Table of Contents
figures & tables
2. systemic theory and complex social systems
2.1. Complex Social Systems - a Starting Point
2.2. Systems Thinking and Systems Archetypes
2.3. Self-reference and Autopoiesis of Social Systems
4. "FIXING THE BIKE, WHILE WINNING THE TOUR DE FRANCE"- F.C.M.'s CHANGE PROCESS
4.1. Becoming a Global Player
4.2. Acquisitions, Mergers and Integration
4.3. A Climate of Transition
4.4. The Permanent Crisis
Figures & Tables
Figure 4.1. Competitive Position of F.C.M Along Criteria of Product Portfolio and Geographic Representation
Figure 4.2. Shifting the Burden of Organic Growth to Acquisitions
Figure 4.3. Archetype "Drifting Goals" applied to F.C.M. Product Development
Figure 4.4. Growth and Underinvestment of F.C.M./F. Mini-excavator Production Capacity
Figure 4.5. Causal Loop "Bad Performance".
Figure 4.6. Systems Archetype "Fixes that Fail". Business Practice Cost Reduction
Table 2.1. The Laws of the Fifth Discipline
Table 4.1. F.C.M. Acquisitions since 1957
Table 4.2. F.C.M. Credit Terms compared to Marketleader
Table 4.3. A Simplistic Model on the Impact of Volume Relative to Revenue
"In a troubled company, people are usually trying in good conscience and to the best of their abilities to solve the major difficulties. (...) In many instances it then emerges that the known policies describe a system which actually causes the troubles. In other words, the known and intended practices of the organization are fully sufficient to create the difficulty, regardless of what happens outside the company or in the marketplace."
This MBA dissertation benefited from the help of many people. I am especially grateful to my tutor John Darwin for his suggestions when preparing and carrying out the project, and Michael Schlinkert for giving me 'injections' of Luhmannian systems theory . Paul Cooper gave great advice on the 'palatability' of the work. Sheridan Webb gave the final script a brush of 'English English'.
"Any manager is only as good as the partner behind him or her", as they say. This holds true especially in times of double work. I am grateful to my wife Maite who put up with a husband travelling extensively in Germany as a sales manager while writing this piece of work in the few and precious hours at home.
I hold a degree in communicational sociology, which is untypical for the industry I work in. Be it for my degree, be it for professional ambitions, my interest has always been to increase my cognitive capabilities as a manager in analyzing situations and improving my abilities in handling complex subject matters. Thus, throughout my MBA studies I was led by a genuine epistemological interest: what do I know as a manager, and what would I have to know to become a better manager ?
During my studies at Sheffield Business School between autumn 1996 and spring 1998 I had the opportunity to delve into a host of material on business, management, strategy, and organizations. One great moment of being lectured I will never forget. Based on Richard Whittington's Does Strategy Matter ? four lecturers gave talks on the characteristics of different approaches to strategy, each of them representing one school of strategy in its own words and speaking for itself - the Classical, the Evolutionary, the Processualist, and the Systemic one. After the Classical school had loudmouthedly propagated "I am one and all for planning !", followed by an Evolutionist credo that "I think only the fittest survive", the Systemic school confessed that "I think it all depends". It would be unfair to consider this exclamation systemic thinking's epigraph (and moreover, it would do great injustice to the lecturer's speech which was excellent), but as a starting point of explanation to those unfamiliar with systemic thinking it may well be suitable.
This paper is an explorative study which applies systemic theory and models of systemic thinking to the case study of F.C.M., global manufacturer and distributor of construction equipment. Systemic thinking stresses the importance of monitoring dynamics of processes instead of seeing events. Representation of dynamics through so-called system archetypes and causal loops helps to identify problematic areas and identify leverage opportunities. Complementary concepts from self-referential systems theory explains why systems are difficult to change even if the dynamics have been detected: social systems operate on the basis of an autonomous logic of control. In brief, any intervention needs to become part of the systems operating rules and procedures to be successful.
