Double-loop learning

As most of today’s organizations are forced to operate in a rapidly changing environ-ment, small adjustments to the business operations may not be enough to meet the goals agreed upon. The strategies to address constant change are more complex, and so is the feedback about them produced by performance measurement systems (Kaplan & Norton 1996b). Sometimes the fundamental expectations about how to be successful in the governing environmental conditions have become obsolete, as a result of changes in the environment. The logic behind how causal relationships link organizational actions and outcomes may become flawed – for example, if a company used to grow its market share successfully by offering the lowest price, it may not notice that the fundamental market preferences have changed towards higher customizability. In this kind of situa-tion, making the production process more and more efficient to be able to lower the cost will no longer gain a higher market share – the assumptions about prevailing causalities have become invalid. Fiol & Lyles (1985) even see double-loop learning arising from a totally different learning theory compared to single-loop learning: they suggest that double-loop learning represents a more cognitive type, whereas single-loop learning is based on repetition, implying a leaning towards a behaviorist theoretical foundation.

It is clear that feedback is needed about how the execution of the strategy matches the plans, as in single-loop learning. Yet, even more importantly, the management needs feedback about whether the assumptions underlying the strategy when it was launched still hold true. (Kaplan & Norton 1996b.) Double-loop learning, or other adjacent learn-ing concepts such as mental model buildlearn-ing, explorative learnlearn-ing or generative learnlearn-ing, addresses the need for a more radical and comprehensive type of learning (Feurer &

Chaharbaghi 1995a; Fried 2010; Hall 2010). Other terms depicting a similar, more transformational learning process include higher level learning, turnover learning, and strategic learning (Kaplan & Norton 1996b; Fried 2010).

Double-loop learning is a reflective process, where the existing theory of business is monitored and scrutinized in order to understand, whether the perceptions and assump-tions underlying what is being done are still valid in the constantly changing business environment (Oliver 2009; Fried 2010). Deviations from the intended track are not cor-rected by only making adjustments within the existing framework, since the error is diagnosed as an incompatibility of prevailing values (Buckmaster 1999). Instead, new understanding must be developed about how the business operates and how it matches the environmental requirements, while old routines, assumptions and beliefs are ques-tioned. The focus of double-loop learning is in longer-range outcomes concerning the whole organization, and the learning is usually linked to non-routine tasks (Huber 1991, after Argyris 1983), like managing a crisis situation. Double-loop learning may be trig-gered by a crisis caused by an event in the external environment, a revolution from within the organization, or a management-created crisis to shake up the organization. It

forces the search for a new operational paradigm to replace the current, dysfunctional one. (Kloot 1997.) Dervitsiotis (2004) specifies that the validity of the current strategy often changes in accordance with developments in the environment reshaping the rules of the game, such as broader trends in technology or geopolitics.

What separates double-loop learning from single-loop learning, characterized by Plan Do Check Act cycle, is the additional cycle where the governing assumptions are vali-dated – hence the expression “double loop”. Double-loop learning is illustrated in Fig-ure 3. When outcomes of organizational actions are observed, it is essential to validate from time to time, whether the goals and the means to achieving them still hold true.

After the validation, goals are refined or new goals developed, and the organization can return to the day-to-day operating single-loop learning process – either by establishing the new goals if needed, or by continuing normally to the action plan development phase.

Figure 3. Double-loop learning (Dervitsiotis 2004).

To enhance the organization’s capability of double-loop learning, supportive practices, systems and structures are needed. Importantly, emphasizing the impact of communica-tion, Kaplan & Norton (1996b) say that to incorporate the new understanding into oper-ations, the ideas about strategic opportunities and possible new directions must be dis-tributed broadly in the organization. Effective communication and openness are particu-larly important, because challenging underlying structures and norms often involves struggles over power and control (Buckmaster 1999). Moreover, to ensure the full po-tential of the organization’s learning capacity is exploited, the double-loop learning pro-cess should be embedded in the management systems and procedures. That way it is made into a regular and inseparable part of them, creating a culture of systemic ques-tioning of the validity of current objectives. (Kaplan & Norton 1996b; Dervitsiotis 2004.) Double-loop learning requires systematic information collection and analysis from a series of sources, ranging from personal observation to instrumentation and

measurement, and being receptive for opportunities to take advantage of changes in the environment. It occurs when the underlying assumptions are questioned and the current theory is reflected against contemporary evidence, observations and experience.

(Kaplan & Norton 1996b.)

New knowledge about the environment must be continuously generated to keep up with the changes in the external environment and to adapt the strategy accordingly, or “learn their way out of their problems” (Dixon 1997). Yet, organizations also need to be aware of the strategic alternatives available, should the situation change. As part of the previ-ously acquired knowledge has become obsolete and must be replaced with up-to-date knowledge, a process of “unlearning” is required to abandon inappropriate behaviors and routines. (Feurer & Chaharbaghi 1995a.) It is important for an organization to be able not just to forget but to intentionally discard invalid information and dysfunctional behaviors, though challenging the status quo. Giving up old, comfortable routines is difficult and requires overcoming the inertia – in fact, it might be even harder for organ-izations to unlearn than learn. (Huber 1991; Easterby-Smith 1997; Melnyk et al 2010.) Comparing to double-loop learning, single-loop learning is a mechanistic, adaptive and reactive way of learning. It corrects symptoms instead of the underlying disease (Batac

& Carassus 2009). It does not attempt to produce new ideas or innovations, and some authors see this kind of incremental monitoring and responding without association building process as mere behavioral adaptation, not learning at all (Fiol & Lyles 1985).

When organizational learning capability is pointed out as something organizations should strive for and as a source of competitive advantage, it is usually double-loop learning that is meant, not learning in general. Clearly, PMS are traditionally designed specifically for single-loop learning purposes – measuring results of organizational ac-tions and giving feedback about them for fine-tuning of acac-tions to achieve predefined goals. However, in the new era of contemporary performance measurement, it is dou-ble-loop learning and its outcomes that are pursued by using PMS in an interactive fash-ion: innovativeness, creativity, change, flexibility and competitive advantage (Henri 2006a; 2006b). Therefore, it is double-loop learning more representative of the contem-porary organizational interests that will be in the core of this study.

Organizations are not capable of learning by themselves, but only through individuals (Argyris & Schön 1978). On the other hand, organizations do not depend on every sin-gle member to learn, and they provide frameworks and structures for enabling individu-al learners to achieve higher results collectively (Romme & Dillen 1997). Therefore it is important to understand the linkage between individuals and organizations and how the learning generated by individuals is incorporated into the organization’s learning pool.

Also single and double-loop learning as learning processes can and should be consid-ered on both levels. On individual level, single loop learning changes the behavior of an individual (Kim 1993) as they respond to environmental changes by detecting and

cor-recting their own errors (Leitch et al. 1996). Double-loop learning, on the other hand, involves the two-way relationship between mental models and learning cycle (Kim 1993). Thus, an individual’s existing mental models influence his learning, whilst learn-ing potentially changes these mental models. Organizational learnlearn-ing may lead to changes in individual actions via the single-loop learning process (Kim 1993) within the organizational normative framework (Leitch et al. 1996), and double-loop learning transfers individual mental models into collective ones (Kim 1993) by questioning the governing norms and establishing new ones (Leitch et al. 1996). In the next chapter, the processes through which individual learning translates into organizational learning are examined in detail.

2.4 Relationship between individual and organizational