Last week, I wrote about the importance of leaders creating cultures that embrace transparency and context. An equally important skill for all great leaders is high proficiency in systems thinking.

From Wikipedia:

“Systems thinking is a holistic approach to problem-solving that views issues as part of a larger, interconnected system, focusing on understanding the relationships, interactions, and interdependencies between different components within that system, rather than just analyzing individual parts in isolation; it prioritizes seeing how elements within a system influence each other to produce emergent behaviors.”

Most of the problems an executive needs to solve are complex and involve several components interacting with one another. People who are good at systems thinking can zoom out and grasp all of these components and empathize with all of these stakeholders, rationalize the complexity, and make good decisions. This is sort of the opposite of linear thinking, where an individual component is thought through without strongly considering interconnections with other components or the broader context of the problem being solved.

A simple example of this is creating a sales commission plan. You might want to pay employees when the deal signs immediately in their next paycheck. Reward the seller immediately, as it’s more likely to drive the sales behavior you want. This makes sense. Simple cause and effect. That’s linear thinking.

Systems thinking encourages you to step back, think more broadly, and ask lots of questions. Questions like: If we pay the seller on the signature, what if the implementation team can’t get the customer to onboard quickly, why would the seller help with that if they’ve already been paid? Who’s going to collect the money from the customer? If the seller isn’t incentivized to help, do we need a larger accounts receivable team? How much will that cost? What will delays in collection do to our working capital? What effect does that decrease in working capital have on our ability to invest in new products? Conversely, do we want salespeople worried about collections? We don’t pay other teams so quickly; what cultural effect might this have?

Systems thinkers can quickly gather all these points in their minds, consider them, and come up with a good recommendation. You know this skill when you see it. And you know when you don’t.

I think this skill comes naturally to some people, but it also can be learned, and it improves as you work on more complex problems. Linear thinking works well with tasks that follow a clear, sequential progression with predictable cause-and-effect relationships. So, if you’re following a clear set of instructions all day, you’re not going to get lots of experience with systems thinking. But if you’re managing a large organization in a multi-stakeholder, regulated, fast-changing, competitive business environment, then you better get good at it really quickly.

To get good at this, I’ve found it’s a lot about having high amounts of empathy, being curious, and asking good questions. As an example, if a competitor releases a new product, don’t just think about how you will position your product pitch against theirs. Think about the larger system. Think about your company’s unique strengths, your long-term plan, what you’re incentivizing, what the competitor’s product strategy is, how other competitors might react, how customers might react, and what advantages their focus on this particular thing might give you. Don’t just react to what you see, think about the systems that led to the thing you see.

As leaders, honing our systems thinking skills can set us apart in an increasingly complex and interconnected world where the ability to get our arms around complex problems and connect dots is more difficult (and critical) than ever.