F.C.M., an organization which is currently in a phase of change caused by growth, suffers from a variety of problems such as low image, low share of market, and low profitability. F.C.M. Corporation's growth strategy depends primarily on acquiring competitors in order to gain access to markets, strengthen its distribution network and enhance its product portfolio.
Systems thinking indeed offers new perspectives on F.C.M.'s problems. The need of being global reveals guiding distinctions which systematically lead away from achieving a realistic understanding of F.C.M.'s situation. F.C.M. Corporation's growth strategy of acquiring instead of growing out of its own devices, is a quick fix which bears the risk of neglecting existing products and services which respond to customer's needs. There is already indication of an erosion of customer standards. There is also evidence that integration between parts of F.C.M. (and newly gained parts) as well as coordination between existing profit centres is an area in which systemic thinking may serve to improve the current status. Finally, F.C.M.'s self-referential loops which govern growth and transaction processes reveal, that the organization is somewhat trapped in circular loops which impede growth, rather than supporting it.
This chapter will take the reader to the starting point of this paper which is determined by the question as to which motivation led to choosing the topic of this MBA assignment and in which area of management studies the topic can be located. Furthermore, this chapter will seek to delineate the research area and try to describe which boundaries confine the subject.
Change management is a contemporary subject in management and business studies. There is a vast body of literature on the management of change encompassing numerous recipes and prescriptions on how to turn around organizations, how to induce change, and how to organize, streamline, re-engineer, re-structure organizations. Some of the material is written in an easy-to-read, easy-to-implement fashion. Some of the concepts in the light of academic scrutiny turn out to be business fads. Others, on in-depth study are revealed to be paraphrased ideas from the 1920s and 1930s. And even the more serious accounts of change and managerial intervention - the critique also finds ample evidence beyond 'airport literature' - sometimes are based on over-simplified accounts which retrospectively explain implementing a nouvelle management practice as a veni, vidi, vici : rational, well-planned, coherent managerial action. Finally, to take issue with the distribution of business success recipes, management recipes are often disseminated into the business community through business consultants, "merchants of meaning and beautiful words". Within the business community there is ample suspicion that consultants arbitrarily come up with new cures to well-known evils every other year - and nothing ever changes.
As a manager working in an organization undergoing massive changes, my prime motivation was to find out what systemic theory had to contribute to change management. Change management was defined elsewhere as the "understanding, creating and coping with change (...) [through] establishing some rationality, or some predictability, out of the seeming chaos that characterizes change processes". Perhaps systemic thinking could serve to achieve some preliminary order out of the chaos and give some guidance to those who are amidst the change processes, seeking to accomplish and facilitate change. Accounts of managers utilizing systemic theory in change processes, however, are rare, although amongst consultants, systemic theory in general has been en vogue for quite some time.
How to manage and cope with change is a contemporary issue in many organizations and in my organization, too. Therefore, there remains the issue of whether there are ways of handling and perhaps organizing change in my organization "beyond the hype". F.C.M. Corporation, global manufacturer and supplier of construction machinery is currently in a phase of growth that follows a long phase of decline. In many markets F.C.M. suffers from low profitability, low market share and low image, in particular:
- In the last 10 years, F.C.M. in Europe incurred losses.
- In Europe, F.C.M.'s market position declined from market-leader in excavators in the mid 1970s to marginal player in the 1990s.
- In some areas such as the Asia-Pacific Rim, F.C.M. has had very little market presence.
- The distribution network in many markets is weak, stagnant or crumbling away. In many current growth areas such as East Germany or Central Europe an early start was missed, so that market coverage is minimal.
- Particularly, in the German market which accounts for 40% of the total European market in terms of industry, acceptance of F.C.M.'s products is below F.C.M. Corporation's expectations.
