. Water is wet despite fact that hydrogen and oxygen that form it are not wet. Marriage is another example • Systems co-produce each other, • meaning that there is never a single cause to any problem situation

9. The significance of systems thinking from a historical perspective • Different conceptions or views of the world have prevailed at different stages in history • The magical worldview dominated the agricultural or pre-industrial era. It is characterised by the belief that life is determined by outside forces, and that the individual has no control over these forces. • The mechanistic worldview dominated the industrial age. It is characterised by the idea that the universe is like a machine, which functions in a predetermined manner according to predetermined universal laws. According to this worldview, knowledge of a thing is derived from an analysis of its parts. Current science and technology is largely based on this worldview. • Growing awareness of the fact that an understanding of the parts was not enough to predict the functioning of the whole meant that there was a need for a new paradigm to understand the functioning of systems at the level of the whole. Systems thinking came into being in the 50’s to address this need.

10. When do we need to use systems thinking? • To solve a problem in a system such as a car following a mechanical approach, the system is taken apart, the faulty part identified, fixed and placed back in its appropriate place • This type of problem solving works well in mechanical systems due to the fact that the functioning of such systems and of their parts are predetermined. A car doesn’t have a choice but to function as it was designed to do when all its parts are in good working order and properly assembled. • But mechanical problem solving fails when social systems are involved. Social systems are systems involving human beings. Due to the free will of the people in this type of systems, their functioning is unpredictable as it is influenced by the choices of these people. Such systems are termed complex systems for this reason. • For this type of systems, systems thinking is more appropriate.

11. The Biomatrix systems theory • There are different schools of systems approaches. • The Biomatrix systems theory is the one I know best. • And what I have shared in this presentation and will continue to share for the rest of it is primarily based on the Biomatrix systems theory, developed by Dostal, E., Clote, A. and Jaros, G. 2003.

12. Summary • Why systems thinking? To produce an understanding of the system as a whole, or the big picture. • What is systems thinking? It’s an approach to problem solving and for systems design • When do we need to use systems thinking? When dealing with social systems, systems involving human beings.

13. A Systems Thinking Framework for Problem Solving

14. The seven system’s aspects • According to the Biomatrix systems theory, each organisation, such as a co-op, display seven different aspects, just like a coin is made up of two sides and a dice is made up of six sides. Governance

15. The seven systems aspects cont • The practical meaning of the seven systems aspects framework is that the seven aspects of an organisation must be understood for it to be understood as a whole • It also means that these seven aspects are the STRATEGIC LEVERS or PLACES TO INTERVENE for the transformation of the organisation. • Any shift in any one of these seven aspects can produce big changes in the whole organisation.

16. The meaning and importance of ethos • Ethos of a system refers to the ideas, beliefs, values, theories that lie at the core of that system. • In the business context, ethos refer to the organisational culture, the mindset within the organisation, which is responsible for the unfolding of the organisation. • Ethos are often unstated. And understanding them or the organisational culture therefore goes far beyond the list of stated values • The more fundamental or drastic the change in ethos, the more drastic or radical will be the change in the system. E.g. Religious conversion, which is nothing but the result of a change of religious beliefs • Sooner or later, the ideas contained in the ethos get activated and are put into form. “What the system believes and values, it will manifest and become, as in the famous expression: “As you think, so you will become” (Dostal,E. et al) • For this reason it has been correctly said that ethos is destiny

17. The meaning and importance of the aims aspect • The aims of a system refer to the results that that system want to achieve • In the context of a business organisation, a co-op or another form of organisation, the aims correspond that organisation’s vision, goals, strategies. • Living intentionally: Without visions, representations, there is no actions, only reactions (De Jouvenel) • Aims create focus. “As soon as a clear purpose has been formulated, opportunities begin to arrive – seemingly in miraculous ways. There is however no other miracle than that of day-to-day happenings becoming meaningful. It is the miracle of focused attention” (Dostal,E. et al. 2003) • Co-ops or other organisations that fail to define aims cannot sift information in a purposeful, thus missing many opportunities.

