Marketing Intelligence & Planning

The Learning Organization: How Planners Create Organizational Learning

Graham Galer Kees van der Heijden
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To cite this document:
Graham Galer Kees van der Heijden, (1992),"The Learning Organization: How Planners Create Organizational Learning",
Marketing Intelligence & Planning, Vol. 10 Iss 6 pp. 5 - 12
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THE LEARNING ORGANIZATION: HOW PLANNERS CREATE ORGANIZATIONAL LEARNING 5
Dynamic learning in organizations is not
compatible wi th a very strong goal-
alignment among its members.
The Learning
Organization:
How Planners Create
Organizational Learning
Graham Galer and Kees van der Heijden
Marketing Intelligence & Planning, Vol. 10 No. 6, 199, pp. 5-12.
MCB University Press, 0263-4503
Which Organizations Learn?
Not all organizations put "corporate learning" high on the
agenda. Some plan in what can be called a "designing the
future" mode, others adopt a more learning-oriented
approach in their business planning. It seems that two
factors are particularly important in determining what
approach is adopted, namely the organization's culture and
the degree of internal goal alignment.
These are not the same thing. The culture dimension runs
from hierarchical mechanistic organizations on the one
hand to heterarchical network organizations on the other
(Morgan, 1986). Each of these can have a strong or weak
goal orientation, depending on the degree of internal
convergence on purpose and goals.
The goal-oriented mechanistic organization will tend to
organize its business planning following the traditional
"design the future" philosophy, typically in a centralized
bureaucratic way. This organization knows where it wants
to go, and will not look back.
At the other end of the spectrum we find the decentralized
heterarchy, with divergence in goals among its members.
This system will try to engage in a more learning-oriented
planning approach in order to create a degree of consensus
needed for action. It involves a dialogue between its
members through which this convergence is created.
Between these extremes we find the strongly goal-
oriented heterarchy, which can be said to plan in a "logical
incrementalism" (Quinn, 1980) mode, and the weakly goal-
oriented machine organization which can only rely on
"emergent strategy" (Mintzberg and Waters, 1985).
These planning approaches can be put in a matrix,
modifying some ideas put forward first by Idenburg (1992):
The dominant culture an organization settles down into
is to some extent an emergent property, and therefore
extremely difficult to change. This is because an
organization will, over time, select members in its own
image. Senge (1990) has pointed out that a learning system
will attract "system thinkers", people who see the current
reality as only one of many possible, and who will therefore
be inclined proactively to change things to their own
advantage. He contrasts this with "event thinkers", people
who are inclined to interpret developments as historical
inevitabilities, a thinking style more associated with the
bureaucratic machine organization. In this article we
explore the learning approach to planning, and its
implementation in Shell. We concentrate especially on the
perceptional needs of this approach.
The Learning Organization
The dictionary rather narrowly defines learning as "the
acquisition of knowledge, skill or ability". In business,
learning is a process through which management teams
Companies within the Royal Dutch/Shell Group of Companies
are separate and distinct entities, but in this text the expressions
"Shell", "Group" and "Royal Dutch/Shell Group of
Companies" are sometimes used for convenience in context
where reference is made either (1) to the companies of the Royal
Dutch/Shell Group in general or (2) to an individual company
or companies where no useful purpose is served by identifying
them more particularly.
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6 MARKETING INTELLIGENCE & PLANNING 10,6
change their "mental models" of their company, their
markets and their competitors. If the business
environment changes faster than the natural response time
of the organization, accelerated learning can become a
means for managers to enhance their ability to create the
results they want.
It is meaningful to speak of a learning organization, in
contrast and in addition to learning individuals.
Organizations specifically learn in three ways:
by affecting the mental models of the people in it;
by filtering the type of people selected to belong
to it;
by embedding the learning in practices and
procedures surviving the individuals who create
these.
Argyris (1977) distinguishes between "single loop" and
"double loop" learning. In the former, errors are corrected
through response to feedback signals, as a thermostat
controls temperature in a room. In double-loop learning,
objectives and policies are questioned, as one might query
whether the right temperature had been set in the
thermostat. In this article learning will be interpreted in
the "double loop" sense of the word, where goals are
open for debate.