With F.C.M.'s IPO in 1994, the company launched a massive turn-around programme aimed at increasing its CE market presence by capitalizing on some existing competencies and the funds released through the IPO, such as
- Long-term success in North America where F.C.M. has a share of market of 20% in some market segments;
- Product acceptance of wheeled loaders, compact loaders, or crawler excavators which have distinct features;
- Sufficient economies of scale as a transcontinental CE manufacturer gaining from of the concentration trend in the CE manufacturing industry.
In F.C.M. Corporation's press releases, Annual Reports, or other items of communication aimed at the external public, growth is one of the most eminent topics. F.C.M. is committed to growth, and its recent growth is in fact remarkable: F.C.M. holds a record of 16 consecutive quarters of growth both in revenues and profits. In 1997 e.g., F.C.M. increased its global revenues by 11% compared to full year 1997 to US$ 6 bn, while gross operating profits increased by 8% to US$ 627 m. Since 1994, when F.C.M. become a public company US$ 1 bn was added in revenue.
In 1998, part of F.C.M.'s growth strategy has already been implemented. Several restructuring measurements have been implemented, and new products have been launched. The most obvious effect, however, was that F.C.M. embarked on several projects to enhance its product offerings such as the acquisition of a manufacturer of compact equipment (e.g. miniexcavators), acquisition of a producer of horizontal drilling equipment, and a joint-venture with a Japanese manufacturer of crawler excavators. Clearly, F.C.M. is already amidst a process of rapid growth and change. This is the starting point of this paper.
Given that there are no equifinal approaches to change management, the question is what systemic thinking and systemic theory, which are typically dedicated to development such as organizational learning, or evolution of organizational dynamics, may add to F.C.M.'s growth processes in terms of tools for diagnosing problems and means of arriving at new perspectives. Thus, this paper will seek to explore in how far systemic thinking helps to develop an understanding of F.C.M.'s problems related to growth and transition, and for the formulation of potential leverage opportunities.
Therefore, it is an explorative study, because it is a venture into applying (to the author, at least) an alternative approach to management issues. Explorative also, as there are no 'hard', 'objective' criteria chosen to analyze and examine F.C.M.'s situation; rather, this paper is designed as a pre-test into a full-scale examination based on application of systemic theory. Such a future undertaking was effectively a consultation project, something which an MBA dissertation clearly cannot achieve.
The narrow scope of this paper does not allow for a fully-fledged application of systemic theory to the entire F.C.M. organization. This is no systemic turn-around programme. Secondly, the theoretical framework will merely draw on two strings on systemic theory: the System Dynamics approach as represented by Peter Senge and his colleagues for example, and the theory of self-referential systems as represented by Niklas Luhmann and collaborators from the University of Bielefeld. Due to the narrow frame of this paper, other schools of systemic theory remain largely neglected. Critique from systemic academia may well be entitled to call the theoretical basis of this study ecclecticistic.
2. systemic theory and complex social systems
This section outlines the theoretical perspective adopted. Beginning with the basics of systemic theory such as defining general features and traits of complex systems, I will continue to discuss the benefits of a specific approach to the application of systemic theory. Recognizing the strength of this approach while compensating for some of its theoretical weaknesses, I will continue to complement this approach to applying systemic thinking with other key concepts within systemic theory which is self-reference. The ensuing theoretical combination will equip us with a compact but adequate theoretical framework to approach the organization under scrutiny.
2.1. Complex Social Systems - a Starting Point
A complex system may be defined. as a holistic ensemble of elements, the relations of which are quantitatively more intense and qualitatively more productive than their relationships to other elements. Complex systems show self-organization, boundary constitution, self-reference and generativity In particular, complex systems show the following dynamic features :
1. they tend to be self-stabilizing i.e. they show tendencies to maintain states of equilibrium,
2. they appear to be purposeful i.e. serve some sort of goal (which may not be explicit),
3. they use feedback - both positive and negative feedback - to modify their behaviour,
4. they modify their environment, and
5. they are capable of reorganizing themselves.