18. The meaning and importance of the process aspect • The process describes the activities of the system • In the business context, the process refers to production activities, or the activities involved in the delivery of services to the customers. • The process must be analysed to identify inefficiencies and also to ensure maximal utilisation of resources though waste reduction and utilisation of by-products • Processes must also be designed to achieve more with less. E.g. Sharing of infrastructures

19. The meaning and importance of the structure aspect • In the context of business organisations, the structure aspect refers to the organogram • Just like the arrangement of the furniture in the room regulates the flow of traffic through the room, organograms acts like a channel within which the activities of an organisation take place • E.g. The flow of planning and decision –making activities is regulated by the organisational structure • Organograms also create the stability and continuity of the organisation in an otherwise changing environment. Structures outlive people and perpetrate the organisational culture. • But this also means that structures play a role in maintaining the status quo. If old structures persist while new aims and processes are being pursued, the chance of success is limited (E.Dostal)

20. The meaning and importance of the governance aspect • The function of governance in an organisation is to set aims and to regulate the movement of the organisation towards the attainment of these aims • Setting the aims of the organisation is to decide for it what to aim for, e.g. the monthly volume of production • And regulation relates to the planning of the course of activities • Governance influences all the other aspects of the system and was drawn in the middle of the seven system’s aspects for this reason.

21. The meaning and importance of the resources aspect • The resources aspect refer to the resources of the organisation, such as it’s capital equipments, financial resources, intellectual property, etc. • Setting the aims of the organisation is to decide for it what to aim for, e.g. the monthly volume of production • And regulation relates to the planning of the course of activities

22. The meaning and importance of the environment aspect • The environment of an organisation consists of its transactional environment, which is the environment which the organisation is directly connected • And the contextual environment, which is the part of the environment over which the organisation has no control over but must adapt to • But even adapting to the contextual environment requires an understanding of it, how it is likely to change and how this could impact the organisation • A organisation can widen its influence and extend its transactional environment by aligning with stakeholders to deliberately extend their influence • E.g. a co-op cannot influence legislation, but a a lobby of coops such as the CWCF can.

23. Summary • The seven systems aspects provide a framework for a wholistic understanding of business organisations or problem situations within these organisations. • These seven aspects are also strategic levers or places to intervene for the transformation of an organisation

24. The Ideal Design Approach to Problem Solving

25. What does the Ideal Design approach to problem solving consists of? • The ideal design approach consists in dissolving the problems that exist in an system by creating a better system • It is a case of Dissolving rather than Solving because the problems inherent in the existing situation disappear with the replacement of that situation, and are replaced with the new realities of the new situation.

26. Why is the Ideal Design approach to problem solving a correct approach? Or What is the rationale behind it? • The ideal design approach is based on the fact that the logic of a problem is not the logic of the solution. By solving a problem , one stays in the logic that created the problem. • E.g. solving the problem of disease is focused on getting rid of the disease through medication. But a focus on health as an ideal inspires a different logic, health producing strategies such as nutrition and exercise, which eventually dissolve the disease. • Eliminating a problem does not necessarily lead to the ideal situation. • E.g. Punishments are designed to eliminate specific undesirable behaviours. But an ideal behaviour must be inspired by ideals values and rewarded. It will never be created by punishments alone. • So the point is to focus on creating the desirable, the ideal, rather than on getting rid of the undesirable. • The logic of the ideal is a “higher order logic”. • E.g. By researching disease, one will not find the attributes of health. By researching a child’s addiction to drugs, one will never find the attributes of a disciplined child. Such discipline belongs to a higher level than the addiction. • The values of the cooperative system cannot be found by researching capitalism • The attributes of a co-op will never be found in a capitalist system

27. How is the Ideal Design approach to problem solving applied in practice? • Experience shows that people find it difficult to imagine ideals. It seems far easier for people to say what is wrong in their life and organisation than to imagine the ideal situation • For this reason, a practical method developed by the Biomatrix group (Dostal, E.et al ) for the formulation of ideals is to start by brainstorming the problems. • These problems are then used as stepping stones for creativity. These problems will point to the areas in which there is a lack of ideals. • Ideals are thus brainstormed to replace the current problem situation • The brainstormed ideals are then integrated into a coherent design, using the seven systems framework, to ensure that you have a complete, wholistic design, that does not miss important parts or aspects of the organisation.

