After our father’s death in 1990, my brother Travis and I took over the family business.  The company was 35 years old and far from being entrepreneurial or participative.  We were in the heavy construction equipment business, like a car dealer for tractors.  It was a "three yards in a cloud of dust" kind of industry.  In the time since our company was founded the industry had matured, and we were not the market leader.  

Most family businesses don’t survive the founder.  Our business had been on a plateau for at least a decade, and we knew we'd have to make some major changes if we were going to move beyond survival. Travis and I are both avid students of new organizational and management models, and we were trying to figure out what leadership really was.  

We read Peter Senge’s seminal book on learning organizations, The Fifth Discipline.  We were intrigued. We soon learned that some of our industry friends were working on building learning organizations in their businesses.  We brought in Charlotte Roberts, then Peter Senge’s partner and co-author, to teach our company a course called Leadership and Personal Mastery.

I'll leave the topic of personal mastery for another day.  But I wanted to share one of the most important concepts I learned from Peter and Charlotte.  It’s called the iceberg.

The iceberg is an illustration of systems thinking, the most important discipline of a learning organization. Systems thinking integrates the other four practices of the learning organization, personal mastery, shared vision, team learning, and mental models.  Here’s how the iceberg works.

In organizations, we are always looking for cause and effect so we can improve our processes, serve our customers better and grow the business.  We look for answers when mistakes are made and things go horribly wrong.  Too often, this process turns into a blame game.  When this happens, everyone becomes defensive and no one really learns, because it is too painful.

Using the iceberg analogy, the part that's visible to us is the events that happen in our lives and businesses.  The trouble is, like an iceberg, 90 percent is underwater and unseen.

The problem with looking for cause and effect is that often they are separated by some period of time.  For example, when I turn on the shower, the water is cold.  If I turn up the hot, it’s still running cold, because of the distance from the water heater to the faucet.  If I make another adjustment and turn the hot water up without waiting for the impact of my last move, I’ll end up scalding myself.  

Another example: I understand that when the Fed changes interest rates, only 50 percent of the impact is felt over the next 12 months.  How many times have we seen interest rate changes come every three to six months, before the full effect of the previous change has been registered? The key question we ponder when we observe only the events is: “What just happened?”

It is much more effective to look below the surface, beyond the events.  As we look a little deeper, and over a longer time period, we often find patterns repeating in the system. Sometimes we see the same scenery passing by that we saw a year or 18 months ago. Recurring patterns.  The key question for this stage is, “What’s been happening?”

When we dig deeper still, we will discover trends over even longer periods of time that develop out of the patterns. Now we are collecting a lot of data over time to reach a more systemic conclusion.

The questions at this level shift.  We ask, “What are the common forces at play?” If you ask the question “Why?” five times, you will begin to peel back the onion and really understand what’s going on.  You need to move past people’s conclusions about what’s going on and begin to understand the data they are observing, and bring a broader perspective into the room. 

Moving to the next level, we begin to examine the structures at play in the organization.  For example, are we building an empowered organization, where we tap into the knowledge, wisdom and skills of those doing the work to plan and organize?  Or is this still a top-down bureaucracy, where decision-making is held closely at the top?  

In the church world, the first model is called "permission-giving." Permission-giving is a move beyond traditional control structures (the Council being the main one) which are designed to withhold permission out of a lack of trust.  These structures are at play in any community.

My father built the family business on what I like to call the "slap and point" style of management.  He was a veteran of WWII and grew up in the time when the boss made the decisions.  He did not pay people to bring their brains to work.  Hence, he built a micro-managing structure in our business.  

As I studied strategy in my executive MBA program, I kept wondering which type of organization our company was.  As I read about each of the different org structures, I finally realized the one that fit: machine bureaucracy.  I couldn't believe it.  How did our entrepreneurial company become such a beast? It came out of what my father knew, and how he saw the Army and much of corporate America organizing. 

There are many types of structures.  Building an organization on trust rather than fear will create very different structures and operate quite differently. Churches and non-profits operate with different structures than for-profit companies.  Public companies have to build structures to identify and groom the next leaders, because CEOs often leave after five years or so.  

Family businesses often do nothing to prepare or promote high-potential leaders, because the founder thinks he is immortal. This structure creates a particular kind of culture. The key question at this level of thinking is, “How do our processes and organization impact?”

Beneath it all is one more level--our mental models.  Our mental models are the paradigms we hold about how the world works.  They are like glasses.  The world looks different through our paradigms, but we soon forget we're even wearing them. Our worldview becomes self-reinforcing.  We begin to filter out any information that doesn't support what we already believe.  Too often, in discussion with others, we just present our conclusions.  We don’t really reveal our underlying assumptions that lead us to our conclusions.  

Working with mental models is one of the five disciplines of the learning organization.  To do so, each person is asked to present the data supporting their conclusion.  Oftentimes people sitting around a table have observed different data about a topic up for discussion or decision. Their differing conclusions are rooted in the meaning they have made of the data they observe. 

Mental models help us understand how the world works.  Unfortunately, our self-reinforcing paradigms keep us from seeing all the relevant data about any controversial situation.  In building organizations, people will build structures they think work the best.  

My father created a fear-based organization where he expected to make all the important decisions.  My brother and I had very different ideas about the best way to organize, lead and manage.  It took years to make the shift to a learning organization.  Culture is deeply rooted and resistant to change. 

The best way to get leverage in any organization is to work with mental models.  They are foundational to everything else.  This is why I trained for several years with Robert Fritz to be an organizational structural consultant, because when you work at this level, deep change is possible.  It is really what the Christian walk is like.  As we start a  spiritual journey, St. Paul tells us in Romans 12:2 to “be transformed by the renewing of your mind.” 

Mental models are the bottom of the iceberg.  The bottom of the iceberg has torn the hull out of many enterprises and churches, just like the Titanic.  The key question at the mental model level is, "How does our thinking allow this to persist?"  Einstein said something like, “We can’t get out of this problem with the same thinking that got us into it.”  

The most powerful, positive change in our mental models comes as we surrender to God and live forward with a grateful heart, understanding that every good thing comes from Him.  Then, change in heart and mind becomes an ongoing process. Read more about mental models here.