Complex systems are non-linear; non-linearity is the guiding difference in terms of dynamics: "in linear systems change is gradual and incremental, whereas in non-linear systems change can be precipitous and revolutionary". Moreover, effects in non-linear systems tend to be disproportionate to the cause, the whole system is greater than the sum of its parts, internal interaction tends to be multi-directional, and outcomes tend to be unpredictable.
Social systems are by definition complex systems because
- they are relatively insensitive to intervention from management intending to alter system behaviour.
- they tend to have a few sensitive spots at which alteration of system behaviour may be more fruitious. However, even when those sensitive spots are discovered there is the risk of misapprehension or misinterpretation of their impact.
- there is a fundamental conflict between short-term intervention and long-term intervention in that short-term solutions which produce improvement tend to shift towards deterioration after some time, while solutions which improve the system over the long-term may initially depress the system.
The human mind is not well equipped to understand the dynamics of complex systems because they are multi-loop nonlinear feedback systems. Learning disabilities such as conceiving of organizations as assemblies of functions instead of purposes, failure to see the consequences of one's actions, seeing events instead of processes are organizational universals, to be found even in successful organizations. The core learning dilemma consists of the lack of direct experience of one's actions in organizations:
"The most critical decisions made in organizations have systemwide consequences that stretch over years or decades. Decisions in R&D have first-order consequences in marketing and manufacturing. Investing in new manufacturing facilities and processes influences quality and delivery reliability for a decade or more. Promoting the right people into leadership positions shapes strategy and organizational climate for years. These are exactly the types of decisions where there is the least opportunity for trial and error learning".
Sensible intervention requires a systemic perspective which in turn requires seeing the system that controls events. Without such an approach, a conventional way of intervention and control will continue to produce failures:
"Corporate life is full of (...) horror stories (...). In retrospect, they always seem blatantly stupid and short-sighted. More fundamentally, they are systemic. They are inevitable in any situation where people are encouraged to edit their understanding of reality to suit narrow purposes."
2.2. Systems Thinking and Systems Archetypes
Peter Senge's The Fifth Discipline prepares the reader for a systemic perspective by collating "laws of systems thinking"" which in principle carry some universal truth in them (see table 1 below).
Senge continues to combine those laws with Systems Archetypes, which are based on the assumption that most organizational problems can be derived from similar root-causes and that there are few genuinely unique problems. They are instrumental (i) as "lenses" i.e. for facilitating inquiry into problems, (ii) as structural pattern templates which serve to detect commonalties and deeper structures in situations, (iii) as dynamic theories for managers, and (iv) as tools for predicting behaviour. In order to illustrate the practical and convenient way systems archetypes are used to explain problems involving dynamic complexity, the archetype "Fixes that Fail" will be discussed in detail.
illustration not visible in this excerpt
Table 2.1. The Laws of the Fifth Discipline, adapted from Senge (1990a:57pp)
Systems thinking and systems archetypes were applied to fields such as aviation industry, Federal Budget, arms race, and disciplines such as marketing, and operations planning ; the value of applying systems thinking to organizations in crisis were shown ; a 'manual' for managerial intervention was published. The underlying goal of practical systems thinking is applying the leverage principle: "seeing where actions and changes in structures can lead to significant, enduring improvements". High leverage opportunities are very difficult to identify, although there are some promising areas such as minimizing system delay times. Identifying high leverage opportunities, however, requires a different perspective on the organization's core processes. It also requires the ability to unlearn core competencies and abandon the practice of "more of the same". Watzlawick pointed out that two reasons for staying "with the same" instead of considering alternatives may be rooted in (i) the cognitive economy recipes present, and (ii) that those recipes also disguise the need to change. Miller has pointed out that there is a "natural" tendency for organizations to move along trajectories of their core competencies towards decline. More of the same of what made them successful, then, becomes a source of organizational threat.