28. What must be done after ideals have been formulated? • Once ideals have been formulated, strategies must be formulated and implemented to bridge the gap between the current and ideal situations. This process is referred to as BACK CASTING. Ideal, imagined future Back casting Projected futures Current situation Projections of current situation and its trends Courtesy of Dostal, E. et al, 2003 Time

29. Summary • When solving a problem, do not focus on the problem itself. Focus on the ideal, what should be rather than what should not be. • As you replace the current situation with the ideal situation, the problems that were inherent in the existing situation will disappear of their own accord. • To formulate ideals, use an understanding of the current problems as stepping stones for creativity. • Once ideals have been formulated, strategies that are required to attain or approximate these ideals are formulated and implemented.

30. The Potential Role of the Co-op System in sub-Saharan Africa

31. The problem of exploitation in Africa? • Africa and sub-Sahara Africa in particular are characterised by: • Widespread and abject Poverty of its people, to an extent that most are deprived of the most basic necessities: food, healthcare, education, etc. • Very rich natural resources, including above ground and underground resources, ranging from a very arable soil, natural hydroelectric potential of its rivers, to abundant reserves of mineral resources,. • How can such widespread poverty co-exist side by side with so abundant mineral wealth and other natural wealth? • The answer lies in the Exploitation of its people and its natural resources through various forms of profit driven investors activities.

32. The spirit, or core values of the co-op system and its potential role in sub-Sahara Africa? Core values of the capitalist system Core values of a Co-operative system • Collective/group approach • Collective strength, financially and otherwise, capable of helping people to help themselves • Stronger and more capable of resisting exploitation in unity, using the strength of the collective • Promotes common collective interests • Individual approach • Limited individual capacity, financially and otherwise, powerless individuals who are unable to help themselves • Weaker more likely to succumb to exploitation • Promotes selfish interests

33. The spirit, or core values of the co-op system and its potential role in sub-Sahara Africa? Core values of the capitalist system Core values of a Co-operative system • Local, decentralised control of resources • Economic and social liberation for all • Economic democracy • Creates local long term &sustainable development • Centralised control of resources to maximise profit • Maximum profit in the hands of a few • Centralised wealth, • creating the Haves & Have-nots, the exploiters & the exploited • Drainage of local wealth

34. The spirit, or core values of the co-op system and its potential role in sub-Sahara Africa? Core values of the capitalist system Core values of a Co-operative system • Democratic • Empowering • Equality • Responsibility • Undemocratic • Suppression • Oppression

35. Summary • The co-operative system can bring a fundamental structural or systemic change, not just some improvement or mitigation to the negative impacts of the capitalist system.

36. How The Co-op system is already making a difference in Kenya and South Africa?

37. The Co-op movement in South Africa • The first coop in South Africa was formed in 1892 • The National Cooperative Association of South Africa (NCASA) was formed in 1997, to serve as the Apex structure or umbrella body for sectoral affiliates of all cooperatives in the country. • NCASA was very instrumental in creating a legal and policy framework for the development of the cooperative movement and also in facilitating the formation of sectoral bodies. A key funder for the formation of this umbrella body was the Canadian Cooperative Association

38. The Co-op movement in South Africa (continued) • Today, the picture of the co-op movement appears as follows: • There are three national policy pillars for the development the co-operative movement, • including the cooperative development policy for South Africa, • a cooperative Act (2005), and • a national strategy on co-operatives still at a draft stage • The following sectoral bodies • South Africa Housing Cooperatives Association (SAHCA), which has 50 housing cooperatives affiliated to it, and 12,500 members • The Savings and Credit Cooperative League (SACCOL) of South Africa, which has 40 SACCOs affiliated to it and 50,000 members. • The Federation of Burial Societies • Attempts are being made for the formation of a sectoral body for worker cooperatives • 16,994 registered stand alone co-operatives. • Growth and concentration of cooperatives are mainly in two provinces in which there is a high concentration of poor rural populations: Kwazulu Natal (40%)and Eastern Cape (19%) • Agricultural sector tops the list with 27%, followed by multipurpose co-ops (25%). • 125 worker co-ops, just under 1%.