Dynamic learning in organizations is not compatible with
a very strong goal-alignment among its members. The
stronger the goal orientation the more difficult the
organization will find it to be open to alternatives and to
consider these non-advocatively as required in a learning
mode. Learning organizations tolerate, sometimes even
encourage dissent. All companies face this dilemma
between fostering a strong goal-orientation to create strong
action, and fostering a learning orientation to increase
relevance in a fast-changing business environment.
Can we assess the extent to which learning is taking place?
How can we test whether a company is a learning
organization in the sense described here?
Peter Vaill (1991) has proposed reasons why, in some
circumstances, learning does not take place. There may
be obstacles to learning, such as:
lack of awareness of the world outside the company
or industry;
using traditional frames of reference ("mental
models") which have become outdated;
pressure of time, resulting in too much fire-fighting;
shortage of resources to make the necessary
analyses, or to embed the learning of individuals;
executive politics;
managing by copying others, rather than by
appreciating the special circumstances of one's own
position;
scepticism about the value of strategic thinking;
''algorithmism'' (i.e. believing that there is a magic
formula to fix every problem);
turbulence in the business environment, leading to
confusion in interpreting the vital "weak signals".
Chris Argyris (1991) suggests that human beings dealing
with embarrassment and threat are dominated by one
fundamental set of rules. These "defensive routines", the
use of which at individual or group level will drive out the
ability to learn, are:
(1) Bypass embarrassment and threat whenever
possible.
(2) Act as though you are not bypassing them.
(3) Do not discuss steps (1) and (2) while they are
happening.
(4) Do not discuss the undiscussability of steps (1) and
(2).
So one way to assess the extent of learning in the
organization is to look for blockages of the above kind at
the individual or organizational level. One can then find
ways to remove them. In Shell many of those working in
decision support roles, such as planners, trainers and
organizational effectiveness specialists, are trying both
systematically (i.e. through formal programmes) and
opportunistically to make managers aware of these areas
of potential difficulty.
The key question is whether a company can develop
workable processes to remove blockages and promote
learning. This article argues from examples that planning
processes can be used in this way.
Organizational Learning in Shell
Royal Dutch/Shell ("Shell") is now the largest player in
the world oil industry (Fortune, August 1991). It is second
on the Fortune Global 500 list of the world's largest
industrial corporations and recently, for two years in a row,
earned more profit than any other company or group.
Shell is not without its problems. Not all parts of the Group
are performing equally well commercially or operationally
and difficult environmental challenges are facing many
aspects of its operations. The case for speeding up
corporate learning in the Shell Group (or any other
organization) rests on the most fundamental issue facing
an industrial organization: the need to build competitive
advantage as a means of survival in a rapidly changing
business environment.
A study made in 1983 had difficulty in finding many
industrial companies that have lasted for longer than the
senior companies in the Royal Dutch/Shell Group, which
are now more than 100 years old. The study also found
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THE LEARNING ORGANIZATION: HOW PLANNERS CREATE ORGANIZATIONAL LEARNING 7
that one-third of the Fortune 500 companies listed in 1970
had disappeared from the list by 1983 and around a half
by 1990. It has been said that in the future the only source
of sustainable competitive advantage for companies will
be their superior ability to learn and change (De Geus,
1988).
Many individuals and initiatives are playing a part in
speeding up learning in the Group. For example:
quality management;
programmes in organization effectiveness and
"organizational capability", which is defined as the
ability to manage groups of people for competitive
advantage;
management training programmes;
planning specialists in Shell think of planning as
learning and of corporate planning as institutional
learning. Planning processes are used as means for
speeding up the capacity to learn of management
teams throughout the Group.
This article concentrates on the contribution of planning
to organizational learning.
As discussed earlier, in strongly goal-oriented mechanistic
organizations, planning can be the antithesis of learning.
In certain circumstances this may be an appropriate
response to the business environment. But if planning is
highly centralized or if it is based on fixed ideas of what
constitutes appropriate business policy it introduces a risk
of leading to rigidity and ossification. One example of the
possible consequences of this approach to planning is the
sad state to which it reduced the economies of Eastern
Europe.
On the other hand, planning can be a process by which
managers discover where they are, where they want to
go, how they believe they might get there, if they are
getting there, and, as they proceed, if they still want to
get there. In this way planning has the potential to make
a powerful contribution to organizational learning.
