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Note about Causal Loop Diagram

Causal Loop Diagrams

that we move away from looking at isolated events and their causes (usually assumed to be some other events), and start to look at the organization as a system made up of interacting parts

If you shift from this event orientation to focusing on the internal system structure, you improve your possibility of improving business performance. This is because system structure is often the underlying source of the difficulty. 

you first generalize from the specific events associated with your problem to considering patterns of behavior that characterize the situation

Usually this requires that you investigate how one or more variables of interest change over time. (In a business setting, variables of interest might be such things as cost, sales, revenue, profit, market share, and so forth.) 

Thus, once you have identified a pattern of behavior that is a problem, you can look for the system structure that is know to cause that pattern.

In this diagram, the short descriptive phrases represent the elements which make up the sector, and the arrows represent the causal influences between these elements.

This diagram presents relationships that are difficult to verbally describe because normal language presents interrelations in linear cause-and-effect chains, while the diagram shows that in the actual system there are circular chains of cause-and-effect

When an element of a system indirectly influences itself in the way discussed for Inventory in the preceding paragraph, the portion of the system involved is called a feedback loop or a causal loop.

To complete our presentation of terminology for describing system structure, note that a linear chain of causes and effects which does not close back on itself is called an open loop

A causal link from one element A to another element B is positive (that is, +) if either (a) A adds to B or (b) a change in A produces a change in B in the same direction. 

A causal link from one element A to another element B is negative (that is, −) if either (a) A subtracts from B or (b) a change in A produces a change in B in the opposite direction.

Many management processes contain negative feedback loops which provide useful stability, but which can also resist needed changes

In the face of an external environment which dictates that an organization needs to change, it continues on with similar behavior

There is some evidence that what are viewed as seasonal variations in customer demand in some industries are actually oscillations caused by delays in negative feedback loops within the production-distribution system.

To start drawing a causal loop diagram, decide which events are of interest in developing a better understanding of system structure.

From these events, move to showing (perhaps only qualitatively) the pattern of behavior over time for the quantities of interest.

  • For the sales example, what has been the pattern of sales over the time frame of interest?
  • Have sales been growing?
  • Oscillating? S-shaped?
  • Finally, once the pattern of behavior is determined, use the concepts of positive and negative feedback loops, with their associated generic patterns of behavior, to begin constructing a causal loop diagram which will explain the observed pattern of behavior.


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