Senge's school of management philosophy nevertheless includes 'genuine' systems theory. However, Senge was heavily criticized for his naive and idealistic conception of organizational change which largely disregards organizational politics, power structures, and resistance to change. The validity of a ready-made approach as a guide for managers was also questioned. Organizational change is a political process, which involves power, catalytic converter of conflict between organizational coalitions. Power generally comes with formal authority. Control of information, and interpersonal alliances are alternative sources of power in organizations. Power and influence in organizations also relies on the individual's network-position, and the subsequent structural autonomy to organize otherwise disorganized clusters within the total organization.
We need to incorporate some essential elements of the theory on self-reference to find explanations as to why it is difficult to apply change to systems even when to an outsider the benefit and the logic of explanation seem rationally obvious. We need to find an answer to the question why organizations even when being made aware of the dynamics of a process are not likely to change.
2.3. Self-reference and Autopoiesis of Social Systems
This section will point out how our ways of observing an organization's problems and areas of leverage are determined by guiding distinctions. These distinctions are organizationally shared and institutionalized in the organization's memory, its operating rules and procedures. This is why the mere creation of alternative views by individual members of the organization will not necessarily bring about change. Change requires that organizations aim to change communicational structures and roles.
However, the theory of self-generating systems is very complex and its host of literature is not too palatable. I will seek to guide the reader through some of the most complex issues by 'translating' from the abstract meta-language into plain English, but I will not be able to spare the reader some 'hard-core' theoretical elaborations.
Let us begin by asking how we take notice of what is happening around us ? How do we actually perceive reality and what determines what we perceive as relevant aspects ? How do we observe ? In the theory of self-referential systems what becomes relevant to individuals and stored in our cognition is governed by guiding differences or guiding distinctions. Guiding distinctions determine the context of what individuals see and describe and perhaps more importantly what they cannot see. I am indebted to Peter Fuchs for the following trivial, albeit illustrative example of guiding distinctions in everyday life: a husband is being asked by his wife to help her 'get rid' of an imposing door-to-door salesman. A male visitor to the house who notices the situation mumbles contemptuously "typically female, cannot manage on her own !", while another (female) visitor observes that the housewife is being imposed on by a intrusive salesman and wonders about offensive and non-offensive means to end the door-sales situation. The guiding distinction operating in the first observer are male/female, while the latter observer distinguishes along criteria of intrusive/considerate.
Commercial organizations make distinctions on the basis of guiding differences based on price-determined cost-benefit calculation , in brief: monetary payments. What is considered relevant must be expressed in terms of this guiding distinction. All genuine acts of communication in commercial organizations reflect this guiding difference. If decisions, risks, processes within such a system are irrelevant in terms of the guiding difference monetary payment, the system is unable to read them.
An example may illustrate the validity of this theorem: goods such as clean air or clear water typically do not have a price (although they may have an indeterminate value associated to them). Consequently, they are not economic events and economic systems cannot "read" them, which serves to explain why to the dismay of environmentalists economic systems continue to overexploit natural resources even when individuals in commercial organization are not blind to the benefits of clean air or clear water. Economic systems simply cannot process the benefits of clean air as they are irrelevant in terms of the guiding distinction monetary payment.
Luhmann defines the act of observing as "handling distinctions". However, any observation or an inquiry into a system has a blind spot in so far as it is blind towards its guiding distinctions when observing. This is an important aspect: when I assess a situation along criteria of true or false I cannot simultaneously observe whether these criteria in themselves are true, false or relevant. Assessing the relevance of the criteria of my observation can only be accomplished by what is called second-degree observation. Second-degree observation offers some advantages: "an observer observing another observer can describe and signify the guiding distinctions of the other observer along his/her guiding differences. Thus, the second-degree observer can observe, that the observed system cannot see, what it cannot see". In simple words: while I may have a blind spot towards the criteria of what I perceive in my environment, someone else (which may be myself at a later stage - reflecting) can examine my distinctions.