Planning in Shell
Shell's principal businesses are in oil, gas, chemicals, coal
and metals. Group companies employ some 130,000 people
and operate in over 100 countries. Group net income in
1991 was $4.3 billion and capital expenditure was $11.5
billion.
Each national operating company ("opco") is an
autonomous decision maker, responsible for its
commercial performance and for the long-term viability
of its operations. Service companies, based in London and
The Hague, provide advice and services to Group
operating companies outside North America.
Within the Service companies, the Group has an
organizational structure based on matrix principles, which
is designed to ensure that the perspectives of business
sectors, regions, functions and opcos are taken into
account and which provides cohesion and consistency in
decision-making.
The Group's planning cycle provides a framework for
periodic overview of the opcos' strategies, plans and
resource requirements. It comprises three main elements:
(1) strategic planning (as and when required), which
forms the basis for the next element;
(2) business planning (annual);
(3) appraisal (annual).
Strategic planning is driven by strategy development at
the level of opcos and business sectors, reflecting the
decentralized philosophy of the Group. Business planning
is concerned with the resourcing of strategy, and is
concentrated in the opcos.
The appraisal of performance against plan is continuous,
and culminates in a series of reviews the so-called
"Spring meetings" carried out by operating company
managements with teams from the service companies.
The sheer existence of a disciplined planning and
budgetary cycle can provide a strong learning mechanism
for a company. In Shell it brings together managers with
their peers from different parts of the Group, and with
colleagues up and down the line. It is institutionalized
through the matrix structure of the service company
organization, which perhaps makes for a longer time to
reach conclusions but for faster implementation of
decisions, given the high degree of consensus reached.
Group Planning, a service company division, has
responsibilities which encompass:
improving management understanding of the
changing business environment in which the Group
is operating;
the identification and study of strategic issues and
options;
the development of methods and techniques which
assist in strategic thinking and which enhance
capability in planning.
The first of these responsibilities is discharged by scanning
and monitoring economic, social, political, technological
and competitive trends which may affect the business of
Shell as a whole or in part. The conclusions of these
analyses are expressed mostly in the form of scenarios
of possible futures for the world or parts of it which are
of relevance for the Group.
The second area of responsibility is covered through Group
Planning's facilitation of the processes used in the Group
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8 MARKETING INTELLIGENCE & PLANNING 10,6
for strategic and business planning, which include
occasional reviews of strategy at Group level, and annual
reviews of resourcing for the Group as a whole.
The third responsibility involves a further scanning and
monitoring activity for new ideas and thinking in planning,
the experimental use in Group Planning itself of new
approaches, and the running of ad hoc seminars and
regular training programmes.
Learning Processes
An individual or a group engaged in learning undertakes
activities which can be represented as steps in a repeated
cycle (Kolb, 1991). One way of presenting this cycle is as:
experiencing feedback from results of action;
internalizing and reviewing experience;
inferring conclusions about "how the world
works";
planning new steps and taking action.
Information from the outside world is received in the
"experiencing feedback from action" stage. It is processed
in the "reviewing stage" and moulded into mental maps
of the world in the "inferring conclusions" stage. As these
maps determine the action taken, and as action taken
determines the information which is received it follows
that mental maps of the world determine what is being
seen (Ingvar, 1985).
Action and
learning are
interwoven
Seeing learning as a cyclical process of this kind suggests
that action and learning are interwoven, in the sense that
it is not possible to have one without the other. Planning
activities map closely onto the four stages of learning as
portrayed in the learning cycle. The ways in which this
occurs in Shell are outlined in the next four sections.
Scenario Planning (as a Means of Reviewing
Experience and Building Mental Maps)
A scenario is an internally consistent account of how the
business environment might develop over time. The use
of multiple scenarios is a means of making sense of a large
number of diverse but inter-connected factors and dealing
with future uncertainty, which will or may affect the future
direction of the organization (Galer and Kasper, 1982).
Sophisticated techniques of decision analysis do not lead
automatically to the best decisions. What goes wrong in
this approach to decision-making is that the manager tends
not to see the unexpected influences that come at his
project sideways, the unforeseen variables that do not
feature in his "mental model". An organization needs to
be aware of its perceptual limitations. This is where
scenarios come in.
