May 19, 2020

What If Business Took Systems Thinking Seriously?

business tips
economic growth
Bob Doppelt
environmental issues
Bizclik Editor
5 min
What If Business Took Systems Thinking Seriously?

Written by Bob Doppelt

The economy is in the tank and thousands of people are out of work. At the same time, the planet is dangerously heating up and ecological systems are declining. What are we to make of these troubles? Are they merely the result of poor policies? Or is something more fundamental at play?
 
The roots of our difficulties are simple, yet for many business leaders completely hidden from view. The activities of most firms, and the goals and structure of the economy as a whole, have been shaped by fundamental misjudgments about how the planet functions and what it means to live a good life.
 
To resolve today’s challenges, our leaders must overcome the erroneous perspectives that created the predicament. At the most fundamental level, this requires moving from a ‘linear’ way of thinking—where we focus on quickly fixing the most visibly broken parts of what isn’t working--to a ‘systems’ perspective that brings our thinking and behavior into line with the natural laws of sustainability. Despite years of talk about systemic thinking, few companies actually practice it. This is due, in part, to the lack of a simple framework to guide the implementation of a systems perspective.
 
Here is a framework involving five interrelated commitments that can help leaders make the shift from linear to systems thinking.
 
First, always strive to see the systems of which you are part. The economy collapsed in large part because the financial sector maximized it’s own self-interests without considering the consequences for the larger economic system is it embedded within. The Earth is heating up because humans have maximized their economic interests by burning coal, oil and gas without considering the effects on the global climate system.
 
It is an indisputable fact that all life on the planet, including each one of us, exists only because we are enmeshed within a complex web of interdependent ecological and social systems. Executives must remove their blinders and recognize this natural law of interdependency. The first commitment required to make the shift to systems thinking is to ‘”see the economic, social and ecological systems you are part of.”
 
Systems are not easy to quantify. But you can map them. Drawing systems maps will help leaders grasp that they exist only because they are a part of complex interdependent systems.
 
Second, be accountable for all of the consequences of your actions on those systems. In today’s over-crowded, over-heating, and extensively interconnected world, almost every action we take affects the planet’s social, economic, and ecological systems in some way, now or in the future. Like a Bull in a China shop, however, business and government leaders pursue their own self-interests without considering the consequences on those systems. The natural law of cause and effect is ubiquitous. Our failure to understand this always produces dire outcomes. Assessing carbon footprints is a start. But much more is required. Executives must strive to account for all of the possible consequences of their firm’s activities on the social, economic and ecological systems they are part of.
 
Like systems, cause and effect can be difficult to quantify. But it can be mapped using tools such as ‘fishbone’ diagrams.
 
Third, abide by society’s long held universal moral principles of equity and justice. After their awareness expands of the effects of their activities on the systems they are part of, leaders must adopt a clear set of moral principles to guide their response. By morality I mean decisions about what is fair and unfair in the way they treat people here and abroad, and what their duties and responsibilities are to others. The most universally held moral precept is to ‘do no harm.’  The natural law of moral justice says that any action that causes unjustifiable human suffering and death is morally wrong. Our use of fossil fuels is already causing human suffering and death, and much more will occur as the planet warms. This is one example of morally wrong behavior. A commitment to ‘do no harm’ focuses executives on the need to control their innate selfish and aggressive traits.
 
Investigating the many ways an organization can ‘do no harm’ is a powerful exercise.
 
Fourth, acknowledge your trustee obligations and take responsibility for the continuation of all life. The scale of today’s economy and associated ecological impacts mean that human activities, not natural processes, will now determine the fate of the Earth. Like it or not, we must now accept the natural law of trusteeship---every individual and organization is a trustee of the planet with the responsibility to ensure the continuation of all life for current and future beneficiaries. The Golden Rule expresses this commitment: “Treat others as you would like them to treat you.” We must treat the economic, social, and ecological systems we are embedded within as we want others to treat them, because our lives depend on it. This commitment magnifies the innate selfless, cooperative, and caring instincts to ‘do good’ that is inherent in every business and political leader.
 
When public and private sector leaders clearly and publicly state-- and enforce --the moral principles that will guide their organization’s activities, constructive changes always result.
 
Fifth, break free from the false beliefs that control your life and choose your own destiny. Many executives have been taught that focusing on ‘Me’ alone—maximizing their personal, family, and organizational wellbeing over everything else--is natural and good. But this view confuses self-centeredness with individual freedom. No executive needs to be controlled by these outdated harmful beliefs and habits. Everyone can think systemically at any time.  The natural law of free will offers empowering knowledge. Every public and private organization can abide by the five commitments any time they choose.
 
The shift to sustainability happens one person and one organization at a time. This means the starting point for addressing today’s many crises is each of us. As other leaders begin to think systemically, social contagion will occur and the cultural and political will needed to set society on a truly sustainable path will emerge.
 
About the Author: Bob Doppelt is the Executive Director of The Resource Innovation Group (TRIG) and an adjunct professor in the Department of Planning, Public Policy and Management at the University of Oregon where he teaches systems thinking and global warming policy. He is the author of From Me to We: The Five Transformational Commitments Required to Rescue the Planet, Your Organization, and Your Life. For more information, please visit www.me-to-we.org.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Tax
Compliance
financeleaders
Deloitte
Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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