Finally, an important aspect is that guiding distinctions are self-referential:
"The distinctions made reveal (sic !) the knowledge of the distinguisher. (...) By isolating a phenomenon, the manager can gain knowledge about it. (...) Self-referentiality means that new knowledge refers not only to past knowledge but also to potential future knowledge. (...) Managers use already established knowledge to determine what they see, and they use what they already know to choose what to look for in their environment."
We will leave the aspect of self-reference until later in the discussion and summarize the above: the distinction which a system such as an organization employs determine what the organization can see and what it cannot see. Presumably, it is not so much whether or not an organization operates certain distinction, but rather how subtle the distinctions are. One may argue then that reflecting upon guiding distinctions forms an integral part of an organization's ability to adapt to a changing environment. Take the business case of People Express Airlines for example. An airline responds to the need to increase service capacity by simply hiring more people - distinction: high turnover of passengers. Challenging the mental model may have relatively easily revealed that more subtle distinctions such as a high standard of service quality might have served to avoid the fiasco the airline found itself in. This is trivial. The point I am trying to make is this: even if individual managers had reflected and arrived at alternative views, would their insights have found it easy to turnaround the system ? Probably not.
We need to take a look at what happens throughout the life-cycle of organizations. Observations and relevant aspects within organizations are spoken about, shared, discussed, debated, and decided upon: they become pieces of communication. Social systems reproduce through continuously linking communication to prior communication. In the course of the organizational life-cycle, all acts of communication recursively refer back to past decisions and past communications which are stored in the organizational memory. They also limit the contingent options for future decisions. The results are chains of communication in which each link refers back to the prior one, and constrains the following one. A useful way of conceptualizing how such chains of communication operate is to consider them to be discourses . A discourse was defined as "a set of ideas and practices which condition our ways of relating to, and acting upon, particular phenomena". Discourses are constructed in particular social contexts; however, they are not merely ways of perceiving a specific part of reality, they are embedded in sets of social practices which self-referentially reproduce the 'truth' of the discourse. Stored in the organization's memory those discourses are formally manifest in files, archives, written policies as well as informal myths, stories, accounts, expectations . Organizational members share an explicit and a tacit understanding of the memory, it is an essential part of what was called embedded knowledge.
The above observation helps us to arrive at an important conclusion: in organizations, today's decisions refer to past decisions, current observations refer to past observations, approved ways of handling problems refer back to the ways in which "we always used to do it", so that the organization self-referentially closes itself from fresh distinctions and alternative approaches. This process of closure from environment was termed self-reference or autopoiesis, and describes the phenomenon that social systems refer to themselves through every operation they perform. Throughout the life-cycle of organizations, patterns of conventions, routines, operating policies and rules emerge. Through every organizational act these patterns are referred to and thus re-enforced. Thus, the key insight from self-referential systems theory for the framework of this paper is thus: Social systems such as organizations are to a large degree autonomous from their individual members. The leverage to organizational change lies in the patterns of communication, decision-processes and base operating procedures. Individual impact on organizational change is limited. "When placed in the same system, people, however different, tend to produce similar results".
 Forrester (1996:225p)
 Whittington (1996)
 Pascale (1990:18pp)
 See e.g. Mumford (1996:46pp) on Mary Parker Follett's ideas.
 I am indebted to an unknown author for this phrase.
 Marchington (1995:52pp)
 Czarniawska-Joerges, quoted from: Björkegren (1994:101)
 Wilson (1992:7)
 See for instance Groth (1996)
 Eccles & Nohria (1992)
 In the following F.C.M. Germany will denote the German construction equipment subsidiary, while F.C.M. Corporation will denote the global holding. Other business units which form part of F.C.M. Corporation shall remain unmentioned to avoid giving away F.C.M.'s identity.
 NB. All financial figures include total portfolio of F.C.M. Corporation's activities.
 Stace (1994:18)
 Hard- and Soft Systems Methodology comp. Checkland (1985); Integrated Management Probst & Siegwart (1985) to name a few.
 Willke (1996a:266)
 Throughout this paper, the term system will categorically and synonymously describe complex systems as opposed to trivial systems such as single-cell organisms. Other common dichotomies in use are e.g. linear/non-linear, or simple/complex.
