This document discusses causal loop diagrams and how they can help create flexible strategies. Causal loop diagrams use nodes and arrows to represent relationships between variables in a system. They help visualize how a system works and identify reinforcing and balancing feedback loops. Examples are given of how causal loop diagrams helped clients improve strategies by recognizing unintended consequences of initiatives and better understanding how changing one part of a system impacts others.
1 of 28
Downloaded 13 times
More Related Content
Creating a flexible strategy using causal diagrams
3. Agenda
What is Causal Loop Diagram ?
How it can help you ?
How to construct CLD ?
Examples of how it helped to improve strategy ?
Simulation tool
www.luxoft.com
5. History
The use of nodes and arrows to construct directed graph models of
cause and effect dates back to the invention of path analysis by
Sewall Wright in 1918
Popularized in System Dynamics. Methodology and mathematical modeling
technique for framing, understanding, and discussing complex issues and problems.
The first formal use of Causal Loop Diagrams was explained by Dr. Dennis
Meadows at a conference for educators
www.luxoft.com
7. Helps to see the whole
www.luxoft.com
How our system is
working so that we
have drop in
productivity ?
My concern is
productivity ? How
to fix that ?
YOUR CLIENT YOU
8. Measure your concerns qualitatively
www.luxoft.com
Productivity drop?
Is it subjective ?
I see drops in rate
of # completed
tasks and # labor
costs are growing
YOUR CLIENT YOU
9. Align understanding of systems
www.luxoft.com
In general I see
that system is
working this way
I would add some
more variables to
that
YOUR CLIENT YOU
10. Empathize
www.luxoft.com
Yes, we can. Lets
think how we can
improve your
strategy to minimize
risks
Unfortunately we
have to cut
salaries
YOUR CLIENT YOU
11. Discover self-reinforcement loops
www.luxoft.com
My fear is that by
cutting salaries you
will balance total
costs for short time
Thanks, I see that
potential staff turnover
will increase total cost
again
YOUR CLIENT YOU
12. Pro-actively improve your system
www.luxoft.com
My fear is that by
cutting salaries you
will balance total
costs for short time
Thanks, I see that
potential staff turnover
will increase total cost
again
YOUR CLIENT YOU
14. Capture potential variables
We have to increase
number of cost cutting
initiatives because
some budget pressures
YOUR CLIENT
www.luxoft.com
Cost cutting
initiatives
Total Costs
(budget)
Salary rate
15. Find relation between concerns
www.luxoft.com
Cost cutting
initiatives
Total Costs
(budget)
Salary rate
16. Polarity in relations
www.luxoft.com
Cost cutting
initiatives
Total Costs
(budget)
-
Salary rate
+
+
18. Further elaboration
www.luxoft.com
YOU
Cost
cutting
initiatives
Total
Costs
(budget)
-
Salary
rate
+
+
B
Reduce
Total Costs
I feel something
wrong with that
19. Self-reinforcement loops
www.luxoft.com
Cost cutting
initiatives
Total Costs
(budget)
-
Salary rate
+
+
B
Reduce
Total Costs
Motivation
to change
R
job
-
Stuff
turnover
+
-
Workforce
Knowledge
Productivity
+
-
20. Delayed effect
www.luxoft.com
Cost cutting
initiatives
Total Costs
(budget)
-
Salary rate
+
+
B
Reduce
Total Costs
Motivation
to change
R
job
-
Stuff
turnover
+
-
Workforce
Knowledge
Productivity
+
-
21. Update you strategy
www.luxoft.com
Cost cutting
initiatives
Total
Costs
(budget)
-
Salary
rate
+
+
B
Reduce
Total Costs
Motivation to
change job
-
R
Stuff
turnover
+
-
Workforce
Knowledge
Productivity
+
-
Launch
motivational
program
Test
Knowledgebase
Reduce load
23. Example #1
Helped Project Manger to show stakeholders many side-effects of selected
strategy
Client abandoned strategy with reducing salary
Client changed development strategy to focus only on critical business
www.luxoft.com
24. Example #2
Helped Agile Consultant to show an importance of slack time for
learning
Client updated marketing strategy to less aggressive
www.luxoft.com
25. Example #3
Helped to show
how new marketing
initiative would
influence company
performance
Client improved
annual strategy to
focus on service
quality, not number
of subscribers
www.luxoft.com
28. www.luxoft.com
Vyacheslav Moskalenko
Luxoft Agile Practice
Luxoft Agile Coach
Kiev, Ukraine
Member of Scrum Alliance,
Certified Scrum Master
Certified Scrum Professional
Member of ICAgile,
Certified ICAgile Coach
Member of scrum.org,
Professional Scrum Master
Editor's Notes
#5: How using different salary initiatives influencing worker performance and costs.
When strategy is to control labour costs by forcing down pay rates.
We can a imagine an initial period in which costs were drifting slowly upwards for some reason. This motivated a wish to make intervention in order to contain costs; as indicated in the figure, cutting pay rates has a rapid and direct controlling effect on labour costs. This initiative has balanced total costs. However, longer term effects are also seen to arise. For example, low pay can increase staff turnover as workers are increasingly motivated to look for - and take - other employment opportunities. This reduces the stock of knowledge that the workforce has to draw on to achieve its tasks and therefore also has the potential to reduce productivity (loop R1). Similarly, low pay rates can reduce the quality of staff that a company can attract and recruit. This reduces the quality of the work done, increases the need to re-work poorly executed tasks and so increases labour costs (Loop R2). Finally, undiscovered poor quality work can increase costs, either because customers return poor quality goods for reimbursement or because there are health and safety consequences resulting in financial compensation (to take a high profile example of the latter, the use of cheaper labour may well be complicit in the safety questions being asked about the UK rail infrastructure). The result of all of these effects is that cutting pay rates can backfire, producing a response that is qualitatively the opposite of that expected as one or more of the reinforcing loops dominates the system behaviour.
#15: This can be done in telephone mode and paper
This can be done on whiteboard with your client and collegues