Scenarios can be defined as tools for organizational
perception. What an organization sees in the outside world
is determined by its traditional modes of thinking, as
expressed by the language that it uses. If it is to become
more observant these have to be expanded. Scenarios
are a tool to do that, to enrich the corporate "one-track
mind".
What scenarios do for an organization is what every
individual does naturally, namely constantly rehearsing
possible pathways into the future as a way of expanding
his area of vision. This mental preparation builds up a set
of mental constructs through which the individual can
respond effectively over a wider territory. Even if
rehearsed scenarios never come to pass the mind has
nevertheless built up a readily available set of concepts
that allows it to judge better what is going on, to recognize
what is happening and consequently to take better
decisions.
While this process is entirely natural for an individual this
is not the case for groups of people such as management
teams. These have the additional task of developing
commonality in their concepts and language in order as
a group to become skilful observers and thereby action-
takers in the business environment. It is not enough for
one person to see danger or opportunity ahead as more
likely than not he will be overwhelmed by the
"conventional wisdom". The skill of observing the
environment must become a group skill. Scenarios can
perform this function for the organization.
This view of scenario planning (Van der Heijden, 1992)
indicates the sort of stories which provide the best
scenarios, in an organizational setting:
There should be enough links with the existing
organizational mental models. Scenarios must be
plausible to a ''critical mass'' of managers in the
group; indeed, a good starting point for a scenario
programme is an exploration into what managers
directly concerned believe is currently going on in
their world.
The scenarios should contain elements of novelty
and surprise in directions where the vision of the
organization needs to be stretched. They should
help managers to "think the unthinkable".
It is not the objective of scenario planning to improve
prediction of the future (although it can help managers
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THE LEARNING ORGANIZATION: HOW PLANNERS CREATE ORGANIZATIONAL LEARNING 9
look deeper and further and thereby gain a better insight
into driving forces which are affecting the business). In
Shell the main purpose of scenario planning is defined as
putting major issues on to the agenda of corporate debate,
in order to improve corporate perception and to make the
corporation ready for action, as and when needed. As a
tool for group perception, then, scenarios can be powerful
instruments for organizational learning.
For example, in one Shell opco scenarios were used to
make managers face the realities of an unstable political
and economic regime, to prepare them for inevitable
changes, to handle great uncertainty during the change
process and to develop a joint vision of emerging as a
strong player in a new world. This was done over a five-
year period and helped among other things in changing
the market profile away from profitable traditional business
towards potential new markets and making the company
financially robust for an uncertain future.
Strategic Planning Workshops (as a Means of
Inferring Conclusions)
In the past a common, if not the main, means for a planner
in Shell to interact with fellow managers was through study
followed by presentation. In particular, the Group
scenarios, often the result of many man-months of work,
were internally published in book form and communicated
through substantial presentations, sometimes three or
more hours long, to groups of managers. Though these
presentations were popular, and often resulted in lively
discussion, links with subsequent actions by the company
were usually hard to establish. We needed to find a more
explicit way of linking the thinking of the scenarios with
business strategy.
The consequence has been the growth in the use over
the last three or four years of "strategic planning
workshops" as a means of making this link. In such a
workshop (Hadfield, 1990), scenarios are linked with the
three other elements which we see as making up the core
of strategic thinking; namely strategic vision, competitive
positioning and the management of options. A programme
is designed which leads a team of managers concerned
through these elements in respect of their own business.
An example, starting with the scenarios, is shown in
Figure 2.
Such workshops have been widely used in reviewing the
consequences for Group companies' businesses of new
scenarios. They also enable groups of managers to think
through the implications of reviews of plans and resources,
or to tackle specific questions of business direction in a
context. Their characteristic "learning" features are that
they provide a simple structure providing for managers
in teams to:
jointly review their experience of what has been
going on in the world in which their business
operates;
internalize this experience against the background
of new information (e.g. new scenarios) and also
to internalize the scenarios themselves;
infer conclusions, at least of a preliminary nature.
In this way, strategic planning workshops of the above kind
have proved a useful tool for learning. They provide an
environment and a structure wherein the individual can
learn and also a process for embedding that learning
effectively in the group.
Business Planning, Project Planning and
Budgeting (as a Means of Planning New Steps
and Taking Action)
The activities of planning new steps and taking action are
facilitated through the mechanism of the annual business
plan and its implementation, through budgets and projects.