 Anderson & Johnson (1997:78p)
 Goldstein (1994:19)
 Forrester (1996:228p)
 Dörner (1989)
 Senge (1990a:18pp)
 Senge (1990b:414)
 Morgan (1990:98)
 Senge (1990a: 378pp) contains detailed descriptions of the most common archetypes.
 Kim & Lannon (1997)
 See Senge (1990a:388p); Kim (1992:16p)
 Kim (1992)
 Kim (1994)
 Gould et al. (1998)
 Anderson & Johnson (1997)
 Senge (1990a:114)
 There is a school of systemic thinking which would strongly reject the idea of 'one best way', and would propose to see solutions as equifinal. (Willke 1996b:78)
 Senge (1990a:89pp)
 Watzlawick (1985:366)
 Miller (1990)
 Willke (1996b:175pp)
 Whittington (1993:128)
 Wilson (1993:122pp).
 Morgan (1997a:170p)
 Nohria (1992:9pp)
 To Luhmann 'disciples' the following paragraphs may seem over-simplified and slightly distorted, as I have deliberately left out many of Luhmann's concepts which would not add value to the framework of this paper e.g. the dichotomy system/environment, the relationship between contingency and complexity, symbolically generalized media of communication, the opposition of psychic systems and social systems, the subtleties such as the difference between autopoiesis and self-reference, to name but a few.
 And not only there: note that I am of course referring to the notion of objectivity and the postulate that there cannot be any denying anymore that there is no such thing as a objective reality: reality and our knowledge of reality are socially constructed (Berger & Luckmann 1980). My axiomatics also tacitly include that our cognition is context-sensitive, and directed to problem definition, rather than problem-solving (Von Krogh et al. 1994:58)
 Luhmann (1995:32)
 Kneer & Nassehi (1994:102p)
 Fuchs (1993:38p). Fuchs has written an excellent book entitled "Niklas Luhmann - beobachtet" [N.L. - being observed/observes; unfortunately, the pun does not translate]. Luhmann's basic but abstract concepts are being acted out in screenplays - certainly a very unorthodox method of theory mediation.
 Baraldi (1997:209pp)
 I am indebted to Willke (1996b:59p) for this example. See also Luhmann (1995) for symbolically generalised media of communication such as love, power, money. See Willke (1995:142pp) for the practical function of guiding distinction and symbolically generated media of communication.
 Speaking about one guiding distinction is in itself a simplification. Key guiding differences also translate into secondary distinctions. In commercial organizations these secondary distinctions may be performance indicators such as share of market, volume, cost-ratios etc. von Krogh et al. (1994:58p)
 Luhmann (1995:36)
 Willke (1996b:25pp)
 Baraldi (1997:103); translation mine.
 Von Krogh et al. (1994:58); emphasis theirs.
 Senge (1990a)
 Here, we may note Luhmann's radical departure from the traditional understanding of social groups. The philosophy of self-generating systems defines communication - not individuals ! - as the basal, constituting element of social systems (Luhmann 1995:138). This theorem will not be dealt with in detail in the following.
 Knights & Morgan (1991:253)
 Willke (1996b:18)
 Badaracco (1991:79pp)
 Again, I would like to remind the Luhmann-informed reader that throughout this paper I will use both autopoiesis and self-reference as synonyms. Hard-core systemic theory would dispute such simplification which is justified through the narrow scope of this paper. The necessary requirement for autopoiesis is the precise descriptions of the component production processes (Von Krogh et al. 1994:56). For a detailed history on the application of autopoiesis to fields of research see Kickert (1993). However, the reader should note that applying autopoiesis to social systems has also caused controversies: Mingers (1992:231) for instance argued that autopoiesis was specified for the physical domain, and that transfering autopoiesis to social systems led to the concept autopoiesis loosing its essence.
 Baraldi (1997:163)
 Senge (1990a:42)