39. The Co-op movement in Kenya • In Kenya, there is • A ministry of cooperatives • a national apex organisation of co-operatives, the Kenya Federation of Co-operatives, and • 8 sectoral organisations. • Over 11,000 registered co-operatives in 2007 • A co-operative tribunal which has handled over 2000 disputes since its inception in 2000 • A co-operatives ethics commission was established in 2003 to focus on issues of good governance and ethics in the movement • A cooperative college since 1952: the Co-ops College of Kenya • Kenyan co-operatives account for 45% of the GDP • In 2007, 31% of the gross national savings was mobilised through co-ops • 250,000 people are directly employed by co-ops • Membership of over 6 million • About 63% of the Kenyan population directly or indirectly depends on the co-op activities

40. Stories of selected successful co-operatives in sub-Sahara Africa

41. Oromia Coffee Farmers Co-operative union, Oromia province, Ethiopia • Was formed after study tours to different parts of the world by key members of Oromia cooperatives • The union is responsible for ensuring certification standards, packaging, marketing and distribution, and farmer development programs • 129 coffee co-operative societies representing 128,361 farmers in 2007 • Individual cooperatives found it difficult to access international markets • The union assisted in getting fair trade and organic certification • With the fair trade labelling organisations (FLO) premiums, the co-ops get an extra 10 US cents per kilogram • The FLO premiums go directly to the co-ops societies for grassroots social services (clinics, schools, electrification, potable water) • Out of 236,482 hectares under cultivation, over 70,000 hectares are organic certified • Also, by taking over the marketing and distribution processes, the co-op union has eliminated two to three middlemen. Coffee goes from the farmers’ to the farmers’ cooperatives to the coo-op union and then directly to the markets. • The coop is further expanding its role by building a processing plant • The union and its members own 70 warehouses, 55 pulperies, and 15 hulleries • Success attributed to high managerial capacity, bottom up development and widespread support from inception, learning from experiences,

42. Co-operative Insurance Company of Kenya • The 8th (out of 43) largest insurance enterprise in Kenya • Entirely owned by co-operatives • Ensures loans for SACCOs against death and disability, and the traditional range of insurance products for co-operatives and co-operative members including home, automobile, commercial, individual and group life products • Had 12 branches and relationship managers for co-operatives across the country in 2007

43. Sodla-Sonke Cleaning Co-operativeSouth Africa • Was founded by 13 unemployed residents who all had to pay R300 (about 100 Canadian dollars) • Members were willing to forego their salaries to buy their first truck • There is a flat structure, with no hierarchy among the members and they pay themselves a flat rate • Each member is supervisor of one of the co-op functions (e.g. truck, street sweeping, litter picking etc.) And each member is responsible for • Below the members are the 28 employees of the cooperative, and temporary staff employed on a two-months contract basis • The primary activity of this coop is waste management, including refuse collection, street sweeping, litter pick up, and collection of illegal dumping • They have divided their area of work into 5 districts, and dedicated each district to a particular day of the week. • Also involved in environmental awareness through lessons in schools, meetings with community, visits to churches, and in pubs and other recreational areas • It has even organised “clean the park” days with the local schools • It has also sponsored community events such as a massive tree planting initiative programs in the community, with the slogan of “cleaning and greening” • Has provided permanent employment to 28 people and temporary employment to an additional 10.

44. Nomzamo Cleaning Co-operative, South Africa • Was formed in 2000 by retrenched cleaning staff at the University of Fort Hare to survive takeover of their function by outside subcontractors. They then tendered for the University’s cleaning services) • Their primary activities: cleaning services for the university buildings , i.e. offices, classrooms, toilets and hostels of the campuses. • They have diversified their activities in two directions: production of cleaning agents , which helps them reduce their costs, and selling of these cleaning materials to customers in the nearby communities • They have also increased their customer base, which now include a local hospital • The co-op has 149 members, most of whom have been there since 2000

45. Khayamandi Women in Development, South Africa • A brick-making co-operative initiated by unemployed women in 2000 • Started with 20 members • The co-operative has managed to pay some wages every month, • Has not managed to be awarded government tenders but work as sub-contractors • Have now diversified to include poultry to sell chickens and eggs to the local community

46. Closing “The co-operative movement which is gradually gaining ground in our economic life, because it represents the highest truth of man, the truth of his unity, is also the true wealth of the people” Rabindranath Tagore, August 20th, 1939