Although these activities take place also in the mechanistic
"predict and control" mode of planning, in a learning
company this will be executed in a bottom-up fashion,
whilst in the machine organization the dominant mode will
be top-down.
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10 MARKETING INTELLIGENCE & PLANNING 10,6
Whether the preparation and execution of a business plan
in fact involve learning on the parts of the individuals and
teams concerned depends a lot on how the process is
managed and on whether the plan on completion is really
"owned" by the management teams involved.
Observance of two conditions improves the chance of this
desirable state of affairs coming about. This first is to
ensure that the line managers themselves develop and
are committed to the business plan and that the role of
any "professional planners" is restricted to facilitating the
process. The second is to provide that the plan is adopted
as the basis for subsequent appraisal of the performance
of the business and its managers.
Business Appraisal (as a Means of
Experiencing and Getting Feedback from
Results of Action)
In Shell's planning cycle, "appraisal" provides an
important feedback from business experience to planning
and policy-making. It can thus be a key element in the
learning processes of Shell managers.
Appraisal as understood in Shell is the formation of a
judgement about the contribution made by a business to
the totality of Group company businesses. For Group
operating companies, this judgement is based on:
Recent performance in the light of:
targets and objectives, short- and long-term,
established jointly by operating companies and
the regional divisions of the service companies;
Group policy guidelines;
longer-term strategic considerations.
The competitive performance of the operating
company, based on comparison with direct
competitors and other relevant opcos.
Stewardship of the human, financial and physical
resources entrusted to the managers of the
business, with particular attention paid to assets
which are under-performing.
Appraisal also covers agreement on the subsequent action
to be taken, covering both immediate management
responses and modification of the business objectives.
New business issues will often surface in the course of
appraisal discussions.
The process of appraisal for an operating company includes
a structured series of discussions which involve:
the regional divisions of the service companies,
representing the interests of both the holding
companies and the operating companies;
operating company management;
sector and function advice.
The process normally culminates in an annual meeting,
based on a selective agenda jointly developed by the region
and the operating company. In multi-sector companies,
pre-meetings are often necessary to identify and review
issues arising within business sectors.
The appraisal system exists so as to influence, guide and
coach the management teams of operating companies. The
ultimate aim is to enable operating companies to contribute
to a strong competitive position and good long-term
performance for the Group as a whole.
This part of the planning cycle of the Group has been the
subject of much attention over the past two years, with
the specific objective of improving business performance
by making appraisal more effective as a process for learning
from business experience.
Managers tend to fall into two groups in their attitude
towards appraisal depending on whether they see it mainly
as a means of "control" (backward-looking) or more as
means of moving towards better business performance
through coaching and learning (forward-looking). Managers
in Shell are tending towards the latter approach to business
appraisal, using the well-tried system more for learning
than for control.
The Art of Organizational Conversation
Underlying all the various processes and cycles described
lies a fundamental management activity, which might be
called "the art of organizational conversation".
It is fairly obvious that a learning organization needs a good
level of open internal debate and questioning if it is to
remain flexible and adaptable for the long term. But the
need for debate must be balanced against the need for
profitable action, and the process of debate itself needs
to be properly managed.
Well-managed debating processes "organizational
conversation'' in other words are vital both for individual
learning and for embedding that learning in the business.
They provide the link between a systems design for
learning and learning at the individual level. A key role
for planners in Shell is to take a lead in the orchestration
of these processes. It is one of the ways in which the
company can learn how to learn.
One example of the use in practice of the art of
organizational conversation concerned the need to
diagnose possible underlying problems in the business
appraisal cycle, which, as shown above, is one of the key
components of the learning systems of Shell.
Business appraisal was an area of management where
signs of weakness had been observed for some time, and
consensus was needed on how these might be tackled.
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THE LEARNING ORGANIZATION: HOW PLANNERS CREATE ORGANIZATIONAL LEARNING 11
It lay within the responsibility of Group Planning to initiate
a review in this area, but the involvement of quite a large
number of senior managers would be required if any
effective action were eventually to be taken. After
canvassing the support of a few key managers at the start,
Group Planning set in motion the following process:
Between November 1990 and March 1991 a two-
man Group Planning team interviewed about 40
senior managers. It turned out that views varied
widely. A brief report was made and given to all
the managers interviewed.
A ''systems'' representation of business appraisal
was prepared, which suggested some possible
routes to improvement (Checkland and Scholes,
1990).
In June and September 1991 two whole-day
workshops were held, attended by different groups
of about 12 representative managers from among
those who had been interviewed. Their objective
was to enable the managers to confront some of
the extremes of opinion expressed in the
interviews, and to receive and discuss the synthesis
made by the facilitators.
In October, a short report was drafted by Group
Planning which proposed some principles of
business appraisal. These principles had been
tested for acceptability in the two workshops, and
could be said to have support from the managers
who had attended them.
Group Planning then conducted a further round of
about ten interviews, this time of managers (who
had already been interviewed in the first round)
whose agreement would be needed if the proposals
in the report were to be fully implemented.
The report was printed and distributed, first to all
those who had been interviewed, and later to all
concerned in this area of management.
Perhaps the events described could be interpreted as a
routine process for seeking and gaining the resolution of
a complex issue in a large organization. In presenting it
as an example of the art of ''organizational conversation"
three observations may be made:
First, the process contained a lot of feedback. Managers,
having once been interviewed, were confronted with their
own views and the views of others, in non-threatening
circumstances which gave good possibilities for useful
discussion. Workshop conclusions were recycled for
further review. Wherever possible, opinions and
suggestions were referred back to the original
interviewees. In other words, every effort was made to
maintain movement round the "learning loop".
Second, the process was carefully "facilitated" by the
planners. A lot of time was spent deciding who to interview
and how to conduct the interviews, on determining the
best points of intervention in the organization, on providing
the best context for discussion among the managers
concerned, on selecting and briefing the consultant and
on designing the workshops. These processes were
unlikely to arise spontaneously and it was a task for the
planners to provide the professionalism needed if individual
managers were to learn and that learning was to be
embedded in ways of doing business in the future.
Third, the process contained a "transitional object" (the
systems description) which could be used as the raw
material for useful experimentation during the workshop
discussions.
Understanding the need for these three elements, and
knowing how to use them, constitute mastery of the art
of organizational conversation, which in turn is the key
to effective organizational learning. Without feedback, the
learning loop will not be closed, and learning will not take
place. Unobtrusive facilitation is not necessarily the
monopoly of planners anyone can acquire the skills,
and anyone needing to build consensus within a large group
will find them useful but it is a necessary condition of
organizational learning. And the transitional object does
not have to be a systems description it can be any kind
of "model", computer-based or otherwise, or even a
person (e.g. a consultant) but it is usually present when
learning is taking place, and its identification, and/or
precise specification, can be very productive.
Conclusions
A learning organization is one which improves its
knowledge and understanding of itself and its environment
over time, by facilitating and making use of the learning
of its individual members. Expressed as a checklist this
requires:
a culture amenable to learning;
a degree of goal divergence, tolerance of dissent,
openness to outside ideas, and desire to do better;
freedom to experiment, tolerance of errors;
commitment, expressed as observable action, by
management to learning as an objective;
planning and action organizationally close together;
follow-up to initiatives, capture of lessons learnt;
trust in the judgement of colleagues;
co-ordination through effective organizational
conversation.
A company will find it difficult to decide to be a learning
organization if it is not one already. However, in a large
company the likelihood of learning taking place is increased
if the various specialists with a role to play have a high
level of awareness of what learning entails. Important
contributions to learning processes can come from those
engaged in quality management, management training,
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12 MARKETING INTELLIGENCE & PLANNING 10,6
organizational effectiveness, information technology and
planning.
Planning can make a distinctive contribution through the
way in which activities in the planning cycle can be related
to the "learning cycle". In Shell scenario planning,
understood as "corporate perception", is a means of
internalizing and reviewing experience. Strategic planning
workshops are a device for inferring conclusions, while
business planning, project planning and budgeting are the
means for planning new steps and taking action. Business
appraisal provides feedback from the results of action.
Underlying the planning process lies the art of
''organizational conversation'', the maintenance of which
seems the key to productive organizational learning.
Organizational conversation in turn requires feedback, to
close the learning loop, and facilitation, a task which is
one of the chief contributions which the planning specialist
can make to management. It also needs a transitional
object, and the provision of a regular supply of thought-
provoking transitional objects models, analyses,
workshops or consultants is a further challenge to the
modern planner.
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